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Business  & Finance News

Tuesday, March 16, 2004

Compiled by SDNP

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Taiwan, BIMST-EC issues

Govt faces diplomatic embarrassment


Staff Correspondent, The Bangladesh Observer

Two major decisions of the government in recent months not to sign the Free Trade Agreement of BIMST-EC and to allow to open the Taiwanese liaison office in Dhaka have evoked diplomatic crisis for the country. It has also caused embarrassment for the Government which is already confronting political crisis in the wake of "oust-government" movement by major opposition parties, according to a source at the Prime Minister's Office.

Some influential cabinet members are now blaming the inefficient performance of the Minister and State Minister at the Foreign Office, Commerce Minister, and the Executive Vice-Chairman of the Board of Investment (BOI) for the two wrong decisions. Some of them have already vented, their serious reaction to the Prime Minister.

The decision to Taiwan to open a liaison office in Dhaka contradicted Bangladesh's avowed "One-China" policy and it prombted a diplomatic dispute with China and caused strains in Dhaka-Beijing relations. Chinese Foreign Minister Li Zhaoxing has sent a letter to Bangladesh to close down the Taiwanese liaison office saying that "it is a part of separatist activities against China". Chinese Ambassador in Bangladesh Chai Xi has handed over the letter to Foreign Minister Morshed Khan on Sunday.

The Foreign Office and the Board of Investment (BOI) are now trying to shift the blame on each other for the permission to allow the Taiwanese trade office in Dhaka. The BOI that gave the permission defended that it allowed the Taiwanese office to promote and facilitate the growing trade with Taiwan. The Foreign Office was consulted before the decision, a BOI source said.

However, concerned people do not rule out involvement of kickbacks in this deal. Chinese Ambassador in Bangladesh Chai Xi called on some cabinet members and finally met Foreign Minister Morshed Khan and Foreign Secretary Shamsher Mobin Chowdhury on Sunday. He communicated Beijing's serious concern and dissatisfaction over the opening of Taiwanese Liaison Office in Dhaka. He complained that the Taiwanese trade office was issuing visa to visit People's Republic of Taiwan. But Foreign Minister Morshed Khan refuted the allegation of the Chinese ambassador and said that the Taiwanese office did not issue any visa. He further added, " if we have proof that the office has issued visa we will close it".

The diplomatic circle here observes that whatever the Foreign Office tries to heal Beijing's wounds the discord created over the Government's permission to the Taiwanese Liaison Office would not be able to erase the strain it already caused in Dhaka-Beijing relations.

The other decision for not signing the Free Trade Agreement of (FTA) of Bangladesh, India, Myanmar, Sri Lanka, Thailand-Economic Cooperation (BIMST-EC) has already been termed by political circle, trade bodies and media here as a "diplomatic blunder". At the BIMST-EC meeting in Thailand last month. Bangladesh delegation led by Foreign Minister Morshed Khan at the last moment abstained from signing the FTA unilaterally raising the demand for compensation to the revenue loss of member countries following the accord. Even the least developed countries like Nepal and Bhutan who joined the BIMST-EC recently did not agree with Bangladesh to raise the compensation package issue. The concerned quarters here feel that the decision of the Foreign Office and Commerce Ministry for not signing the FTA while all other member countries signed the accord leaving Bangladesh alone had embarrassed the country. They observe that Bangladesh became isolated on the FTA issue.

Though late, the Government has now realised the mistake and finally decided to sign the FTA. An inter-ministerial meeting on Saturday acknowledged the necessity to sign the accord and it has sent the proposal for the cabinet approval.

The two issues that raised diplomatic row also created sharp reaction among the Cabinet members. Talking to the Bangladesh Observer a senior Minister regretted the "how we can save the face of our Government, if such mishandling is done by certain ministries to deal with sensitive bilateral and regional issues"

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Interest rate cut on lending to enhance export stressed

The Bangladesh Observer

Commerce Minister Amir Khosru Mahmud Chowdhury on Sunday called for reducing financial service charge including interest on lending to six or seven percent to make the country's products competitive in the global market, reports BSS.

"We have to consider every segment of cost of production to compete with our product in the global market, and if the current rate of bank interest continues, survival in export market would become almost difficult, particularly after phasing out of multi fibre agreement (MFA) this year," he said while speaking as the chief guest at the opening session of a workshop.

The Commerce Minister said although the rate of export growth in January 2004 registered 28 percent higher against the export of same period of 2003, the country's export share in the global market stands at only 0.10 percent.

The workshop on the study report titled "The Efficiency and Effectiveness of Banking and Financial Service for Exporters" was organised jointly by ministry of Commerce and Bangladesh Export Diversification Project (BDXDP) at Hotel Purbani in Dhaka.

Commerce secretary Suhel Ahmed was present as the special guest.

Director of BDXDP Mohammad Abdul Karim and chief technical advisor of Coordination and Development unit of the project David Holbourne also addressed the opening session.

Senior research fellow of Bangladesh Institute of Development Strategy (BIDS) and consultant for the study Dr Atiur Rahman presented the report at the workshop.

Amir Khosru Mahmud said the country's banking sector has been enjoying profit at a rate of 600 to 700 percent by utilizing only a portion of total deposit with them.

Mentioning that there were a huge amount of idle money lying with the bank and financial institutions, he said if this money is utilized properly with minimum interest rate, the banks and financial institutions could earn more profit.

"A bank and financial institution must earn profit, but they should provide scope to their customers also to get such benefits," he said questioning the justification of huge profit margin in the banking sector.

Khosru referred to the problems faced by small and medium enterprises (SMEs) while taking financial support from banks. He identified the bank management system and collateral support as the main problems in this regard.

He said for a large enterprise like spinning mills it is just impossible to pay Taka 12 to 14 crore as interest to the bank annually after taking a loan of Taka 100 crore.

The Commerce Minister also called for eradicating other hindrances to the industrial uplift and export promotion in the country.

Suhel Ahemd said country's SMEs have to face challenges of global economic impact of post MFA period. He said the survival of the SMEs would become crucial during the post MFA period, if they could not improve their productivity and cut cost of production.

Dr Atiur Rahman said the commercial banks are the single most important source of institutional financing for exporter.

However, he said, many hindrances exist to get the loan quickly . High interest rate is also impeding proper financial support to the export oriented enterprises as well as hampering growth of export.

He said that high rate of interest is a major issue raised by exporters from all sectors but, central bank is not in a position to further lower the lending rate mainly due to non- performing assets and high deposit rate.

In this context, he recommended that Bangladesh Bank (BB) should continue to put its weight behind management reform in national commercial banks to improve their efficiency to lower their cost of banking operation.

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Trade capacity building for better market access suggested

The Bangladesh Observer

A two-day workshop on “Strengthening the Capacity for Multilateral Trade Negotiations with focus on the Doha Round” began in Dhaka at BRAC Center Inn on Monday, reports UNB..

The Commerce Ministry and United Nations Conference on Trade and Development (UNCTAD) jointly organized the workshop with financial support from the European Commission, said a press release.

The inauguration ceremony was attended by Commerce Minister Amir Khosru Mahmud Chowdhury as chief guest, State Minister for Cultural Affairs Begum Selima Rahman as special guest and Ambassador Esko Kentrschynskyj, Delegation of the EC as guest of honour.

In his address, Ambassador Kentrschynskyj stressed that trade-related capacity building has become an essential element in the EC-Bangladesh development cooperation.

In this context, an important objective is to further strengthen and consolidate Bangladesh’s negotiating capacity in multilateral talks to take full advantage of international trade arrangements.

The Ambassador pointed out that Bangladesh is already a vital player in the WTO negotiations and that it has played a constructive role as LDC spokesman. He also underlined that the multilateral trading system remains a high priority for the EU.

The EC in its current country strategy for Bangladesh has allocated 49 million Euro for trade capacity building and private sector development with the overall aim to promote export diversification and increase competitiveness.

This includes support to the WTO cell in the Ministry of Commerce and the Bangladesh Foreign Trade Institute, the release added.

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Prime Minister's office leads government 'E-volution'

The Bangladesh Observer

The Prime Minister's Office and the United Nations Development Programme (UNDP) signed an agreement on Thursday to harness the power of Information Communications Technology (ICT) for more efficient Governance.

Through a new project entitied, "Strengthening the ICT Capacity of Prime Minister's Office", UNDP will support the office to initiate the automation of work processes. The project is expected to run for one year, and is valued at USD 171,682.

Among other things, the automation will enable the Prime Minister's Office to track development projects managed by the office, and extend services to the public through web-based technology.

The project is also aimed at improving the capacity of staff to manage e-government systems, and determine the future ICT needs of the Prime Minister's Office.

The agreement was signed by A.M.M. Nasir Uddin, Additional Secretary, Prime Minister's Office, and C Q K Mustaq Ahmed joint Secretary, Economic Relations Division (ERD), Ministry of Finance, and Mr. Jorgen  Lissner, UNDP Resident Representative.

UNDP is actively supporting the Parliament, the Election Commission and BTRC in the area of ICT, with an overarching view to assisting the Government to provide better social services and information to the public.

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Export Processing Zones
Govt finally opts for limited TU activities

The government has finally decided to allow trade union albeit in a limited form in the export processing zones (EPZs).

Finance Minister M Saifur Rahman yesterday conveyed the decision to US Ambassador Harry K Thomas during a meeting at the finance ministry.

"EPZ workers will be given rights to practise limited unionism," Saifur told reporters after the meeting. "The law ministry has been asked to draft a law by March 25 for EPZ trade unions."

The EPZ trade unions will not be permitted to get involved with any political party, sources said. "If parliament is not in session when the law has been drafted, it will be made effective through an ordinance," Saifur said. "The law will be acceptable to all parties concerned."

The World Bank and the Bangladesh EPZ Authority have prepared a framework for the law after discussions with investors and US labour organisation American Federal Labour Congress and Industrial Organisation (AFLCIO).

The framework was presented at yesterday's meeting with Thomas, who reportedly found it acceptable. The meeting over, Thomas told journalists that the framework would be finalised in a few weeks.

He said introduction of trade union would not scare away investors and would be acceptable to all.

Earlier, the US agreed to give Bangladesh an extension of about two months to decide on allowing trade union in the EPZs. Bangladesh got bogged down in a trade conflict with the US that threatened cancellation of trade concessions if it did not allow EPZ unionism by January. But the overriding concern was that foreign investors opted to roll out of the country if unionism was allowed.

The two EPZs -- one at Savar and the other in Chittagong -- employ 130,000 workers in around 180 industrial units and boast South Korean and Japanese investments, apart from local investment to the tune of $600 million.

Bangladesh sat on the issue because GSP (generalised system of preference) has a comparatively low economic value in its total export basket.

Under GSP, Bangladeshi exports to the US fetch $40 million a year, but exports from the EPZs earn $1.2 billion, a fifth of the country's total export earnings.

Again, the US is the largest buyer of Bangladeshi products, accounting for 44 percent of its total exports -- mostly outside GSP.

Around $103 million was invested in the EPZs last year and fresh recruitments there increased to 10,000 in a country with high unemployment.

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Re-launch of WTO talks hinges on farm subsidy, S&D treatment
Commerce minister tells workshop

Re-launch of stalled WTO talks hinges on resolution of farm subsidy and special and differential treatment issues, Commerce Minister Amir Khosru Mahmud Chowdhury said yesterday in Dhaka.

Reduction of export subsidy on farm products and special and differential treatment can increase the world trade share for least developed countries (LDCs) and developing nations, the commerce minister said.

Khosru said developing countries are interested to negotiate further on Doha Development Agenda which covers agriculture and non-agriculture trade while rich countries are pressing for Singapore Issues which dwell on investment, competition, transparency in government procurement and trade facilitation.

"As rich countries are in advantageous position on global trade they should go for compromise," he said while addressing a workshop on "Strengthening the Capacity for Multilateral Trade Negotiations with Focus on Doha Round".

The Ministry of Commerce and United Nations Conference on Trade and Development (Unctad) organised the workshop with financial support from the European Commission.

Khosru said Doha agenda should be the benchmark of all WTO negotiations. Developed countries should provide special and differential treatment to LDC products to help increase their market share which is only 0.4 percent now, he added.

It is not possible for the LDCs to fully exploit preferential treatment like duty and quota free market access if these are not complemented by flexible and realistic rules of origin, he went on.

State Minister for Cultural Affairs Selima Rahman said LDCs must be aware of TRIPS (Trade-related Aspect of Intellectual Property Rights) as it would marginalise poor farmers.

"The farmers, who get seeds from previous year's harvest, should not be left at the mercy of multinational companies who hold patent of major crop seeds," she said.

Commerce Secretary Suhel Ahmed said Bangladesh has proposed to raise the LDC market share to at least 20 percent of the clothing market of the EU and ensure 30 percent market share for primary and low-tech manufactured products of LDCs in the EU to cut poverty level in poor countries.

Head of European Commission Delegation to Bangladesh Esko Kentrschynskyj said Bangladesh is not only a vital player in WTO negotiation but is also playing a constructive role as LDC spokesman.

He said European Commission has allocated 49 million euros ($59 million) for capacity building and private sector development in Bangladesh.

Norbert Lebale, coordinator of Technical Co-operation Wing of Unctad, also spoke at the inauguration of the two-day workshop.

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