ICSB Journal (January March 2018)

Volume : XX

Issue : 1

Contemporary Economic and Corporate Governance Compliance Issues

January - March 2018

Institute of Chartered Secretaries of Bangladesh (ICSB)

Institute of Chartered Secretaries of Bangladesh (ICSB) established under an Act of Parliament i.e. Chartered Secretaries Act 2010 is the only recognized professional body in Bangladesh to develop, promote and regulate the profession of Chartered / Company Secretaries in Bangladesh.

The Institute was initially established under a license from the Ministry of Commerce in 1997 as the Institute of Chartered Secretaries and Managers of Bangladesh (ICSMB) and subsequently converted to Institute of Chartered Secretaries of Bangladesh (ICSB).

The affairs of the Institute of Chartered Secretaries of Bangladesh (ICSB) are managed by a Council consisting of thirteen elected members and five nominees of the Government.

The major contribution of a Chartered Secretary is in the corporate sector.

Chartered Secretary is a requisite qualification to become a Company Secretary.

Company Secretary is an important professional, aiding the efficient management of the corporate sector. Company Secretary is a Statutory Officer under the Companies Act 1994. According to Bangladesh Securities and Exchange Commission (BSEC) all the listed companies should have a Company Secretary.

Company Secretary is the compliance officer of the company, who has to interact, coordinate, integrate and cooperate with various other functional heads in a company.

THE COUNCIL 2016-2019

EDITORIAL BOARD

Subscription Rate

Mohammad Sanaullah FCS Mohammad Bul Hassan FCS Md. Selim Reza FCS Nazmul Karim FCS Mohammad Asad Ullah FCS Itrat Husain FCS Md. Shahid Farooqui FCS Safiar Rahman FCS Md. Azizur Rahman FCS A. K. M. Mushfiqur Rahman FCS Gopal Chandra Debnath FCS Md. Anwar Hossain Chowdhury FCS Salim Ahmed FCS Munshi Shafiul Haque, Additional Secretary (IIT), GoB Nasreen Begum, Additional Secretary, GoB Mohammad Abu Faruque, Joint Secretary, GoB Prof. Md. Helal Uddin Nizami, Commissioner, BSEC Md. Mosharraf Hossain, Registrar, RJSC, GoB Editor Prof. Dr. Feroz I. Faruque FCS Members Itrat Husain FCS Bazlur Rahman Sikder FCS Kazi Ashiqur Rahman FCS Subash Chandra Moulick FCS Mohammad Shahajahan FCS Md. Shiful Islam ACS For Students : per copy Tk. 100; per year Tk. 350 Others : per copy Tk. 150; per year Tk. 560

Design & Print

: : : : : : : : : : : : : : : : : :

President Senior Vice President Vice President Treasurer Councilor Councilor Councilor Councilor Councilor Councilor Councilor Councilor Councilor Councilor Councilor Councilor Councilor Councilor

In this issue

Editorial

3

Message from the President

4

The Council 2016-2019

6

Institute News

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ARTICLES

Published by Institute of Chartered Secretaries of Bangladesh (ICSB)

(Established under Chartered Secretaries Act 2010 (Act No. 25 of 2010)

The views and opinions expressed in the articles published in this Journal are those of the writers only.

Administrative Ministry Ministry of Commerce Government of the People’s Republic of Bangladesh Institute Office Padma Life Tower (8th Floor) 115 Kazi Nazrul Islam Avenue Bangla Motor, GPO Box No. 3100 Dhaka-1000, Bangladesh Phone : +88 02 933 9957, 933 4878, 933 6972, 4831 5338 +88 02 4934 9578, 933 6901 (Extn.-101-108) Fax : +88 02 933 9957 Mobile : 01708 030804 E-mail : secretary@icsb.edu.bd, icsb@icsb.edu.bd Web : www.icsb.edu.bd Campus Padma Life Tower (7th Floor) 115 Kazi Nazrul Islam Avenue Bangla Motor, GPO Box No. 3100 Dhaka-1000, Bangladesh

Graduation of Bangladesh from LDC - A Historic Event!

- Prof. Dr. Feroz I. Faruque FCS

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Improved Management in SOCBs -Need of the day - Masih Malik Chowdhury FCS, FCA

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Role of The Supreme Audit Institution in Bangladesh to help Achieve Good Governance - Mohammad Shahajahan FCS

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AGM as per Provisions of the Companies Act-1994: Bane or Boon?

- Bipul Kumar Bhowmik FCS

30

Economic Shifts and Related Corporate Governance Issues due to Graduation Status of Bangladesh from LDC - Prodip Kumar Roy FCS1 - Gourav Roy2

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Emergence of Knowledge Economy from Traditional Economy - Babul Meah ACS

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Liquidity Crisis in Banking Sector and its Impact on Bangladesh Economy - Md. Mizanur Rahman

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One Belt One Road (OBOR) Initiative: Opportunities for Bangladesh - Rahat Mahmud

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Today’s Global Economic Challenges: An Overview - Razia Sultana

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Editorial

this issue...

CHALLENGES ARE OPPORTUNITIES AS RISKS ARE

I

n GDP growth rate Bangladesh stands among the top 15 Countries of the world. In 2017-18 Bangladesh has aimed GDP growth rate to 7.4%, while last year it was 7.2% and China has planned for 6.4% in 2017-18.

World Bank has predicted on GDP growth rate of 134 countries in 2018 and Bangladesh stands among the top 15 countries of the world which will exceed 6.4% growth.

Among the South Asian countries Bangladesh will stand third, even they predicted that during next two years Bangladesh will be able to maintain high growth rate. India will have 7.3%, Bhutan will have 6.9%, Pakistan will have 5.5%, Sri Lanka will have 5%, Maldives will have 4.9%, Nepal 4.6% and Afghanistan only 3.4%. In the global context even 6% growth of Bangladesh is still far better. According to the World Bank the countries which will have comparable growth in 2018 are: China, India, Bhutan, Vietnam, Cambodia, Ivory Coast, Djibouti, Ethiopia, Ghana, Laos, Myanmar, Philippines, Senegal and Tanzania. At long last in the same report World Bank has agreed that Bangladesh has achieved 7.2% growth last year.

The reasons behind high growth rate are higher value addition in production and service sectors, high internal demand and higher government investment. Among the competing countries, Bangladesh will have better trade of which Vietnam with 6.5%, Myanmar 6.7%, Laos 6.6%, Cambodia 6.9%, Indonesia 5.3%, and Malaysia 5.2% growth.

Venezuela (4.2%) and Equatorial Guinea (6%) may see negative growth this year.

Zimbabwe, Azerbaijan and Ecuador will not have even 1% growth. There likely to have 2.5% growth in USA, but in EU, Japan and United Kingdom will see lower GDP growth. Over all global growth will be 3.1%, having turnaround of global economy, with South Asia 6.9%, next East and Pacific Rim with 6.2% growth rate.

January - March 2018

In an estimate of the GED of the government of Bangladesh there will be a need of Tk. 93,000 crore in next 13 years for SDG, which is about 19 times higher than the current fiscal year’s budget. For SDG strategy on average about 50 new proposals were received from various ministries. About 42% of the SDG budget may come from the government sources, and the rest may come from private sector, foreign agencies and foreign investments.

The developed countries are to give 0.7% of their GNI to the LDCs and DCs, they also promised to transfer technology. After 7th 5 year plan the GDP growth is estimated at 9%, which is much higher that the 8th objective of SDG, which is estimated at 7% growth for LDCs. Good Governance and Corporate governance are the two brothers which need high attention for maintaining the statusco of graduation. Ethical education, ethical training and ethical practices are to be under scored at every sphere of life. Corruption must be curved and shunned. Corrupt people are to be strictly avoided-socially, culturally, politically, financially and religiously to the extent of giving salam and matrimonial relationship with these kind of people.

Proven corrupt people to have capital punishment publicly. You need not to punish many, only few or some will serve the purpose.

Prof. Dr. Feroz I. Faruque FCS Editor

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Message from the President TOP PRIORITY CHALLENGES WOULD NOT BE POSSIBLE TO ACHIEVE WITHOUT SUPPORT AND CONTRIBUTION OF MEMBERS

D

ear Professional Colleagues,

The prime objective of the Institute is to develop, promote and regulate the profession of Chartered/Company Secretary in Bangladesh, ICSB is proud of its past history and it further looks to future opportunities to advance the profession to the highest level. With these objectives in mind the Council is giving highest priority to enhance the opportunity for its members, students, corporate sector which will ultimately enhance employment and create working atmosphere where our members will be able to share their expertise with corporate sector. The Institute is committed to addressing the professional needs of close to 500 members who are committed to establishing good governance in the corporate sector of Bangladesh.

In the mean time some important things have been achieved by the Institute and some strong aspects of the Chartered Secretary profession are continuing. There is much to be done in the coming days. These are to incorporate Chartered Secretary profession to the right shape in the proposed Companies Act, proposed Corporate Governance Guidelines issued by the Bangladesh Securities and Exchange Commission and inclusion of Chartered Secretary profession in the Income Tax Ordinance 1984 as Tax Practitioner and Value Added Tax 2001 as VAT Agent.

New Companies Act The proposed Companies Act is expected to be placed in the Parliament this year. ICSB organized a workshop on

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‘Reforms of Companies Act 1994’. Honorable Secretary; Ministry of Commerce Mr. Subhashish Bose chaired the session. We have highlighted different issues of Chartered Secretaries' needs to be inserted in the new Companies Act. Commerce Secretary assured us that he would consider our proposals in the new Act. Besides, delegations from ICSB have participated in the different seminars, discussion sessions and dialogues organized by different trade bodies, Ministry of Commerce, GoB, Committee for new Companies Act and we have highlighted different aspects of Chartered Secretaries profession. Apart from this the Council duly submitted their recommendations to the Ministry of Commerce, GoB for inclusion in the proposed Companies Act. We do hope that our recommendations will be incorporated.

Without proper representation in the Companies Act, the profession would not be able to flourish as expected and Chartered Secretaries Act 2010 would have no visible effect to the corporate sector of Bangladesh.

Corporate Governance Guidelines Proposed Codes of Corporate Governance of Bangladesh issued by the Bangladesh Securities and Exchange Commission is supposed to come into effect shortly. We wish to place our sincere thanks to the Chairman, Members and Directors of the Bangladesh Securities and Exchange Commission for incorporating provision of the Chartered Secretaries Act 2010 in the proposed Codes of Corporate Governance. After having the proposed Codes of Corporate Governance, the Council formed a committee and according to the suggestions we have January - March 2018

submitted our recommendations to the Bangladesh Securities and Exchange Commission for considering in the final Code of Corporate Governance. We do hope that those will be considered in the final Code of Corporate Governance.

Finance Act 2018 Chartered Secretaries Act 2010 empowered Chartered Secretaries in Practice to practice Income Tax and Value Added Tax but Chartered Secretaries profession is yet to be inducted in the Income Tax Ordinance 1984 alongside of other two professional bodies. Because, existing provision is not sufficient to meet the requirement of Income Tax Ordinance 1984. Therefore, the Council strongly approached the National Board of Revenue for necessary footing in the Finance Act 2018. The Honorable Minister for Finance and Chairman of National Board of Revenue assured us that they would incorporate relevant provision so that Chartered Secretaries can move in the National Board of Revenue as Income Tax and Value Added Tax practitioner.

These are the top priority challenges for this time for Chartered Secretaries professionals. The Council has been doing their best towards achieving aforementioned objectives to benefit the members and profession as a

January - March 2018

whole. The Council alone cannot do so many things.

Whatever we achieved during past that was our common effort. The Institute could not have reached to present shape without the loyalty and active participation of the members. We acknowledge your support. So my continued thanks to members for their hard work and commitment.

We also gratefully acknowledge to our concerned ministry, regulatory bodies and concerned officials for their continuous support.

Now, the Institute seeks underpinning support with three major areas of activity this time from the members as in the past. Top priority challenges would not be possible to achieve without support and contribution of members. In conclusion I urge upon you to support and lend your helping hand with our activities so that we can go forward and create together a world class professional body.

May Almighty Allah always be with us.

With warmest regards to you all,

Mohammad Sanaullah FCS PRESIDENT

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The Council 2016-2019

Mohammad Abu Faruque Joint Secretary, GoB

Kazi Shamsul Alam

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January - March 2018

Institute News January - March 2018

T

he 1st quarter (January March) of the year 2018 was eventful for the Institute.

INTERNAL MEETINGS Council Meeting During the 1st quarter 2018, the Council met on March 5, 2018 in which the Council took the following decisions: • The result of different levels of CS Examination, July-December 2017 Session of the Institute; • The Guideline for the Members of ICSB regarding participation in International Seminar, Conference, Workshop and Meetings; • ICSB’s Annual Budget and Action Plan for the year 2018.

Meetings of Committees

the

Standing

Meetings of the following Standing Committees were held during this quarter:

• Corporate Governance Award Committee Meeting held on January 7, 2018.

Meetings of Sub Committees Meetings of the following Sub-Committees were also held during this quarter:

• Seminar and Conference Sub Committee met on March 8, 2018; • Information Technology Sub Committee met on February 10, 2018; • Corporate Laws Review Sub Committee met on March 28, 2018;

• Journal & Publications Sub Committee met on January 4, January 20 & February 24, 2018;

• Members’ Welfare and Recreation Sub Committee met on February 13, 2018.

• International Relations Sub Committee met on February 22, 2018;

ICSB Annual Picnic 2018

• •

• •

Like every year ICSB arranged annual picnic to get relief from the monotony Secretarial Practice Sub Committee of our routine life. The Annual met on February 13, 2018; Picnic-2018 of ICSB was held on Friday, January 19, 2018 at Sea Shell Project Development and Resort & Picnic Spot, Purbachal. The Implementation Sub Committee Members’ Welfare & Recreation met on March 1, 2018; Sub-Committee arranged the picnic of ICSB. Indeed it was a naturally Company Law Review Sub Committee met on March 24, 2018; beautiful spot but very close to Dhaka city. This year highest number (620 Dhaka Regional Chapter Sub nos) of members along with their Committee met on February 10, spouses and children participated in 2018; the Picnic.

• Professional Development Sub Committee met on January 24, February 27, March 8, 14 & 21, 2018;

The Picnic was inaugurated by the President of ICSB Mohammad Sanaullah FCS by releasing Balloons and Festoons. The Immediate Past

• The Executive Committee Meeting held on January 21, February 10, February 19 & February 26, 2018; • Membership & Registration Committee Meeting held on March 5, 2018; • Education Committee Meeting held on February 13, 2018; • Examination Committee Meeting held on January 24 and March 5, 2018; • Audit Committee Meeting held on February 11, 2018;

January - March 2018

The President of ICSB, Mohammad Sanaullah FCS inaugurated the Annual Picnic 2018

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drawn and gifts were, dinner set and a decorated blanked. There were 58 prizes for the raffle draw, among which I-Pad, Dhaka-Cox’s Bazar- Dhaka air ticket for couple and dinner set were the first, second and third prize respectively.

Orientation Programme of 41st Chartered Secretary Batch

Delighted Members of ICSB

The President of ICSB, Mohammad Sanaullah FCS handed over the prizes to the winners

President, Council Members, Fellow and Associate Members also participated in the inauguration programme.

There were also arrangement of recitation of rhymes and poems by the small children and songs by the members, spouses and children.

It was very much exciting that all the participating members were given two Polo Shirts for the male members, Ladies Shawl for the spouse and female members and Water Bottle/ Color, Pencil Box for children. Polo shirts were sponsored by UCB and Anwar Group of Industries.

Apart from this, member of the year and lucky couple of the year were

There were colorful and attractive events for the participants in different categories. Biscuit race and race for children, pillow passing for ladies, ball basketing for families, ball passing for senior members, balloon busting for young members, football and cricket for members.

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Institute of Chartered Secretaries of Bangladesh (ICSB) has organized an orientation program for the students of 41st Batch of Chartered Secretary at ICSB Campus, Dhaka on Friday, February 16, 2018 at 4:00 pm. The programme began with the recitation from the Holy Quran.

Mohammad Sanuallah FCS, President of the Institute inaugurated the programme by greeting the newly enrolled students with his blessings and urged the students to strive for academic excellence, personal values and social concern. He said that Chartered Secretary profession is now a challenging and rewarding profession in the country and talked about the plethora of opportunities in corporate sector at home and abroad. He also emphasized on the need of value addition, creativity and innovation in order to show excellence in professional field and to set a golden platform for the future generation. He added that the Chartered Secretary is the requisite qualification to become a

From Left: Kazi Shamsul Alam, Secretary, ICSB, Mohammad Sanaullah FCS President, ICSB, Safiar Rahman FCS and Nazmul Karim FCS

January - March 2018

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Company Secretary who plays very important role in the listed companies.

Safiar Rahman FCS, Chairman, Education Committee of the Institute discussed about the role of Chartered Secretaries in the corporate management and also corporate expectations from the new generation of management personnel.

Finally, Nazmul Karim FCS, Treasurer of the Institute gave the vote of thanks on behalf of the Institute. A good number of students were present in the orientation programme.

From Left: Salim Ahmed FCS, Mohammad Sanaullah FCS, President, ICSB Mohammad Bul Hassan FCS and Md. Selim Reza FCS

ICSB Observes Amar Ekushey February and International Mother Language Day ICSB observed Amar Ekushey February and International Mother Language Day with due solemnity and significance at the Conference Hall of the Institute. On this occasion Members’ Welfare and Recreation Sub Committee of ICSB organized a programme on behalf of the Institute on Wednesday, February 21, 2018 which includes hand writing competition, art competition and poetry recitation. A good number of ICSB Members, their spouses and children participated in the programme with patriotic zeal and enthusiasm. The programme began with the recitation from the Holy Quran and singing of the national anthem.

Mohammad Sanaullah FCS, President of ICSB inaugurated the program.

While speaking on the occasion, he emphasized that the main purpose of celebrating this day is to promote the awareness of language and cultural diversity. He also said that learning to speak in the mother tongue is very important for a child’s overall development. Being fluent in the mother tongue benefits the child in many ways. It connects him to his own culture, ensures better cognitive development, and aids in the learning of other languages.

January - March 2018

Chattogram Regional Chapter Sub Committee: Md. Reajul Hoque Shikder FCS, Md. Delowar Hossain ACS Babul Meah ACS, Mohammad Abu Salam ACS and other Members

Among others Senior Vice President Mohammad Bul Hassan FCS, Vice President Md. Selim Reza FCS, Chairman, Members’ Welfare and Recreation Sub Committee, Salim Ahmed FCS of the Institute participated in the programme.

MEETINGS EXTERNAL Meeting with Hon'ble Finance Minister ICSB President Mohammad Sanaullah FCS along with the other office bearers Mohammad Bul Hassan FCS, Senior Vice President, Md. Selim Reza FCS, Vice President and Nazmul Karim FCS Treasurer met Mr. Abul Maal A. Muhith MP, Honorable Minister, Ministry of Finance, Government of the People’s Republic of Bangladesh at his office

on February 25, 2018. The President of ICSB briefed the Finance Minister on various ongoing activities of the Institute and thanked him for his generous support and cooperation to the Institute.

ICSB President then requested the honorable Minister to allow the Chartered Secretary profession for Income Tax Practice (ITP and VAT Agent) like Chartered Accountants and Cost & Management Accountants under the Income Tax Ordinance 1984.

Honorable Minister took it very positively towards the development of the profession and assured that he will discuss the issue with the concerned experts for necessary action in short time.

Kazi Md. Shamsul Alam Secretary and Md. Shamibur Rahman ACS, Director

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Continuing Professional Development (CPD) programme on "Bangladesh Secretarial Standards Issued by ICSB� on Friday March 16, 2018 in a local hotel.

ICSB Delegate met Mr. Abul Maal A. Muhith MP Honorable Minister, Ministry of Finance, GoB

(A&F) of the Institute were also present during the Meeting.

Meeting with the Chairman, National Board of Revenue ICSB delegation led by its President Mohammad Sanaullah FCS along with officer bearers Md. Selim Reza FCS, Vice President and Nazmul Karim FCS, Treasurer of the Institute met Mr. Md. Mosharaf Hossain Bhuiyan ndc, Senior Secretary, Internal Resources Division (IRD) and Chairman, National Board of Revenue at his office on March 14, 2018. The President of ICSB briefed the Chairman on various ongoing activities of the Institute and thanked him for his generous support and cooperation to the Institute.

The President, ICSB requested the Chairman, NBR to allow Chartered Secretary professionals to become Income Tax Practitioners and VAT Agent like Chartered Accountants and Cost & Management Accountants under the Income Tax Ordinance 1984.

The Chairman, NBR took this request very positively and assured his cooperation for the development of the Profession of Chartered Secretary.

Kazi Md. Shamsul Alam, Secretary and Md. Shamibur Rahman ACS, Director (A&F) of the Institute were also present during the Meeting.

CPD Programme on "Bangladesh Secretarial Standards Issued by ICSB" Institute of Chartered Secretaries of Bangladesh (ICSB) organized a

ICSB Delegate met Mr. Md. Mosharraf Hossain Bhuiyan, ndc, Chairman, NBR

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Mohammad Asad Ullah FCS, Chairman, Professional Development Sub Committee chaired the CPD programme and summed up the whole session. In his welcome address, he stressed the importance to enforce the Secretarial Standards (BSS-1, BSS-2, BSS-3 and BSS-4) for integration, harmonization and standardization of diverse secretarial practices prevailing in the country and requested the Chief Guest and Special Guest to incorporate the provisions in the new Companies Act and revised Corporate Governance Guidelines initiated by Ministry of Commerce and Bangladesh Securities and Exchange Commission (BSEC) respectively. He requested the BSEC to incorporate a mandatory clause in the revised Corporate Governance Guidelines for appointment of Chartered Secretary in every listed company as Company Secretary who will contribute for the economic development as well as to achieve SDGs of Bangladesh.

Mohammad Sanaullah FCS, the President in his address pointed out that the Institute of Chartered Secretaries of Bangladesh is a regulatory body to promote, develop & regulate the Profession of Chartered Secretaries in the Country in Compliance with the requirement of the Chartered Secretaries Act. 2010.

The Council of the Institute of Chartered Secretaries of Bangladesh (ICSB) established a Secretarial Standard Board (SSB) to develop and release Secretarial Standards on Corporate Management in the year 2012. Subsequently, SSB released 4 (Four) Secretarial Standards (SS) on (I) Board Meeting (II) General Meeting (III) Minutes (IV) Payment of Dividend.

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From Left: Prof. Dr. Feroz Iqbal Faruque FCS, Md. Azizur Rahman FCS, Mohammad Asad Ullah FCS Mr. Shaubhashish Bose, Secretary, MoC, Prof. Swapan Kumar Bala, Commissioner, BSEC Mohammad Sanaullah FCS, President, ICSB, M. Naseemul Hye FCS and Safiar Rahman FCS

The Institute has been making consistent efforts to sensitize the law makers about the significance of Secretarial Standards. The Council brought to the notice of the Honorable Secretary of the Ministry of Commerce the importance of incorporating Secretarial Standards in the new companies Act at the ICSB workshop on Reforms of Companies Act 1994 at the 20th anniversary and at the concerned Ministry while presenting proposals for new Companies Act. The President also appraised the Chairman, BSEC and other officials about the need to include Secretarial Standards in the Corporate Governance Guideline, which were duly incorporated in the proposed CG Guidelines. The President thanked BSEC for realizing the needs of the corporate sector.

The formulation of Secretarial Standards by SSB of ICSB is a unique and pioneering step towards Standardization of diverse Secretarial Practices. Similar Standards are also in existence in the world. Indian Companies act 2013 under section 118 (10) mandated that every company to observe secretarial Standards formulated by the Institute of Company Secretaries of India (ICSI).

Further section 205(1) of the Indian Companies Act 2013 lays down the functions of the company Secretary which inter-alia ensures that the January - March 2018

company complies with the applicable SS in the Secretarial Audit Report.

The adoption of the Secretarial Standards by the corporate sector will have substantial impact on the quality of company secretarial practices being followed by the companies, making them comparable with the best practices in the world.

The President also requested the Chief Guest and the Special Guest to make Secretarial Standards mandatory like India and give opportunity to Chartered Secretaries to serve the corporate world with greater responsibility.

The president appealed to the Hon’ble Chief Guest to include a mandatory provision in the new Companies Act that every Company whose paid up capital is Tk 10 crores and above should have a full time Company Secretary.

Mr. Shubhashish Bose, Secretary, Ministry of Commerce, Government of the People’s Republic of Bangladesh attended the programme as the Chief Guest. He said that the present government has taken lot of initiatives to attract foreign direct investments (FDI) in Bangladesh and establish good corporate culture in the country. He also expressed his view that Professional Institute’s like ICSB should come forward and share their knowledge regarding the development process of the Country. He assured that the recommendations made by ICSB members in this programme for incorporation of the provisions of Secretarial Standards 1, 2, 3 and 4 in the Companies Act will be taken into consideration, so that the corporate sector of the country will be developed and the nation will be benefitted as a whole.

The President of ICSB met the Newly QCS

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companies of the country, Corporate Leaders and Government Officials.

Meeting with the Newly Qualified Chartered Secretaries

Prof. Dr. Swapan Kumar Bala, Commissioner, Bangladesh Securities and Exchange Commission (BSEC) attended the programme as the Special Guest. He said that Bangladesh is on the path of rapid development and already graduated from Least Developing Country status. ICSB is a professional Institute and can work with BSEC to establish good governance in the corporate sector of Bangladesh. He appreciated the role of Chartered Secretaries in a company for compliance with the rules and regulations imposed by regulatory authorities from time to time. BSEC will do everything for the development of ICSB profession. He also assured that necessary measures would be taken to incorporate the Secretarial Standards issued by ICSB in the final revised Corporate Governance Guidelines initiated by BSEC for the development of capital market of the country.

Mohammad Sanaullah FCS, President along with Vice President Md. Selim Reza FCS, Treasurer Mr. Nazmul Karim FCS and Council Member Mr. Salim Ahmed FCS of the Institute met the newly Qualified Chartered Secretaries (QCS) of the Institute on Saturday, March 24, 2018. The The Newly Qualified CS President of ICSB congratulated the A lively question & answer session was QCS and briefly discussed on the held at the later part of the programme guidelines for Internship Program. He, where the Commissioner, Bangladesh in his speech, emphasized on the Securities and Exchange Commission importance of ethical standard to be a (BSEC) and Paper Presenters answered true professional. . He advised them to different questions of the participants. seek guidance from the Council and Senior Fellow Members of the Institute The Program was attended by a large when they feel it necessary. He further number of Members of the Institute directed them to be involved with the who are working in different listed public limited company for their

ICSB President handed over Cheque to the Successors of Late Rafiqul Islam FCS

Two Keynote Papers were presented in the CPD programme by Md. Azizur Rahman FCS, Council Member of ICSB on Secretarial Standards 1 and 2 and the other one was presented by M. Naseemul Hye FCS, former Senior Vice President of ICSB on Secretarial Standards 3 and 4.

Official discussants of the session were Dr. Feroz Iqbal Faruqe FCS, former Senior Vice President of the Institute and Safiar Rahman FCS Council Member of the ICSB. They gave valuable inputs in their discussions.

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ICSB President handed over Cheque to the Successors of Late Safir Uddin ACS

January - March 2018

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Internship Program. Other Council Members discussed on the significance of Company Secretaries to establish Corporate Governance and economic development of Bangladesh.

Financial Assistance from ICSB Members Benevolent Fund On 24th March, on behalf of the Trustee board, President of ICSB Mohammad Sanaullah FCS handed over financial assistance of BDT 2,00,000 (Two Lacs) to the successors of Late Md. Rafiqul Islam FCS and Late Md. Safir Uddin ACS ICSB team at Jatiyo Smriti Soudho

Beneficiaries expressed their wholehearted gratitude towards “ICSB Council”. The President of ICSB Mohammad Sanaullah FCS spent few hours with them and expressed his continuous support and future cooperation.

Visit to National Martyrs' Memorial in Savar

ICSB Team Paid Tribute with Bouquet of Flowers at Jatiyo Smriti Soudho

A team of ICSB members and officials lead by the Treasurer Mr. Nazmul Karim FCS paid tributes to the Liberation war martyrs on Monday, March 26, 2018, which marked the 48th independence day of Bangladesh. They reached Jatiyo Smriti Soudho (National Martyrs' Memorial) in Savar early in the morning to pay the floral tributes in remembrance of the souls who sacrificed their lives to earn Bangladesh liberation from the then West Pakistan after a bloody war. After placing the wreaths, ICSB team stood in solemn silence for some times as a mark of profound respect to the martyrs.

Results of the Chartered Secretary (CS) Examination January 2018

ICSB Team in Front of Jatiyo Smriti Soudho

January - March 2018

The Council of the Institute of Chartered Secretaries of Bangladesh (ICSB) in its meeting held on 5th March 2018 has announced the results of the Chartered Secretary examination of January 2018.

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ÂŤ Roll Nos. of the successful candidates are as follows: C.S. Executive Level-I: Roll No.: 001, 006, 015, 022, 025, 026, 027, 028, 040, 044, 048, 056, 057, 058, 070, 071, 075, 076, 079, 080, 084, 085, 086 and 090.

Total - 24 (Twenty Four) C.S. Executive Level-II: Roll No.: 106, 110, 111, 116, 118, 119, 121, 122, 140, 159, 168, 170 and 172.

Total - 13 (Thirteen) C.S. Executive Level-Ill: Roll No.: 180, 182, 184, 194, 198, 202, 213, 215, 217, 225, 228, 231, 236, 238, 240, 245, 251 and 252.

Total - 18 (Eighteen) C.S. Professional Level-I: Roll No.: 001, 006, 008, 012, 014, 016, 017, 018, 019, 021, 023, 025, 027, 029, 035, 041, 043, 052 and 053.

Total 19 (Nineteen) C.S. Professional Level-II (Qualified Chartered Secretary) Roll Number and Name: Sl. Roll Name of the Students 01 P-061 Md. Ibrahim Khalil 02 P-063 Hubert Boidya 03 P-070 Mohammad Sohel Rana 04 P-073 Md. Anowar Hossain 05 P-076 Chan Mia

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NEWLY ELEVATED FELLOW MEMBERS During the 1st Quarter of 2018, the Council has elevated 6 Associate Members to Fellow Members. The newly elevated Fellow Members are: F-0201

Mohammad Monirul Islam Khan FCS Company Secretary Bangladesh Infrastructure Finance Fund Ltd.

F-0202

Md. Zillur Rahman FCS Sr. Vice President & CFO NRB Global Bank Limited

F-0203

Shahadat Hossain Chowdhury FCS CFO & Company Secretary CEAT AKKHAN LTD.

F-0204

Muhammad Aminur Rahman FCS Company Secretary PRAN-RFL Group

06 P-078 Md. Nazrul Islam 07 P-081 Md. Mozahidul Islam

F-0205

08 P-084 Md. Mijanur Rahman

Mohammad Mahtab Uddin FCS Vice President- Human Resource Division Mercantile Bank Limited

09 P-085 Sonjoy Maitra 10 P-086 Md. Abdur Rahman Rony 11 P-087 Tanmoy Kumar Ghosh 12 P-089 Md. Mamun Hossain 13 P-093 Mohammad Abir Islam 14 P-094 Mohammed Quamruzzaman Khan 15 P-095 A.B.M. KalimUllah

F-0206

A. S. M. Sayem FCS Company Secretary NCCB Securities and Financial Services Ltd.

16 P-097 Md. Ahsanul Hasan 17 P-098 Mohammad Nuruzzaman

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NEWLY ADMITTED ASSOCIATE MEMBERS

During the 1st Quarter of 2018 the following 7 Chartered Secretaries were admitted as Associate Members of the Institute: A-0480

A-0481

Mohammad Golam Kibria ACS Advocate, Supreme Court of Bangladesh Head of GK CHAMBERS

Shahriar Molla ACS Assistant Company Secretary Stylecraft Limited

A-0482

A-0483

Md. Mohsin Reza Khan ACS Senior Manager & Company Secretary Prime Finance & Investment Limited

Md. Abdur Rahman ACS General Manager (Finance & Accounts) Impulse Hospital

A-0484

A-0485

Mohammad Mahbubur Rahman ACS Deputy General Manger (CSIM) Teletalk Bangladesh Limited

Sanjib Baran Roy ACS Assistant Manager (Company Affairs) Square Group

A-0486

Md. Saiful Islam ACS Officer United Commercial Bank Ltd.

January - March 2018

15

Institute News

ÂŤ C.S. Final Qualified

During the 1st quarters of 2018 the Following Students were Qualified as Chartered Secretary

CS-3336 Md. Ibrahim Khalil

CS-3672 Hubert Boidya

CS-2880 Mohammad Sohel Rana

CS-3147 Md. Anowar Hossain

CS-3633 Chan Mia

CS-1483 Md. Nazrul Islam

CS-2055 Md. Mozahidul Islam

CS-3613 Md. Mijanur Rahman

CS-3480 Sonjoy Maitra

CS-3638 Md. Abdur Rahman Rony

CS-3664 Tanmoy Kumar Ghosh

CS-2496 Md. Mamun Hossain

CS-3644 Mohammad Abir Islam

CS-3667 Mohammed Quamruzzaman Khan

CS-3594 A.B.M. Kalim Ullah

CS-3792 Md. Ahsanul Hasan

CS-3685 Mohammad Nuruzzaman

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January - March 2018

Institute News

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Introduction of New Employees KAZI SHAMSUL ALAM Secretary

Kazi Shamsul Alam joined as Secretary, ICSB on November 15, 2017. He was member of the BCS (Administration) Cadre and retired as Joint Secretary to the Government. While serving the Government, he was Commercial Counselor at the Bangladesh Embassy in Washington, D.C., USA, Director, Bangladesh Public Administration Training Centre (BPATC) and Additional Deputy Commissioner (ADC), Narayanganj. After retirement from the Government, he worked as Secretary General, Shippers Council of Bangladesh, Secretary, BGMEA and Government Liaison Specialist, USAID’s Bengal Tiger Conservation Activity Project.

Mr. Alam did his graduation and post graduation in Social Welfare from Dhaka University.

MD. SOHEL MOLLICK Deputy Secretary

Md. Sohel Mollick joined as Deputy Secretary, ICSB on March 18, 2018. Mr. Mollick worked for more than 14 (fourteen) years in different reputed organizations. Before joining ICSB he was the General Manager at Empire Group.

Mr. Mollick completed his MBA (International Business) from Maastricht School of Management and BBA (Finance) from IUB. MEHEDEE HASAN Deputy Director (Education)

Mehedee Hasan joined as Deputy Director (Education) on April 1, 2018. He successfully served for more than 10(ten) years in different top ranking private Universities and MNC. Before joining here, he was the Assistant Registrar at North South University.

Mr. Hasan completed B.Sc. and M.Sc. in Fisheries & Marine Resource Technology from Khulna University. He also achieved PGDHRM form Bangladesh Institute of Management.

MD. KAMRUL ISLAM KHAN Assistant Director–HR & General Administration

Md. Kamrul Islam Khan joined as Assistant Director–HR & General Administration on April 1, 2018. He successfully served for 11 (eleven) years in top ranking private Universities, college and business organization. Before joining ICSB, he served at Bengal Media Corporation Ltd. (Rtv) as a Deputy Manager, HR & Admin.

Mr. Kamrul achieved MBA (HRM) from East West University and MA (English) from State University of Bangladesh. He also completed Advanced Certficate in Managerial Communication from IBA, University of Dhaka.

January - March 2018

17

ARTICLES JANUARY - MARCH 2018

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GRADUATION OF BANGLADESH FROM LDC - A HISTORIC EVENT! - Prof Dr Feroz I. Faruque FCS

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above for elevation from LDC status which is 72.9 for Bangladesh. In case of EVI the standard index is 32 or less which is 25 in Bangladesh, meaning Bangladesh is much ahead of the standard index in all aspects.

The EVI is a composite index made of several indicators which are all measured and aggregated using the same min-max procedure as for the HAI but with different weights by indicator. EVI indicator assess the economic and agricultural vulnerability of a country and therefore higher the EVI, greater the vulnerability and worst the situation of the country.

In calculating gross national income (GNI) in U.S. dollars for certain operational and analytical purposes, the World Bank uses the Atlas conversion factor instead of simple exchange rates. The These criteria are reviewed every three years by the Committee for method uses a three-year average of Development Policy (CDP) of the exchange rates to smooth effects of transitory exchange rate fluctuations, United Nations Development Policy adjusted for the difference between and Analysis Division (UNDESA). the rate of inflation in the country The GNI per capita provides The idea of the EVI is to establish information on the income status of indicators expressing the occurrence and it reduces the impact of exchange rate fluctuations in the a country. GNI is equal to the gross of shocks, both economic and domestic product (GDP) less natural. The EVI comprise currently cross-country comparison of national incomes. The borderline for primary incomes payable to the following indicators: -instability a developing country being a LIC non-resident units plus primary of exports of goods and services -instability of agricultural today is very close to the often production-population size quoted two dollars a day per LDCs GET ACCESS TO -share of agriculture, forestry capita income.

CONCESSIONAL FOREIGN and fisheries -merchandise ASSISTANCE, PREFERENTIAL export concentration The 2017 List of Low, MARKET ACCESS WITH DUTY -homelessness due to natural Lower-Middle, and UpperFREE & QUOTA FREE MARKET disasters and climate change.

Middle income economies ACCESS FOR MOST OF THEIR There are currently 47 included Low-Income EXPORT PRODUCTS. countries in the LDC Economies ($1,025 or less) are Afghanistan, North Korea, Ethiopia, Nepal etc, Lower-MiddleIncome Economies ($1,026 to $4,035) are Bangladesh, India, Sri Lanka, Bhutan, Cambodia, Philippines, Indonesia etc. and Upper-Middle-Income Economies ($4,036 to $12,475) are Algeria, Argentina, Belarus, Iran, Romania, South Africa, China, Thailand, Cuba, Maldives etc.

The standard GNI of a country should be US$ 1230 for graduating from the LDC group which, in case of Bangladesh, is now US$ 1272. It said the standard of human assets index of a country needs to be 66 or January - March 2018

incomes receivable from non-resident units. Values are expressed in current United States dollars, calculated according to the World Bank Atlas method and reflect an un-weighted average of three years.

The Human Asset Index assesses the human capital of a country. It is an aggregated index of four equally weighted criteria of (a) under 5 mortality rate, (b) percentage of population under nourished, (c) gross secondary school enrollment ratio and (d) adult literacy rate.

category; 33 in Africa, 13 in Asia and the Pacific and 1 in Latin America.

There are some benefits for being an LDC, a variety of benefits are granted. These benefits cannot really be said to be granted by the world as a whole, neither by the UN. They are granted by development partners and the major benefits associated with least developed country status vary among donors. The benefits fall into four main areas: (a) preferential market access, (b) special treatment regarding World Trade Organization-related obligations; (c) ODA and other forms of

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« development financing and (d) technical cooperation and other forms of assistance.

LDCs get access to concessional foreign assistance, preferential Market Access with duty free & quota free market access for most of their export products. They get priority access to technical assistance for capacity building under ‘Aid for Trade’ assistance. They enjoy flexible terms for implementation of different international agreements including in the areas of trade, Trade related intellectual property rights (TRIPS), standards and also reduced financial obligations and contribution to international institutions. The graduated LDCs will continue to receive all special and preferential treatments for the next three years after graduation as well as also during the treatment for the next three years after graduation as well as also during the preceding six years, i.e. six years after reaching the threshold mark.

Introduction Sixth five year plan for the period 2011-2015 explicitly targeted the attainment of middle income status by 2021. As far as becoming an MIC is concerned, Bangladesh should be recognized as having achieved the status back in 2015, well ahead of the target 2021. It was undoubtedly a great milestone in Bangladesh’s developmental journey for which credit was overdue to the government of the day and the people of Bangladesh. Thus Bangladesh crossed the 2015 lower-middle-income country inclusion threshold of US$1046, six year earlier than expected. World

bank for its operational lending activities, categorises countries into four groups based on GNI per capita-low- income, lower- middleincome, middle- income, upper –middle- income and high- income, the lists of which are updated every year. Even if a country has high income owing to, for instance, its natural resources, it may still be considered an LDC due to weak social progress or vulnerabilities to external shocks.

UNCTAD conference in Istanbul in 2011for implementation of work plan, the LDC countries got time up to 2020.

UN has been thinking of pulling out 50% of the 48 LDC countries to developing status by 2020. The economy of Bangladesh is no more so much dependent on foreign loans and grants as it was earlier, but corruption is the main enemy of Bangladesh and its people.

Within the LDCs the number of lowincome countries decreased, while the number of lower –middleincome, upper-middle- income and even the high- income countries increased over the years. Equatorial Guinea was once a high- income country retaining LDC status that later slided back to the upper-middle-income category, despite its graduation from the category. There are two ways a country can graduate from the LDC category: meet two out of the three graduation criteria or have GNI per capita that is twice the graduation threshold. These criteria must be met at two consecutive triennial reviews to effectively graduate after three more years. Decisions are not automatic as country considerations are duly assessed. At least 6 years

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needed for a country to graduate after it has met the criteria for the first time. The status of developing country raise prestige of a nation/ country and at the same time benefits of LDCs reduced in phases.

Bangladesh needs internal reform and capacity building to finance own development programs and become self-dependent. We have to upgrade from beggar to self-reliant.

The UN gave LDC status to 17 countries in 1971, now the total number of LDCs is 48, after Bangladesh’s graduation there remains 47 countries now. Five countries have so far graduated from LDC status: Botswana in 1994, Cape Verde in 2007, the Maldives in 2011, Samoa in 2014 and Equatorial Guinea in 2017. The UN reviews the LDC list every three years and makes recommendations on the inclusion and graduation of eligible countries.

The UN did the review in 2015 when three countries including Nepal and Bhutan became eligible for graduation from LDCs. There are three benchmark criteria for eligibility of graduation from LDC to DC as under: In a major leap forward Bangladesh has qualified and has graduated to a Developing Country from an LDC. UN Committee for Development Policy (CDP) officially communicated this on March 17, 2018 i, e on the Birth Anniversary of Bangabandhu Sk. Mujibur Rahman.

Bangladesh has achieved all the three threshold as mentioned in the table above. The HAI is an indicator of nutrition, health, adult literacy and secondary school enrolment rate.

EVI is an indicator of natural and

Gross National Income (GNI)

Human Assets Index (HAI)

Economic Vulnerability Index (EVI)

Minimum Requirement>

US$1230

66

32 or below

Bangladesh Score>

US$1272

72.8

25

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trade related shocks. Despite repeated natural calamity, climate change and huge influx of Rohinga (1.5 million) into Bangladesh, yet the country has been well managed and absorbed unexpected shocks and good performance of its economy successively.

Sustainability of Graduation UN Committee for Development Policy (CDP) will review Bangladesh’s progress in 2021, to see the country’s sustainability of graduation, a transition period of three years. If the country maintains its position in all the three categories for the next six years, it will eventually graduate from LDC block. It is so amazing that Bangladesh is the only country to have met all the three criteria at a time for becoming eligible to graduate from the LDC group.

Bangladesh has to pass two more reviews in 2021 and 2024 respectively to get out of LDC list. Two other countries Myanmar and Laos have also become eligible to leave the LDC group.

Implications of Bangladesh’s Graduation Once the country gets out of the LDC group in 2024, it will be given a three year transition period before it loses duty free quota free market access to the European Union under the Everything but Arms (EAB) facility for LDCs. The benefits of technical cooperation and other forms of assistance such as fund support for scholarship, fellowship, participation for special training as well as for research may be pulled out. The scope of credit accessibility will also be shirked. According to a study by ERD, government of Bangladesh the country may lose about US$2.7 billion in export earnings every year once it graduates

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from LDCs. No grant will be available, all will be debt, government should be very cautious in all its dealings and make high government officials fully responsible/ accountable for proper use of such debts. We will enjoy equal benefits that the other countries get as developing nations, we won’t be deprived of facilities. We will feel a psychological boost and proud that we are no longer a beggar country, we have to come out of our general bad habit of saying “we are poor”. Poors do not have any prestige, dignity and moral courage.

Critical Analysis The country needs to reduce under nourished population faster to achieve higher grade on the Human Assets Index. Reducing poverty will help increased number of nourished population. Challenges are there for economic vulnerability. Dependency on garments exports to be substituted by other exports of goods and services of higher local value addition. Trade policy, logistics and business regulations to be more business friendly for export development and diversification.

Though EU GSP facility will be closed down, but for availing GSP plus serious efforts must be started from right now. We have to have our serious initiatives in East Europe, Russia, Africa, South America and explore new market places for our products and services globally. Over all the country must be more effective in economic diplomacy.

Bangladesh will lose benefits of LDCs in terms to duty free, quota free market access, non-compliance of agreement on trade related aspects of intellectual property rights (TRIPS) flexibilities and patent protection for pharmaceutical products. Export subsidy will be stopped, due to these Bangladesh will

face challenges in terms of competitiveness in the global market.

However, during the transition period the country will continue to enjoy preferential market access under WTO regime. Longer transition to implement WTO agreements, flexibilities regarding WTO rules, and priority to delivering technical assistance. Bangladesh will only lose benefits after second terminal assessment in March 2021

by CDP. Then there will be a transition time of three years, means till 2024. EU the largest trading partner of Bangladesh will allow another three years, i,e until 2027 for transition. Bangladesh will have full nine years to prepare and brave the graduation challenges. Bangladesh has overcome many obstacles since its birth in 1971 including US GSP withdrawal, ACCORD, ALLIANCE pressure after Ranaplaza disaster (ultimately it turned to be good for Bangladesh) and many other trade barriers/restrictions last of all Rohinga influx etc since August last year. The country has tripled its RMG exports to $35 billion in a decade. If we can stand on our own feet in next 6 years’ time new facilities will crop up/come up in front of us, the world is now appreciating the economic success of Bangladesh.

Our GDP growth has reached to 7.65%. Economic power has been enhanced and per capita income has been doubled, which is now US$1752. Bangladesh is now set to reach the middle- income country by 2021 and to reach high income/rich country by 2041.

What is Next?

Agricultural production to be stable, though availability of farm land is a great challenge. Population growth rate to be reduced, man to turn manpower, population dynamics to be diversified. Natural disaster is uncertain, global warming is a great

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« issue for Bangladesh. There are obstacles such as weak infrastructure, bureaucratic hustles, misuse of fund/corruption, untrained/ unskilled people, energy sustainability, weak governance etc.

Bangladesh needs to improve its infrastructure sector with more efficiency. True implementation of one stop service, skill development, faster and balanced application of technology, ICT and automation in industrialization and good governance, more accountability of government servants, control of corruption, strict banking control, better banking services.

Unfortunately, once a US Secretary of State- Henry Kissinger a Jew despised Bangladesh as a ‘bottomless basket’?? which is now an iconic development basket case of the world. Surprisingly many in the country used to quote this illiterate visionless guy, a conspirator too frequently. Now Bangladesh is set to a middle income country by 2021, by 2030 attainment of sustainable development goals and by 2041 a developed country having economic and social stability.

For example, due to traffic congestion daily 50 lac working hours are lost, other than this people are facing financial and health hazards, accidents including fatal accidents what has negative influence in the economy. If such traffic pressure continues economy will see total stoppage soon. Yearly loss is about 55000 crore taka, of which if proper steps are taken about Tk. 22000 crore wastage could be stopped in a year, which is clearly 2/3rd of Padma

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bridge cost. Dhaka traffic jam second in the world, but the huge loss could be minimized thus to mitigate traffic congestion the important steps are; Pushing out the NGOs, RMGs to district level, restrict motor cycle licence, more public bus, metro rail, under pass, uncoordinated construction and delay in completion of construction works, pushing out the shop keepers from walkways.

Irresponsible traffic control, throwing out many so called VIP sticks (flag stands) from the vehicles, which are mainly responsible for traffic violation, we are wondered to see an idea of separate lane for stick VIPs! Rickshaws may be only in the by lanes. Specific bus stoppage in the road side, must not be in the middle of the street. While there are only two VIPs in the country by constitution, but in the street we can see thousands of stick VIPs (cars with VIP sticks- (flag stands). It is not the end of the VIP story, there are also VVIPs, which is unconstitutional.

Concluding Remarks Of course Optimistic- ‘Himmat se Larna, Akkel se Chalna’ About economic Freedom issue the Heritage Foundation of USA produces research reports having a ranking list since many years now, wherein Bangladesh stands at 128th position out of a ranking of 180 countries and among 41 Asian countries it is in the 28th position.

But it is interesting to observe that Bangladesh is coming up every year bypassing countries like India, Pakistan, where in India and Pakistan

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in the 130th and 131st position respectively. Though Bangladesh stands at 128th position like last year but its point increased by 0.3% this year. In 2016 Bangladesh was in 137th position and has come forward by 9 positions in a year.

Heritage Foundation’s Economic freedom is something more than business environment: means to ensure/create such an environment, where entrepreneurs can perform their activities freely and which can help the country to march forward.

Through economic freedom; people are empowered, standard of living is enhanced. In preparing the economic freedom index; rule of law, volume of government income and expenditures, quality/efficiency of control environment and open market environment; these 4 criteria are considered and these are again broken into 3 categories each, making a total of 12 criteria. Under rule of law; right to property, effectivity of judiciary, clean image/cleanliness of the government, under government income and expenditures: tax burden, government income and expenditure and revenue situation, under the control efficiency: freedom of business, labour rights and freedom of monetary policy, in open market criteria trade opportunities, investment opportunities, and financial opportunities. Go ahead Bangladesh, Cheers!! » About the Author Fellow Member of the Institute & Former Senior Vice President

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IMPROVED MANAGEMENT IN SOCBs -NEED OF THE DAY - Masih Malik Chowdhury FCS, FCA

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ay back in 1983 during the practically favoured by regulator, bureaucracy & lack of commercial regime of then Army Central Bank. These favours to aptitude in protected regime & based Chief Lt. Gen. H M NCBs being into the ownership of upon welfare motive as Government Ershad private sector state had started to lead them to Banks. Inefficiency of employees was banks started coming into business in delinquent bankers in management. often not dealt with disciplinary Bangladesh. The 4 pioneers were These banks are now called State actions which has in turn aggravated Arab Bangladesh Bank, IFIC Bank, Owned Commercial Bank. These 4 (SOCB) banking sector.

Islami Bank Bangladesh Ltd & SOCBs have been getting constant National Bank Ltd. In fact, these favours from government. These The presence at large of PCBs banks opened up the vista of private however created bankers who left started diluting the position in sector banking in Bangladesh. They NCBs/SOCBs to join PCBs. These business of SOCBs. Government are termed as First Generation Banks bankers however performed with sector banks were left in shambles in our country. It was welcome by immensely professional excellence in due to absence of professionals who many & the State Owned private sector. Being in NCB sector moved at higher attractive packages Commercial Banks (SOCBs) started they could not excel well due to either to private sector. Those feeling the pinch of competition regulated regime or government who remained in SOCBs were mostly without preparation to face the new controlled intervention scenario. But reluctant to take new challenges in situation & increasing its own NCB’s gave birth to a new generation the private sector. Also performers in capabilities. On the contrary SOCBs were gradually allured this led to SOCBs persistently to PCBs. The rescue in SOCBs THE LOAN PORTFOLIOS ARE deteriorating pace. were however initiated by CONCENTRATED IN 5% OR Central Bank that took LESS BRANCHES IN ALL SOCBS. The downward pace measures to recruit new AN INORDINATELY HIGH accelerated as more Private generation bankers into the NUMBER OF INCENTIVE Commercial Banks (PCBs) SOCB stream. A banker’s BONUSES ARE PAID ON THE were given license to entry. recruitment committee came BASIS OF BASE PAY TO ALL in to recruit for the SoCBs to EMPLOYEES WHETHER OR It was during 1991 to 1996, meet the dearth of NOT HE/SHE IS A PERFORMER. 1996 to 2001, 2001 to 2006, professional bankers. Those and 2008 to 2017 many new PCBs came in to banking business getting government nods mostly on political consideration.

New entrepreneurs started flourishing in in the backdrop. Capital market had started seeing new PCBs heating the price interactions in stock market.

PCBs are fostering competition in the banking sector. And those grew in a faster speed gradually earning laurels from entrepreneurs for business growth. The control of Central Bank was less regulated & especially the Nationalized Commercial Banks (NCBs) were January - March 2018

of bankers who performed with excellence in PCBs. Such transformation of a banker’s community from within a state control to private sector gave them impetus to perform enormously better. This growth in professional bankers left the private sector grow at a much better and faster pace compared with their tenure in Government sector banks. Profit motive in them with performance incentives took the PCB’s to newer heights.

Contrary to this NCB/SOCB’s fell apart in

who were recruited also shifted or are mostly in the process for search of scope to move newer places for more & higher packages.

In the perspective from 2015 the SOCBs have now been offering competitive remuneration packages for employees in the backdrop of recent 100% rise in the pay scales.

The AGMs, DGMs & above in these banks are getting car loans, with extra allowances not relating to performance. This policies of incentives were resembled from PCBs but equal operational efficacy

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« in SOCB like PCBs is still a far cry.

These should have been linked with performance. The branches mostly opened at the behest of bureaucracy & politics without viability study are mostly liabilities to the bank’s branch network. Less than 10% of the branches earn profit from portfolio loans. Deposit based branches lend funds to Head Office (HO) which in turn lends to the loan disbursing branches. Indeed, banker in SOCBs by and large hardly think about individual branch profits rather than safely lending to HO. The loan portfolios are concentrated in 5% or less branches in all SOCBs. An inordinately high number of incentive bonuses are paid on the basis of base pay to all employees whether or not he/she is a performer.

The PCBs pay packs are very performance based while SoCBs are otherwise managed. Seniority rather than Performance is the primary basis here. Absence of accountability has left NPL (non-performing loans) to rise recklessly. The term NPL has become a word of phobia for readers. always symmetrical with SOCBs. This percentage is reported at 10+% but leaving apart the colossal volume of loans disbursed which are consistently being re-phased or restructured only to be prevented from being categorized as classified loans. With increased volume of these into classified loans NPL would have soared to shameful heights. The rate as Mr. Ibrahim Khaled has spoken is 35% in SOCBs while it is 7% in PCBs. The delinquent borrowers avail easiest resort to courts obtaining verdicts in favour of borrowers.

The SOCBs law enforcements are deplorably poor due to absence of monitoring transparency & accountability. The managements are also not free of cronyism & nepotism. The regulatory regime, Central Bank gives them being owned by the government inordinately lenient scope of

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compliance. These favours have made them uncompetitive & made them a non-professional banking regime. They do not largely feel the urge to earn instead of depending on HO interests from safely lending out the idle deposits. Yet very contrarily they perform well in PCBs- a great contradictory professionalism.

The same banker shifting from SOCB to PCB sector has demonstrated capability with excellence when accountability, reward & penalty stood ready for the professional delinquencies & accomplishments. The SOCBs were turned into limited companies but the control remains in the owners, the government. The Boards are made of government’s nominations but not with liberty, accountability & onus of earning profit. Those banks render various kinds of free services to the government. Again cost of funds are not cushioned to these banks by government when these are having obligatory requirements to invest in treasury bills, bonds etc. which bear a modest 2.5% to 5% rate of interest. The cost of fund is over 8% again mainly due to NPL while lending into these are at the rate of 5% or even less. These have been in practice since long. Despite these in force the SOCBs are forced to persistently bear the burden of blame of Government fund injections.

Their portfolio to the extent or over of 20% goes to NPL. Another 30+% goes to government low income investments. On all budgets an amount of new capital etc. for these banks are sanctioned by the Government This fund injections bring in concerns not complacence for these banks often further downgrading persistent negative public perception about those. This funds come actually against free services from these SOCBs. Yet it leaves SOCBs into dire defamation

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only adding fuel to the fire as these banks are living on blood circulations from the government allegations are rampant.

The deplorable state of SOCBs also gives upper hand to IMF, WB, ADB & all self-claimed global financial pivots to speak for privatizing these SOCBs. These SOCBs & its management are having more foes than friends. Even the government wants them to run well but does not leave them with liberty & accountability to perform.

Consequently, welfare motive dominates over profit but the non-performing of SOCB banker’s accountability remains a far cry and utopia.

In different locations 4 SOCB’s have more than one branch. It is very often that 4 branches from 4 banks exist in same Upozilla or locations.

Almost 90% if not more of these branches are run at loss by its own operational earnings. It is now high time to gradually reduce the branch network by 20% per year over a tenure to run the networks into profitable one. Government is the owner & hence it should expect better & cheaper services from SOCB’s. But free services to government & getting new injections of funds into capital from budget looks like a dual policy. So an alternative can be, to pay these SOCBs service charges at a reduced rate & not inject any sum into its capital. Instruct all the SOCB to replenish new capital to meet capital inadequacies, can be strictly given.

Giving them a standard & strict time frame like 3 years to find own sources with reduced branch network will reduce the operational cost. Options to employees for voluntary retirements can have easier way for profit search by these branches. The lending from HO to branches can be transferred to inter branch January - March 2018

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transactions along with a HO levy like 25%. In that case all such inter branch lending should be profit based & HO must not take responsibility of Non-Performing Loans (NPL) etc. The branches are to be held accountable for individual NPL, profit earnings & for that networks of branches are to be made narrower than now. The viability of branches opening must be checked with regulator and not on political or bureaucratic considerations as it happened before & happening now.

The blame game of inefficiency, non-banking performance, NPL, big overhead without any visible profit, attention to profit rather than welfare, free government services replaced by reasonable charges should be introduced. A task force composed of 4 SOCBs can be formed to bring forth changes for welfare based banking to be replaced by profit based one. Task forces must include private sector bankers of

January - March 2018

excellence & prominence reformist thinking.

with

The SOCBs having been in enduringly protected environment, its bankers have developed personal relationship with NPL delinquents.

The NPL borrowers are not even taken seriously & professionally by the SOCB management. The relationship developed over year between NPL borrowers & bankers in SOCBs has never been pro- profit & recovery. Rather these bankers promote the causes of NPL groups most often getting employment in PCBs soon after retiring from SOCBs. Thus with the insider information in SOCBs those employees get attractive packages in private banks as CEO/MD etc. only to the deterioration of NPL to persist.

Retirees at GM & above level must be refrained from joining PCBs as DMD/MD etc. Many SOCBs have

favoured large number of new generation bank promoters by leveraging or impacting upon loan disbursements to them. The DMDs/GMs of these SOCBs have joined in those PCBs at large. This is unethical for employees of SOCBs and debars independent decision making often in favour of SOCB banks. These bankers remaining in transition to PCBs after retirement in SOCBs often take wrong decision for their would be employers (PCBs) but against SoCBs. They are then still serving in the SOCBs, even against the stake of current employer the SOCBs. This re-employments should be stopped by regulations. Alternatives could be many more however. Âť About the Author Fellow Member of the Institute

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ROLE OF THE SUPREME AUDIT INSTITUTION IN BANGLADESH TO HELP ACHIEVE GOOD GOVERNANCE - Mohammad Shahajahan FCS

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Public sector auditors’ impartial and objective assessments provide assurance regarding whether public resources are managed responsibly and effectively to achieve intended results.

They work to achieve accountability and integrity of public entities; to improve operations and to restore the confidence of stakeholders and the public. Their role supports the governance responsibilities of oversight (intended results), insight (independent assessment for decision makers), and foresight (trends and emerging challenges).

Public sector governance is ensuring a public sector entity’s credibility, establishing equitable provision of services, and assuring the appropriate behaviour of government officials including reducing the risk of public corruption (IIA-2012).

In order to protect public interest, independent audit activities need to provide a range of assurance and advisory services (from financial attestation to performance and operational efficiency) either conducting internal or external audit services or both (IIA-2012). An effective public sector audit activity requires organizational independence, a broad base formal mandate, unrestricted access, sufficient funding, competent leadership, competent staff, stakeholder support and professional audit standards.

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Through effective public sector audit, Supreme Audit Institution (SAI) of Bangladesh is striving to attain Accountability and Transparency in public financial management and to contribute towards achieving good governance which will ultimately have a good impact in society and communities. In this study, our main focus is to find out to what extent SAI, Bangladesh has required key elements for effective public sector audit and to what extent the reform initiatives strengthened its ability to provide unbiased objective assessment of public expenditure for safeguarding public interest.

of Bangladesh provides power and functions of OCAG Bangladesh in Articles 127 to 132. Article 127 (1) of the Constitution states that there shall be a Comptroller and Auditor General of Bangladesh (here-in-after referred to as the Auditor General) who is appointed by the President of the country.

Therefore, the constitution has empowered the OCAG, Bangladesh with a broad based mandate and twofold responsibilities i.e. Comptrollership function and audit function.

Moreover, the roles, responsibilities and power of comptrollership have been described in section 3, 4, 6 and 7 of the Comptroller and Auditor General (Additional DIGITAL BANGLADESH IS AN Functions) Act, 1974. The IDEA THAT INCLUDES THE IT Comptroller and Auditor USE FOR MANAGEMENT, General (CAG), Bangladesh ADMINISTRATION AND has the responsibility to GOVERNANCE TO ENSURE specify how, where and by TRANSPARENCY, whom the accounts of the ACCOUNTABILITY AND republic shall be kept, RESPONSIBILITY AT ALL LEVELS complied and produced. The OF SOCIETY AND STATE. CAG played an indirect supervisory role in respect of Office of the Comptroller and pre-audit and an active role in post Auditor General of Bangladesh audit functions which has been a part of a legacy inherited in the context of Office of the Comptroller & Auditor broader accountability framework.

General (OCAG) - SAI of Bangladesh, is responsible for Article 128 (1) states, ‘The public auditing government receipts and accounts of the Republic and of all public spending to ascertain whether courts of law and all authorities and expenditures have yielded value for offices of the Government shall be money in government offices, public audited and reported on by the bodies and statutory organizations to Auditor General and for that purpose safeguard public interest (OCAG, he or any person authorized by him 2016). OCAG of Bangladesh is an in that behalf shall have access to all integral part of the accountability records, books, vouchers, documents, structure in Bangladesh. The cash, stamps, securities, stores or Constitution of the People’s Republic other government properties in the January - March 2018

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possession of any person in the service of the Republic’.

Article 128 (2) states ‘Without prejudice to the provisions of clause (1), if it is prescribed by law in the case of anybody corporate directly established by law, the accounts of that body corporate shall be audited and reported on by such person as may be so prescribed’.

Article 128 (3) states ‘Parliament may by law require the Auditor General to exercise such functions, in addition to those specified in clause (1), as such law may prescribe, and until provision is made by law under this clause the President may, by order, make such provision’.

These indicate that the CAG, Bangladesh has broad based scope of audit and unrestricted access to public entity/ corporations.

Article 128 (4) states ‘The Auditor General, in the exercise of his functions under clause (1), shall not be subject to the direction or control of any other person or authority’.

Article 131 states ‘The public accounts of the Republic shall be kept in such form and in such manner as the Auditor General may, with the approval of the President.

Article 132 states ‘The reports of the Auditor General relating to the public accounts of the Republic shall be submitted to the President, who shall cause them to be laid before Parliament’.

These have given organizational independence of OCAG, Bangladesh.

The CAG is financed through a budget from charged expenditure.

The OCAG budget is submitted to parliament through the Ministry of Finance and in parliament this budget is not voted.

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Article 88 states, ‘The following expenditure shall be charged upon the Consolidated Fund: a.

the remuneration payable to the President and other expenditure relating to his office;

b. the remuneration payable to: i. the Speaker and Deputy Speaker; ii. the Judges of the Supreme Court; iii. the Comptroller and Auditor-General; iv. the Election Commissioners; v. the members of the Public Service Commission; c.

the administrative expenses of, including remuneration payable to, officers and servants of Parliament, the Supreme Court, the Comptroller and Auditor-General, the Election Commission and the Public Service Commission;’ In practical terms, the OCAG Bangladesh has sufficient budget to pay all costs and hire experts for specialised audit and inspection purposes.

The Leadership of OCAG, Bangladesh and Project Interventions The leadership of the OCAG has modern knowledge and skills. They believe, in the Information Age, connecting all people to a universe of knowledge and learning is the key to ensuring a lifetime of success. Digital Bangladesh is an idea that includes the IT use for management, administration and governance to ensure transparency, accountability and responsibility at all levels of society and state. OCAG Bangladesh had started its journey towards automation of audit along with capacity building of completing audits in an IT environment & IT audit specifically. A significant number of officials are trained in IDEA, Team Mate and home grown

AMMS software with the development partners’ aided projects intervention like SCOPE (Strengthening Comptrollership and Oversight of Public Expenditure) and SPEMP-B (Strengthening Public Expenditure Management Program-B Project). Officers are also enrolled for professional examination like CISA with a view to develop a resource pool for IT Auditors aiming to begin e-audit to change the shape of the OCAG (CAG, 2016). The leadership of OCAG had implemented other projects like Reform in Government Audit (RIGA) and Financial Management Reform Program (FMRP) Project for strengthening capacity of the OCAG to improve the quality of auditing through need based practical training, enhance report writing skills and develop the IT system through overhauling the present network.

The leadership of OCAG also realises environmental issues, like climate change, and their impact on mankind. Importance has been given to Environment Audit and OCAG Bangladesh have already conducted 7 Environment Audits with the technical assistance of SPEMP-B Project, of which three of the reports have already been discussed in the Parliament. Apart from that a number of officers have trained on Environment Audit mostly from IDI training program, ASOSAI initiatives training program and also from iCISA (India) (CAG, 2016).

Six (6) ISSAI compliant audit manuals and important ISSAIs guidelines (Financial Audit ISSAIs, Compliance Audit ISSAIs and Performance Audit ISSAIs) have been published. Translation of these ISSAIs has also been completed. 35 ISSAI compliant pilot audits of different types and on different audit topics have been conducted with SPEMP-B project intervention and by doing so 180 officials got practical

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« exposure. A significant number of officials got foreign training in different topics especially procurement, IT audit, Environment Audit and Revenue Audit (CAG, 2016). All these initiatives and learning were disseminated through creating core groups’ presentation and in house training within OCAG audit department to enhance the audit quality and audit effectiveness in Bangladesh.

who had completed CIPFA IPFM courses were: i) at Certificate level 176, ii) at Diploma level 40, iii) at Advanced Diploma level 25 and iv) at Strategic level 10 (CAG, 2016). These professional accountants are now working for OCAG to improve the audit quality within OCAG Bangladesh.

For mainstreaming the ISSAI compliant audit in audit department of Bangladesh, 393 OCAG personnel were trained on ISSAI TOT Course aiming that the TOT trainees will disseminate their knowledge to their respective audit directorates so that ISSAI awareness base is further broadened in the department. 201 OCAG officials got training at the Government’s Financial Management Academy (FIMA) on “ISSAI based Audit Planning” with a view to impart comprehensive insight into Audit Planning as per ISSAI requirement (CAG, 2016).

In Bangladesh, from FY 1982-83 to FY 2014-15 the government revenue has increased by 1704% and the government expenditure has increased by 2044%. Simultaneously, audit activities of OCAG, audit observations and audit reports have also increased significantly. But due to delayed responses as well as responses without appropriate evidences the settlement of audit observations compared to the rising number of observations each year is poor. Consequently the pending observations have become Himalayan in size which causes a severe problem in ensuring public sector governance as the public entity is not responsive to audit recommendations for different reasons.

One project development objective of SPEMP-B project was to professionalize OCAG officials through training in an internationally recognised professional accreditation. Accordingly, OCAG signed a Memorandum of Understanding with the renowned Chartered Institute of Public Finance and Accountancy (CIPFA) to enrol the OCAG officials in the International Public Financial Management (IPFM) course of CIPFA and deliver training to them in Bangladesh. CIPFA trainers were delivered training at FIMA, Dhaka, to enhance the professional accounting, auditing and public finance knowledge of OCAG officials by providing IPFM course training from 2012 to 2016. At the end of SPEMP-B project on 30 June, 2016 the total number of OCAG officials

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Initiative to ensure Good Governance in Public Sector

In FY 2012-13 the total pending audit observations in 8 of 10 audit directorates of OCAG were 781,899.

Of which, 86.1% were general para (not serious irregularities), 12.3% advance para (serious irregularities) and only 1.6% were draft para in CAG audit reports (serious irregularities and submitted/to be submitted to the parliament) (OCAG, 2016). From the analysis of pending audit para, it is clear that general para which is not serious irregularities should be settled by providing spot reply with evidence by the public entities. To make the OCAG audit responsive, a ‘Strategy Paper on Improving Responsiveness to Audit Observations’ was prepared to

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improve two way communications of both auditor and auditee and to ensure governance in public sector.

The strategy paper was prepared based on a detailed study and survey on the audit management process of OCAG and its audit directorates as well as the audit management process of line ministries and auditee organizations in Bangladesh. The study found that audit directorates suffered from: the lack of a dedicated database for generating automated reports on the status of audit observations; insufficient skilled manpower; weak internal control systems; lack of yearly and individual audit planning; lack of human resource plans; incomplete application of Audit Monitoring and Management System (AMMS) software; unstructured and subjective quality control approaches; unit based auditing practice with little coverage; non-compliance of timelines in reporting; absence of modern auditing methodology and techniques; lack of interaction with auditee; absence of internal and external peer auditing with a lack of motivation- reward and punishment approach. Despite these limitations, audit directorates were striving hard to entertain the Broad Sheet Reply and meeting minutes as well as attending various meetings for settlement of audit observations (OCAG, 2016).

The audit cell of line ministries (LMs) had inadequate manpower with a huge number of subordinate cost centres and their audit management related activities. LMs had no computerised database of audit observations and no effective internal audit system. The financial management section of auditable units suffered from lack of adequate skilled manpower to face OCAG audit, weak documentation, lack of public financial management training, unwillingness, negligence and January - March 2018

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ignorance to timely respond to audit observations, absence or ineffective internal control mechanism, lack of computerised database of pending audit observations and huge work loads (OCAG, 2016).

Based on the survey findings, the strategy paper recommended two strategic goals along with strategic objectives to improve responsiveness to OCAG audit observations which is as follows: Based on the strategic goals and strategic objectives, detailed implementation matrices both for the OCAG and the Line Ministries had been designed for specific actions to be undertaken in order to achieve the goals for improving responsiveness to audit observations. The strategy paper was presented and disseminated to the high officials across the government and dignitaries from relevant stakeholders.

The OCAG leadership is very much optimistic that the implementation of the recommendations of the Strategy Paper would contribute to improving the responsiveness to audit observations and thus ensure good governance in public sector.

The implementation of the strategy paper also has a direct impact settling the number of pending audit observations as well as a decrease in the number of audit observations in the future (CAG News, Jan-June, 2016).

Conclusion SAI Bangladesh has organizational independence, a broad based formal mandate, unrestricted access, sufficient funding, competent leadership, competent staff, stakeholder support and professional audit standards for doing quality audit work to enhance the public interest. The leadership of OCAG Bangladesh believes in modern technology, team dynamism and mutual communications and cooperation. Its vision is attainment of Accountability and Transparency in public financial management to contribute towards achieving good governance. Through different projects’ intervention especially SPEMP-B Project and SCOPE project, OCAG has already undertaken many initiatives and have completed a remarkable reform of activities to uphold the image; give better assurance to the citizens and most importantly to give better

assurances for the future of the nation. The ultimate success will be dependent on the sustainability of the initiatives, strategy implementation and change of the mind-set.

References 1.

2.

3.

4.

5.

6.

CAG (2016): Annual Report, 2015, Office of the Comptroller & Auditor General of Bangladesh, Published on November 1, 2016.

CAG News (Jan-July, 2016), Office of the Comptroller and Auditor General of Bangladesh, Audit Bhaban, 77/7, Kakrail, Dhaka-1000.

Constitution of the Peoples’ Republic of Bangladesh.

IIA (2012): Supplemental Guidance: The Role Of Auditing In Public Sector Governance, 2nd Edition, The Institute of Internal Auditors, Release Date: Jan. 2012 OCAG (2016): Strategy Paper on Improving Responsiveness to Audit Observations, Published by the Office of the Comptroller and Auditor General of Bangladesh, April, 2016.

The Comptroller and Auditor General (Additional Functions) Act, 1974, Act no. XXIV of 1974, published in 13th February, 1974.

» About the Author Fellow Member of the Institute

Forward Looking Strategic Actions Office of the Comptroller & Auditor General Recommended Goal-1 To enhance responsiveness to CAG’s audit observations by adopting ISSAI-compliant audit methodology Strategic Objectives • Shifting from existing Unit based to Entity based ISSAI compliant audit • Restructuring audit directorates from existing functional based to ministry wise • Arranging executive meeting with the auditee before sending manuscript to OCAG • Introduction of follow up mechanism • Strengthen internal control mechanism in audit processes • Create public awareness through communications

Line Ministries Recommended Goal-2 To ensure good governance by responding to CAG’s audit observations Strategic Objectives • Ensure mandatory spot reply to initial audit observations • Follow timeliness strictly set by OCAG to reply to audit observations • Ensure evidence based reply to audit observations • Ensure Line Ministry’s detailed comments in Broad Sheet Reply.

• Training program for skill development of auditee organisation • Seminar/ workshop/training on audit observations settlement process

Source: OCAG (2016): ‘Strategy Paper on Improving Responsiveness to Audit Observations’

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« AGM AS PER PROVISIONS OF THE COMPANIES ACT-1994: BANE OR BOON? - Bipul Kumar Bhowmik FCS

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he powers devolving the Board of Directors and also of the members are exercised through the medium of meetings. In this connection, Annual General Meeting (AGM) is an important institution for the protection of the rights of shareholders of a company. The ultimate control and destiny of a company should be in the hands of its shareholders. It is, therefore, desirable that the shareholders should come together once in a year to review the working of the company. In this context, annual general meeting is very important event for stakeholders in general and is very crucial for shareholders and management in particular. It is conspicuous that provision of sections 81 and 183(2) of the Companies Act 1994 where annual accounts are to be placed, both the sections are mandatory, but they make no reference to each other. While section 81 has got nothing to do with reparation of balance sheet, section 183 is completely aloof from the earlier provision for holding the AGM. Uniform conformity in both sections is that any contravention is punishable. In the following paragraphs, initiatives have already been taken so far applicable in light of the Companies Act 1994 so as to get a harmonious construction from the application of section 81 and section 183 together, avoid the breach of the said provisions and ensure an annual general meeting to be held on time.

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So far as the company meeting is concerned - Annual General Meeting in particular, this is governed, mostly, by the Companies Act 1994. The company may have its own provisions laid down in its articles, but the mandatory requirements mentioned in the Companies Act must be observed. In compliance with the provisions of section 81 depicted on ‘Annual General Meeting’, every company is required to call at least one meeting of its shareholders each year and this meeting is known as the annual general meeting. The first annual general meeting of a company must

conducted in such a manner as the Court thinks fit. In this connection, the Court can act not only on an application of any director of the Company or an even of any member of the Company but also suo motu.

In directing the holding of such a meeting the court is to look to the general interest of the public and not to any individual consideration [Ahmed Hossain vs. Syedur Rahman (1966) 18 DLR 506.]

It is the statutory duty of the directors to convene the AGM as required by provision of section 81 of the Act. This section does not have reference to annual accounts to be placed before the meeting.

WHEN THE COURT CONDONES Since this is not the only DELAY IN HOLDING THE AGM matter to be considered in the ACCORDING TO PROVISION OF AGM, therefore it cannot SECTION 81 (1), THE TIME possibly be ground of not FRAME DESCRIBED IN THAT holding the AGM to perform SUB-SECTION FOR HOLDING the statutory duty of directors AGM BECOMING INEFFECTIVE. (In re EI Sombrero Ltd. 1958 WLR 349, 1958, 28 Com. Cas be held within eighteen months from 619). If the business of a company is the date of its incorporation and then vested to the Government, the no meeting will be necessary for the company having separate entity year of incorporation and the remains as before and the directors following year. Thereafter, one are bound to call the AGM of the annual general meeting must be held company and present the balance every year. The gap between one sheet of previous year before the meeting and the next should not be meeting. It was not excuse to say that the books of accounts were made of more than fifteen months. over to the custodian and it was not The legislature recognized that there possible to call the general meeting may be circumstances in which the (Hindustan Co-operative Insurance holding of the Annual General Society Ltd. In re 1961 31 Com Cas. Meeting could not be held within the 193). prescribed period. The legislature has therefore bestowed on the court the According to provision of section power to direct that such a meeting 183 (1) of the Companies Act-1994, of the Company be called, held and the board of directors of every January - March 2018

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company shall lay before the AGM, a balance sheet together with profit and loss account or income and expenditure account in case of non-profit company for a period specified in sub-section2 of section 183. According to the provision of section 183 (2), the accounts shall cover the period from the date of incorporation to a date which falls within the months proceedings to the first AGM. In case of subsequent AGMs, the accounts shall cover the period from the date immediately after the last account and ending on a date which is a date within nine months preceding such meeting or in case of company having interest or carrying business outside Bangladesh, a date within 12 (twelve) months preceding the date of such meeting or in case of granting extension of time under that section.

According to the provision of section 183(2), the Registrar of Joint Stock Companies may extend the period not exceeding three months if an application is made before the expiry of nine or twelve months as the case may be. According to provision of section 183 (4), the accounts shall relate to the financial year which shall not exceed fifteen months provided the Registrar may extend this period up to eighteenth months.

The Act under section 81 provides that one AGM must be held in one calendar year subsequent to first AGM and that the maximum period of interval between two AGMs shall not exceed 15 (fifteen) months. The minimum period of interval between two AGMs after the first AGM has not been provided in this section.

According to provision of section 183(4), the accounts shall have to be prepared for one financial year which may be more or less than a calendar year but shall not exceed 15 months except when the Registrar grants

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extension up-to 18 (eighteen) months. Again according to provision of section 183(2) the accounts which will be presented to AGM will relate to a period not beyond nine months preceding to the date of AGM or twelve months for companies having business or interest outside Bangladesh.

Considering the provision of section 81 and 183 together, it can be said that when July-June is the financial year and the last AGM was held in last December, subsequent AGM may be held not beyond December to remain within one AGM in each calendar year. Similarly when January-December is the financial year, the AGM has to be held within September next following i.e. with nine months of ending date of accounts as per provision of section 183(2) or within December next following, for a company having business or interest outside Bangladesh as the case may be.

When the Court condones delay in holding the AGM according to provision of section 81 (1), the time frame described in that sub-section for holding AGM becoming ineffective. The new schedule starts from the date of holding the AGM as per order of the Court and the 15 (fifteen) months interval should be from that date (41 DLR 529). And when the Registrar extends the time for presentation of accounts in the AGM as well as the time for preparation of accounts, therefore, in special cases, the Registrar can extent the time under section183 (4) up-to 18 months; (AIR 1954 Mad 276). If the Registrar extends the time for holding of AGM, it will be deemed that he has also extend the time for presentation of balance sheet in the AGM (AIR 1941 Mad 504).

According to provision of section 183, accounts shall have to submit

before the AGM. The accounts shall relate to a period not before nine months of the AGM i.e. within a period prescribed in section 81 whenever the AGM is held (within 18 months of incorporation or within 15 months of proceeding AGM).

Accounts shall have to prepared up-to a date as far as possible and practical, closer to the date of AGM (20 DLR 1056).

It is true that inaccuracies or omission in the balance sheet and profit and loss account should not be gone into by the Company Court while disposing of applications under sections 85(3) and 81 (2) respectively in as much as that the Court shall be reluctant and slow to prove but nevertheless when requirements of law of the Companies Act and the articles of the company have been given a go by, this court should not hesitate to set right and correct the affairs of the company. [Alpha Shipping (Pvt.) Ltd. & others Vs. Ghyasuddin Ahmed BCR (1987) HCD 31] It is the duty of the Board of Directors to call an annual general meeting after the close of the financial year and discharge functions imposed on them by the provisions of the Act. The balance sheet and profit and loss account have to be placed before it. The non-compliance with the provisions of these sections is penal. Directors must hold meetings of the company even though the accounts are not ready [Brahmanberia Loan Co. ILR 61 cal.

408 A1934 Cal 624]. In case even when the company is not functioning it is obligatory upon the directors to call the annual general meeting [Madan Gopal Dey vs. West Bengal (1968) 2 comp., J 22] Moreover, the legislature’s intent is clear that the Directors should not continue beyond the period of their

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« elected term. There is no scope for the contention that the Directors merely because the meeting is not hold. To allow them to continue would be the allowing of the default Directors in office and no defaulting Director could take advantage of his own wrong to continue in office. It is well established that a director cannot, by his own default is not calling the Annual General Meeting as he is bound to do, continue in office (1975 Tax LR 1852).

It is clearly evident that at times, there is a possibility of non-compliance emerging on this subject – while compliance would be in order to section 81 for holding the annual general meeting, there could not non-compliance under section 183 – due to different timing specified in

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both these sections for holding of annual general meeting. It is advisable on this ground that section 81 and section 183 is to be read together so as to get a harmonious construction and if a breach of the provisions of one or the other two section is to be avoided and the annual general meeting to be held on the earlier of the relevant dates as mentioned in the above paragraphs.

The companies could be assured that no action would be taken against the company so long as the company holds its annual general meeting within the time prescribed under section 81, though such a meeting is held beyond the expiry of stipulated time from the close of its financial year and the company files its annual return within 21 days of the holding

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of said meeting. The authority would not be collecting any additional fees in such a case for filing of the annual returns and audited accounts after the annual general meeting within the above specified time limit of 21 days.

The government is currently finalizing significant and widespread changes to the Companies Act in line with recommendations from various concerned authorities. As a part of the process, clear-cut provisions are essentially required to be incorporated inter-alia (if any) to ensure undisrupted AGM for shareholders’ satisfaction. » About the Author Fellow Member of the Institute

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ECONOMIC SHIFTS AND RELATED CORPORATE GOVERNANCE ISSUES DUE TO GRADUATION OF BANGLADESH FROM LDC - Prodip Kumar Roy FCS - Gourav Roy

I

ntroduction

Bangladesh, until 1975, used to be a Least Developed Country (LDC). But in March, 2018, Bangladesh has shown her capacity to graduate from the status of LDCs and step ahead towards the Developing Countries status. This is definitely a mirror image of the development of Bangladesh’s improvement in the scale of UN standard. The study in brief will discuss on the pros and cons of the graduation from LDC status of Bangladesh.

The Criteria that were Fulfilled by Bangladesh for Graduation from LDC Status Any country must fulfill any of the three following criteria to shift or graduate form the LDC status.

Fortunately, Bangladesh showed its quality and capability to succeed in all the three criteria given below: Here, we see that Bangladesh became successful in attaining all of the requirements very successfully. Thus, the UN Committee for Development Policy (CDP) announced that Criteria Matrix Benchmark Requirements The Score Achieved by Bangladesh

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Bangladesh has achieved the graduation criteria of LDC status.

The Benefits that Bangladesh Probably to have from this Achievement Definitely, the graduation from LDC status is an achievement for any LDC status holding country like Bangladesh. Bangladesh, as a country will now get the same standard of status as other developing countries which was once unthinkable. Also, some other key factors will emphasize the country image as a developing country that will definitely have a positive impact over the economy and other social factors.

The economic impacts are the most vivid impacts that we may find in the near future, maybe we have started to see the benefits of the status changing as epoch making event for the country and the people of the country.

High Investments and GDP It’s pretty common that the foreign investors including institutional investors and the individual investors will attempt to invest in Bangladeshi market (money market and capital

market) at a great deal just because of the confidence enriched from the improvement of status. Thus, the GDP that is a function of investment, consumption, net exports and government expenditures will grow up eventually.

GDP = F (C + I + G + NX) Where, C

→ Consumption

G

→ Government Expenditure in Public Benefits

I

→ Investments (Domestic and Foreign)

NX → Net Export = (Export – Import) Thus, the ultimate target that led to the graduation will be sustained through increase of GDP as a whole.

Increase of Foreign Aids Bangladesh has been receiving foreign aids from different international organizations like the World Bank, IMF, Asian Development Bank (ADB) etc. Also, Bangladesh has been receiving loan under different conditions and terms

Gross National Income (GNI)

Human Assets Index (HAI)

Economic Vulnerability Index (EVI)

$1230 or More than that

66 or More than that

32 or Less than that

$1272

72.8

25

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« from different developed and developing countries. But maximum of the countries which were ensuing loans to Bangladesh used to provide loans under suspicion of not getting paid in due time. But the success or the achievement of the Bangladesh in the form of graduation from LDC status will motivate the foreign countries to lend to Bangladesh more spontaneously than previous. That means, the number of sources of loan providing organizations and countries is supposed to rise than previous. Also, the amount for what the loans were being taken by Bangladesh will rise than before. This will enhance and precede the country’s development projects and reduce distress conditions.

major advantages from the achievement is increase of international status. Most of the foreign countries listed in the developing countries’ status or developed countries’ status always get high concentration with respect to social, demographic, economic and tourism factors but the LDCs don’t.

These crucial factors though are correlated with many past data analyses but maximum of them are just behavioral bias of the investors, tourists and other concerned participants who lack enthusiasm and interests in the LDC status countries.

Thus, Bangladesh has come out of the poor image to a greater extent with this status of being a developing country.

Sustainable Development

Policy

Motivation for Socio-economic Development

Most of the policies prepared in our country are not visionary. That means, the policies prepared for the country is not for long term and also not sustainable. The policy made are not by considering the issue of the adaptability of the project for our country and also for long tern benefits from the projects. Thus, the failure rate of the projects is also pretty high. The graduation from LDC status will be mandated with a stringent agenda to be fulfilled by 2028. This will ultimately force the concerned Ministry under Government of Bangladesh (GoB) to prepare a sustainable policy that is supposed to be consistent with the country’s environment and will fulfill the goals in the three criteria required for graduation from LDC status.

The country-Bangladesh is beset with huge potentials and possibilities. Just one thing that will lift all the policy

Elevation of International Status The point of discussion that doesn’t require any quantitative data but is more substantial than most other

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making efforts is a strong forced implementation. The budgeted period (2028) that has been fixed by the CDP will motivate and keep the reign for improvement as a burning torch for the development.

The Challenges that Bangladesh Probably to Face from this Achievement A coin has both sides to represent the benefits and the costs tagged in the opposite of the same. The same case is also applicable to the achievement of the graduation from LDC status of Bangladesh. There are some challenges that we think to be existent in the near future tagged with the already discussed advantages of this achievement.

Increase of Interest Rates on Foreign Loans In previous, due to the country being in the LDC status group, Bangladesh

High Investments and GDP Increase of Foreign Aids

Sustainable Policy Development

Increase of International Status Motivation for Socio-economic Development

Figure 1: Benefitsof Graduation from LDC Status for Bangladesh

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used to get a subsidized rate as interest on the loans taken from different international organizations like WB, IMF, ADB etc. and other foreign countries like USA, India etc.

But after the graduation, getting subsidized interest rate will not be received by Bangladesh.

The Grace period for loan is supposed to be reduced by Foreign Lenders The grace period for loan is supposed to be shortened. Bangladesh, as a member of the LDC group, used to get the benefits of longer grace period but it is suspected that from

now Bangladesh may not have this advantage as before.

The Export highly

The International Quota and Duty Benefits will Shrink

As discussed previously, the export market is getting affected due to not getting quota and duties benefits in foreign trade. Also, the competition in the global market will rise among the developing countries. Previously, Bangladesh could export in the privileged countries without facing that much competition. But now, Bangladesh will have to face the same level of competition that other developing and developed countries face. Thus, the level of profit may deteriorate.

The quota represents extra benefits in exports. On the other hand, the duty represents the costs that have to be incurred in the establishment of foreign trade. Bangladesh used to get these at time of being the member of the LDC group. But now, the exports and foreign trades of Bangladesh will be negatively affected due to not getting these big opportunities.

will

suffer

Interest Rates that Foreign Loans Require May Increase The Grace Duration is Supposed to be Reduced by Foreign Lenders The International Quota and Duty Benefits will Shrink

The Export market will Suffer

The Loan Repayment Windows may be Tightened Mandatory Fulfillment of Agenda by 2028 The Projected Devaluation of Currency in Expansionary Vision for Graduation

Figure 2: Costs of Graduation from LDC Status for Bangladesh

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« Mandatory Fulfillment of Agenda by 2028

graduation from LDC status for Bangladesh.

this stage to absorb the benefits of the achievement.

The development procedure or agenda is fully dependent on so many flexible factors concerning the country itself. Bangladesh requires a great adjustment factors considering the political, social and economic environments it contains. So, the restrictions of time frame and controlling agenda of UN and CDP may not render a spontaneous, adaptive and flexible course of actions for the development requirements of being a member of developing countries by 2028.

It is supposed that the corporate governance guidelines followed by our listed corporations in the country may be modified a bit for the sustainability issue of the corporations. We know that the existing corporate governance guidelines followed in Bangladesh lack flexibility and proper categorization with respect to the differences in attributes and types of industries. Thus, maximum of the corporations gets the scope of showing non-applicability of the criteria. Thus, the corporate governance issues remain a subservient concerning issue for the corporate world of Bangladesh. Also, because of this, the problems that arise is a poor stability and sustainability in the corporate infrastructure. It’s assumed that the graduation from the LDC status will create huge competition and restrict the benefits our corporate world has been getting long since. So, ensuring internal strength through a sustainable, categorized, flexible and mandatory corporate governance is the most prominent issues for the corporations and related authorities of Bangladesh.

2. Subsidizing local industries will motivate domestic trade that will fight against the future competition from foreign competitors.

The Projected Devaluation of Currency in Expansionary Vision for Graduation One serious point that may be overlooked in this development procedure and course of actions by 2028 is the devaluation of currency.

It’s all known to all that the country needs to raise funds to greater extent for the development activities. Also, the country needs to borrow a huge fund from the foreign countries and organizations as well. The country can issue domestic bonds or increase tax to gain the money locally also.

The country can also print money by itself. All these will motivate the case of hyperinflation leading to cause a lower value of currency.

Analysis of Corporate Governance Issues The corporate governance for an organization or corporation is considered as the key benchmark for following some rules and regulations that render the entity to be well acceptable to the participants and the stakeholders. Thus, it’s quite important and in a sense crucial to know the impacts that are going to be efficacious as an aftermath of the

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Analysis and Suggestion The achievement of this graduation from LDC status for Bangladesh may have both advantages and disadvantages. It’s strongly noticed that challenges may arise from different concerns. So, the following suggestions can be applied by the policy makers and authorities for a better absorption of the achievement: 1. Creation of strong human resource through training and education is highly required at

3. Easy loan facilities should be enhanced to the entrepreneurs.

4. The local industries and entrepreneurs should highly concentrate on Research and Development (R&D) and Innovations in their business.

5. Local investments should be encouraged so that foreign loans can be reduced.

6. Introduction of Bond as a parallel alternative to equity in the capital market will help a great extent.

7. Investment from government in vertical integration of industries in Bangladesh should be encouraged.

8. The policy makers should be more conscious to make decisions for the betterment of country’s sustainable economy.

9. By 2028, the corporate governance issues must be strictly complied by most of the industries that are considered to be the key source of global competition on behalf of Bangladesh.

10. The corporate governance must be monitored by an approved professional firm that will publicly disclose the non-compliance of the corporation it audits and give stringent conditions to fulfill all of the compliance criteria.

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11. The corporate governance in our country used to be a second concerning factor after the financial statements. But, this must be given same pinnacle of emphasis for a company’s continuation of operation in the domestic and foreign market.

Graduate from LDC group. But the question is that to what extent Bangladesh herself is capable of sustaining this achievement. This is really a serious query. That’s why, the policy makers of Bangladesh and the government should be careful in dealing with the future external crisis.

12. The international competitors that come to market should not be spared if they can’t follow the compliance criteria of corporate governance.

Ultimately, the sooner we can be accustomed to the changes brought due to this boon, the better it is for us.

Conclusion

1. Chowdhury, T. (2018).

Graduation of Bangladesh as Least Developed Countries (LDC). Bangladesh Institute of Development Studies.

Bangladesh is progressing at a rapid speed. With this goal, the GoB succeeded to make Bangladesh

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2. Kim, N. (2016). Key Elements of LDC Graduation Criteria in the Case of Angola. Committee for Development Policy (CDP), UN. 3. Rahman, A. (2018). Least Developed Countries: Bangladesh among Top Five Growth Achievers. The Daily Star.

References » About the Author Fellow Member of the Institute BBA Student, Department of Finance University of Dhaka.

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EMERGENCE OF KNOWLEDGE ECONOMY FROM TRADITIONAL ECONOMY - Babul Meah ACS

T

he knowledge-based economy is one where the generation and utilization of knowledge contribute to a significant part in economic growth and wealth creation. It is Peter F. Drucker who first popularized the phrase “Knowledge Economy” in his book “The Age of Discontinuity”. But, the initial foundation for the knowledge economy was introduced in 1966 in the book “The Effective Executive”

by Peter Drucker. Asia Pacific Economic Cooperation (APEC) and the Organization for Economic Cooperation and Development (OECD) define that the knowledge economy is a term that is associated with new skills, high performance and new added value as the only way for enterprises and countries to compete in the global economy. Another view on the knowledge economy defines it as the application of knowledge based industries where the knowledge becomes the key competence. It is the economy which is directly based on the production, distribution and use of knowledge and information.

Characteristics of a Knowledge-Based Economy •

Knowledge is information that is interpreted and used by decision-makers to meet their goals. It is a public good, in that, there is no additional cost when shared with other users and others cannot be excluded from using it once it is created.

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•

Knowledge is generally divided into two types, namely, knowledge about technology and knowledge about the attributes or tacit knowledge. The latter refers to knowledge gained from experience and which is often a source of competitive advantage.

Knowledge-based investments generate increasing returns to scale and therefore, more wealth for all.

c) A highly educated labor force: The knowledge economy comprises a better-informed populace as the government invests more on human development.

Workers contribute to ideas, skills and knowledge by using latest technology.

g) A shift from top-down hierarchical organizational structures to flatter shared-structures such as networks of semi-autonomous teamsh) Skills and knowledge are key assetsi) Information and communications technologies (ICTs) are the pillars of the knowledge-based economy

e) Open cosmopolitan society attractive to global talent: There will be ample opportunities for locals to tap foreign knowledge a) Have abundant resources: Unlike and learn about best business most resources that deplete practices as world-class when used, the knowledge input infrastructure will encourage is ever expanding in tandem with foreign investment.

The technology and innovation. population will be willing to accept and put into practice new b) No location barrier: Innovation ideas and technologies and in technology opens access to hence, local companies will become fit and fully equipped to face global BANGLADESH IS NOW challenges.

WORKING TO ACHIEVE THE VISION OF “DIGITAL BANGLADESH 2021”. AND MORE f) Well connected to other global knowledge nodes: IMPORTANTLY, BANGLADESH IS Connectivity to the rest of ON ITS WAY TO BECOMING A the world and technology MIDDLE INCOME COUNTRY BY sharing as well as 2021. t e c h n o l o g y transformation will be resources and markets all over made easy with the free flow of the world, creating virtual market information with lower cost, and places and organizations. There reliable infrastructure encourage will be increased mobility of information and technology workers and capital. sharing.

d) A high level of per capita wealth:

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Driving forces of Knowledge Economy

the effective communication, dissemination, and processing of information.

There are three driving forces of knowledge economy such as:

Pillar 4 Innovation system

1. Globalization, explanation??)

(Need

2. Information or Knowledge Intensity (Need Explanation??), and 3. Networking and Connectivity (Need Explanation??).

Pillars of Knowledge Economy In 1999, the World Bank Institute launched a project entitled “Knowledge for Development” (K4D). Its aims were to raise awareness among national policymakers about the powerful growth effects of knowledge and to encourage economists to combine global and local knowledge in order to accentuate comparative advantages (World Bank, 2002) The World Bank has set these elements as the four pillars of the knowledge economy within the Knowledge Economy Framework. These pillars are (World Bank, 2012): Pillar 1 Economic institutional regime

and

The country’s economic and institutional regime must provide incentives for the efficient use of existing and new knowledge and the flourishing of entrepreneurship.

Pillar 2 Education and skills The country’s people need education and skills that enable them to create and share, and to use it well.

Pillar 3 Information and communication infrastructure A dynamic information infrastructure is needed to facilitate

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The country’s innovation system—firms, research centers, universities, think tanks, consultants, and other organizations—must be capable of tapping the growing stock of global knowledge, assimilating and adapting it to local needs, and creating new technology.

Strengthening the four pillars of the knowledge economy will lead to an increase in the quantity and quality of the pool of knowledge available for economic production in any country.

This in turn will increase productivity and, thus, economic growth (Dahlman, 2003).

Knowledge Codification In order to facilitate economic analysis, distinctions can be made between different kinds of knowledge which are important in the knowledge-based economy: know-what, know-why, knowhow and know-who. Knowledge is a much broader concept than information, which is generally the “know-what” and “know-why” components of knowledge. These are also the types of knowledge which come closest to being market commodities or economic resources to be fitted into economic production functions.

Other types of knowledge – particularly know-how and know-who – are more “tacit knowledge” and are more difficult to codify and measure (Lundvall and Johnson, 1994).Let us discuss different types of knowledge as below: Know-what refers to knowledge about “facts”. Here, knowledge is close to what is normally called information. Know-why refers to

scientific knowledge of the principles and laws of nature. This kind of knowledge underlies technological development and product and process advances in most industries.

Know-how refers to skills or the capability to do something.

Know-how is typically a kind of knowledge developed and kept within the border of an individual firm.

Know-who involves information about who knows what and who knows how to do what. It involves the formation of special social relationships which make it possible to get access to experts and use their knowledge efficiently.

Therefore, it becomes important.

Learning to master the four kinds of knowledge takes place through different channels. While know-what and know-why can be obtained through reading books, attending lectures and accessing databases, the other two kinds of knowledge are rooted primarily in practical experience. Know-how will typically be learned in situations where an apprentice follows a master and relies upon him as the authority.

Know-who is learned in social practice and sometimes in specialized educational environments. It also develops in day-to-day dealings with customers, sub-contractors and independent institutes. One reason why firms engage in basic research is to acquire access to networks of academic experts crucial for their innovative capability. Know-who is socially embedded knowledge which cannot easily be transferred through formal channels of information.

K-economy Versus P-economy The manual worker works with his or her hands and produces goods or services. In contrast, a knowledge worker works with his or her head, not hands, and produces ideas, knowledge and information.

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« In a production economy (P-Economy), land, labor, and capital are the three factors of production.

The P-economy is characterized by labor-intensive production and low technology content industries.

Consequently, the value that is added in the course of production is low. P-economies are quickly losing out on their competitiveness, even in agriculture.

The main features of the knowledge economy (K-economy) are a highly educated labor force, workers who are skilled in the application of knowledge, and the use of information and communications technology (ICT). K- economy promises more value-added production and greater international competitiveness.

The K-economy is expected influence and invigorates the P-economy. In other words, the development of the K-economy need not necessarily be at the expense of the P-economy.

Initially, the use of ICT, the presence of knowledge workers, and the application of knowledge may be denser in some areas. But it is expected to spread to all sectors, even those that were traditionally labor-intensive and with low knowledge and technology content.

For instance, agriculture, which once exemplified the P-economy, would be revolutionized by the K-economy.

In fact, the emphasis on the K-economy is hastened by the recognition of the limitation of the present P-economy to sustain a high economic growth and productivity in the future.

As often said, a P-economy is, until a point, subject to a law of diminishing returns which suggests that rapid growth in capital or labor (while other factors of production remain

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relatively fixed) will eventually produce lower returns to the economy.

In K-economy, knowledge and people skills will account for the biggest share of assets. What this means is that the K-economy will be a people-powered economy. People will be the company’s and the country’s biggest assets. People’s skill, their knowledge, creativity and ideas will determine whether a company or a country remains at the cutting edge or languishes in the backwater.

Overall scenario of Bangladesh towards Knowledge Driven Society Bangladesh is now working to achieve the vision of “Digital Bangladesh 2021”. And more importantly, Bangladesh is on its way to becoming a middle income country by 2021. In addition to these, Bangladesh has been emerged as ‘’next economic giant” in the world due to its growth over 6 (six) percent since 2008. To achieve the above-mentioned status and continue the GDP growth, rebuilding a knowledge-based economy is essential.

But Bangladesh's performance in research and innovations is awfully poor. Asian Development Bank (ADB) has recently published a report-Innovative Asia: Advancing the Knowledge-based Economy.

ADB referred to the World Bank's Knowledge Economy Index where Bangladesh ranked 27th out of 28 emerging economies of Asia and the Pacific. Bangladesh fell below India, Sri Lanka, and Nepal in the rankings.

Much to our despair, we positioned below even Pakistan in the index of Knowledge economy. While we find ourselves 'an emerging tiger' before Pakistan, that tiger has turned into a cat in the race of economic knowledge with Pakistan.

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In order to crop the fruit of knowledge economy, it is required to transform our vast human resources into skilled workforce equipped with innovative and creative abilities.

The successful transition to knowledge-based economy and developing the country as a knowledge-hub depends on the key contribution from higher education institutions. For this, special emphasis needs to be placed on the development of educational infrastructure, curriculum, research, innovation, as well as on the improvement of generic skills (e.g. communication, teamwork, leadership, planning and organizing, self and stress management, analytical thinking and enterprise skills) and enhancement of the use of technology in teaching and learning process, including online and distant learning.

Our ranking and scores in the knowledge economy index warrant urgent attention from the government.

For building a Knowledge Based Economy Bangladesh it is imperative to focus on the following issues very meticulously 1) The successful development of the knowledge-based economy will, therefore, largely depend on the quality of the education and training system. We need an ability driven education system with a focus on innovation, creativity, and entrepreneurship which can produce smart graduates. Like universities abroad, Higher Education Institutions in Bangladesh should have adopted — 'Outcome Based Education'.

2) Method of teaching needs a relook. Teachers need to January - March 2018

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encourage logical thinking and creativity in students. Our universities can consider problem-based learning, student-centered instruction, and competency-based (outcomesbased) instruction. Nowadays, performance based assessment is preferred over traditional assessment.

Questions in examinations are set in a way that student's understanding of the subject can be assessed. Students are required to expose themselves to the economic and societal problems in the world.

They will be assigned a task in which they can demonstrate their mastery and assessment should be based on their performance.

3) Necessary emphasis should be given on increasing Research and Development (R&D) manpower, improving related infrastructure, strengthening existing mechanisms for supporting R&D and technology development and diffusion.

These will provide the basis for a well-functioning national innovation system.

The corporate sector, including the smalland medium-scale enterprises (SMEs), will be provided significant incentives to allocate a greater proportion of their revenue for R&D. 4) Concerted efforts will have to be initiated in order to ensure equitable distribution and provision of telecommunications infrastructure and services to underserved areas and groups to bring them into the mainstream of the knowledge-based economy so that it can support the rapid flow and accessibility of information within the country and across countries at competitive prices

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5) Institutional framework needs to be created a conducive environment for the development of the knowledge based economy and proliferation of knowledge activities. The legal framework will be fine-tuned to support the orderly operation of electronic activities such as ecommerce, e-government, e-financing and e-education as well as to support a flexi-working system.

6) Legislation relating to intellectual property rights and protection of privacy and security will be reviewed to improve the flow of information and knowledge.

7) Initiatives to develop the capital market will be accelerated with the introduction of innovative funding instruments and the development of alternative capital raising avenues to finance high-technology companies.

8) The banking system, which currently serves as the main source for corporate financing will introduce innovative lending instruments and develop capability to assess future cash flow potential of knowledge-based projects.

9) In the services sector, efforts will be taken to modernize and enhance its efficiency so that it becomes more competitive as well as supports an advanced industrial sector.

While developing the traditional sectors, there is the need to identify and develop new service products that will be generated by the knowledge based economy.

10) The private sector, including the SMEs, will have to swiftly redefine their production

processes by applying appropriate and cost-efficient technology. They must also take a global view as markets will become virtual and borderless.

Traditional modes of sourcing inputs and marketing products will have to be complemented by the greater use of e-trading and e-business tools.

Initiatives taken by Bangladesh to join the Knowledge Economy a) Recently, the University Grants Commission (UGC) has taken initiatives in preparing 2016-2026 strategic planning for higher education. It is our expectation that the plan should be aimed for preparing graduates who will be qualified as skilled workforce. It is expected that 2016-2026 strategic planning for higher education will provide a guideline in overcoming weaknesses in the present education system and revitalization of universities and for linking higher education to development. b) Bangladesh government launched Bangla Gov Net project which is a dedicated, secure network connecting dozens of government ministries and hundreds of government directorates with regions around the country via a high-speed fiber optic system. The network will deliver government services to citizens’ doorsteps, increasing transparency and efficiency and reducing corruption. c) The rural poor in Bangladesh have been forced to travel long distances to receive the simplest of government services and information, losing wages in the

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« process. To remedy this, the government created the Access to Information online program, which brings government services to its citizens. They can access government sites, see public exam results, read online textbooks and take advantage of a range of services from home. d) Digitization of government services and expansion of Bangladesh’s IT economy was a core principle of Prime Minister Sheikh Hasina to integrate with the K-economy. Bangladesh’s digital breakout is already improving the lives of its people.

The World Bank said that Bangladesh – long classified as a “low-income” country – has improved to become a lower middle-income country, a testament to the government’s efforts to create jobs and lure investment. e) Bangladesh is on the process of graduation from Least Development Country (LDC) to Developing Country. In order to be stable at this point, the contribution of service sector must be ensured and enhanced as there is a possibility of declining the exports of goods due to increase of Bangladesh’s goods prices for exemption from duty free access to importing country.

Bangladesh Government has started chalking out the necessary action plan taking account the importance of knowledge economy.

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f)

An innovative people will be the backbone of the envisioned society in 2021.

These individuals will acquire appropriate knowledge, skills, and abilities through a strong learning system consisting of pre-primary, primary, secondary, and tertiary education; and through the application of research, science, technology, and innovation. Creation of this innovative people has been given due development priorities in the perspective plan for Transformed Bangladesh by 2021.

h) The national ICT Policy 2009 has expressed its vision in terms of expansion of information and communication technology and its huge potential in establishing a transparent, committed and accountable government, the development of skilled manpower, improvement of social justice, and management of public services. Put together, this will generate the impetus to move Bangladesh towards a poverty-free middle income prosperous country by 2021.

The Perspective Plan of Bangladesh 2010-2021 has provided the road map for materialization of the national goals enshrined in The Vision 2021. The Vision 2021 also constitutes a goal that is eloquently described by the Prime Minister as ‘Digital Bangladesh’ to rapidly address the lack of capacity to generate productivity improvements

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from technological progress, which has long been undermining Bangladesh’s growth potential. To minimize such constraints, the government has implemented the national ICT Policy 2009 in order to enhance the usage of information communication technologies in both private and public sector. On the whole, the ‘Digital Bangladesh’ agenda is likely to aid the creation of a knowledge-based society, which is necessary for Bangladesh to move up in the development ladder.

To win the battle of coming global economic challenge, we need a sustainable global economic policy, innovative ideas, advanced technologies and knowledge intensive economy. But, it will be a daunting task especially for the third world countries like Bangladesh to execute the concept as we have scarcity of resources, ever-growing population, poor technology and poor literacy rate; nevertheless, we have ample opportunity to demonstrate Bangladesh as a new comer before the world in the arena of global knowledge economy challenge emphasizing its recent achievements in the field of economic success and the technological advancement as well. In order to develop a knowledge-based economy, it is imperative to address the issues and resolve them swiftly. » About the Author Associate Member of the Institute

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LIQUIDITY CRISIS IN BANKING SECTOR AND ITS IMPACT ON BANGLADESH ECONOMY - Md. Mizanur Rahman

I

ntroduction

Literature Review

2) To determine the liquidity position in banking sector in Bangladesh

Bangladesh is a lower Most recent studies considered the middle income country banking sector as an important having per capital income of 1610 source of financing in an economy. 3) To determine the origin of this crisis.

USD and has been uplifted from least There is diversification in the role of developed country status recently banks into financial intermediaries, positively moving towards facilitators and supporters (Freixas et 4) To determine its impact in the economy of Bangladesh. developing country. The banking al., 2010). In other words, banks act sector of Bangladesh is one of the as liquidity providers and financial Fundamental Principles for major contributors to the Bangladesh intermediaries in a financial system.

Management and economy. Basically, banks do not do This is accomplished by mobilizing the business with their own capital. They funds (short-term Supervision of Liquidity do business with the deposit of the deposits/liabilities) from the surplus Risk general depositors. They collect units (lenders) and making use of the scattered money from the general funds for financing the deficit units All the schedule Banks have to liquidity from two depositors and give loan to the party (borrowers) in form of loans and manage perspectives.

The first one is to who need money. That’s why banks investments (long-term assets). At address regulatory should keep sufficient money requirement like Cash Reserve in their vault so that the THE BANKING SECTOR OF Ratio (CRR) while the second respective depositors can get BANGLADESH IS ONE OF THE one is to meet the contractual money as per their demand.

MAJOR CONTRIBUTORS TO obligations to fulfill the THE BANGLADESH ECONOMY. In banking parlance, liquidity demand from the depositors. is a bank’s capacity to fund increase in assets and meet both expected and unexpected cash and collateral obligations at reasonable cost and without incurring unacceptable losses. The liquidity risk of banks arises from funding of long-term assets by short-term liabilities, thereby making the liabilities subject to rollover or refinancing risk. Liquidity risk is usually of an individual nature, but in certain situations may compromise the liquidity of the financial system.

In general, a bank is said to be liquid if it is able to provide money to its customers trying to withdraw. On the contrary, a bank is said to be 'illiquid' if the customers try to withdraw more money from the bank than it can accommodate.

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times, banks as liquidity provider, may unexpectedly experience extreme shortages of liquidity which could be triggered by larger amount of standby credit drawn or/and unexpected reduction in the availability of deposits (Crockett, 2008).

Therefore, efficient coordination of the cash inflows and cash outflows, in order to meet the cash flow shortfalls, requires effective risk management structure for managing liquidity (Nagret, 2009).

Objective of the Study This study aims to achieve the following objectives 1) To determine how liquidity crisis can create liquidity risk.

Commercial banks are allowed to extend loan up to 85 per cent and 90 per cent of their deposits mobilized for conventional and Islamic banks (as well as Islamic window of conventional banks) respectively and therefore, 15 per cent and 10 per cent of deposits are left with them.

Principles for the Sound Liquidity Management 1) Banks should publicly disclose information on a regular basis that enables market participants to make an informed judgment about the soundness of its liquidity risk management framework and liquidity position.

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ÂŤ 2) Banks should have a sound process for identifying, measuring, monitoring and controlling liquidity risk.

3) Banks should have a funding strategy that provides effective diversification in the sources and tenor of funding.

4) A bank should conduct stress tests on a regular basis for a variety of institution-specific and market wide stress scenarios to identify sources of potential liquidity strain and to ensure that correct exposures remain in accordance with a banks establish liquidity risk tolerance.

5) Banks should actively manage its collateral position, differentiating between encumbered and unencumbered assets.

6) A bank should actively manage its intraday liquidity positions and risks to meet payment and settlement obligations on a timely basis under both normal and stressed conditions and thus contribute to the smooth functioning of payment and settlement systems.

7) A bank should have a formal contingency funding plan (CFP) that clearly sets out the strategies for addressing liquidity shortfalls in emergency situations. A CFP should outline policies to manage a range of stress environments, establish clear lines of responsibility, include clear invocation and escalation procedures and be regularly tested and updated to ensure that it is operationally robust.

Current Liquidity Position in the Banking sector of Bangladesh Just Five or Six months ago, the banking sector was facing problems

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over surplus liquidity. A number of banks had to stop taking deposits to reduce the burden of extra liquidity which stood at around TK1.25 lakh crore. The problem was exacerbated by the fact that investors did not see attractive growth for private sector investments. But within last two months this scenario has been changed dramatically.

The Bangladesh economy has fallen into liquidity crisis. The banking sector of Bangladesh is passing a critical period. Often depositor's cheque bounces due to lack of funds.

Moreover, Non-banking financial institutions take loan from the banks at a minimum rate. But due to the current liquidity crisis, they are not getting loan from the banks. As a result investment in the overall economy has been decreased tremendously.

The Origins of the Crisis 1) Last year the depositors were interested in investing in National Saving Certificates as the deposit interest of banks was too low. That’s why by withdrawing money from the bank general customers started to deposit in Sanchaypatra. Thus, Government borrowing through Sanchayapatra & Bonds also a reason of deposit crisis of Banks. According to Bangladesh Bank report, a huge amount of surplus liquidity remained in our economy in 2017. The surplus liquidity was 1, 260, 00 crore in January, 2017, and 1, 22, 000 crore in June, 2017 and 86, 463 crore in September, 2017.

2) Over the next few months, the import of the country swelled while the export earnings and remittance lagged behind the import bills. The banks have to pay the import bills through dollars and the Bangladesh Bank

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sold the greenback worth Tk11, 000 crore to the private banks in the previous year.

3) The schedule Banks have received a total deposit of around Tk. 85, 000 crore, while they disbursed around Tk. 1, 25,000 crore between January and December 2017.

4) The crisis has deepened following the scams of some new generation banks like farmers Bank Ltd, NRBC Bank Ltd which created panic among the depositors and they (depositors) have withdrawn their deposits.

5) Where compliance is not maintained, then there is a very good possibility to have the experience of liquidity crisis in that bank; example Basic Bank, Farmers Bank Ltd. 6) When any humor spreads about any bank, the respective customers rush towards the bank and start to withdraw as much as possible.

7) Recently some investors of our country invest their funds in other foreign countries which resulting of funds diverting from our economy abroad.

8) Many big borrowers defaulted on or started delaying repayment. So the banks' cash flow management went haywire. Their receivables could not be realized on time, leading to deposit crisis.

9) Withdrawal of funds from private Banks by Government entities.

10) Hike in Dollar price 11) Money laundering under the cover of import.

12) Bangladesh Bank has ordered the private banks to reduce their Advance-Deposit Ratio or ADR January - March 2018

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(83.5% for conventional and 89% for Islamic banks) with a view to controlling the aggressive lending. The central bank has lowered the ceiling of the ADR, for which we have to adjust Tk20,000 crore by next June.

(Last Five years weighted average lending rates)

Instant initiatives taken by the Banks to overcome the Problem of Liquidity Crisis Liquidity crisis is not a problem of any particular bank or any financial institution. At this moment all the public and private commercial banks are in a state of shortage of liquidity.

Meanwhile, most of the banks have raised rate of interest on deposits this year to attract depositors.

Agrani Bank has fixed the interest rate at 5% for three month term deposits (0.5 rise), 5.25% for six month term deposits, and 5.50% for one year or above term, according to new rates.

The state owned Rupali Bank also increased the interest to 5.25% from previous 4.50% for three month term deposits, 5.50% for six month term deposits from previous 4.75%, and 6% for deposits with one year or above term from previous 5%.

For short term deposits the bank is providing 4% of interest from previous 3% and for saving deposits, January - March 2018

the rate is now set at 4% instead of previous 3.5%

most of the Commercial Banks are increasing the landing rate.

Pubali Bank Ltd also increased their deposit rate. For short term deposits the bank is providing 4% of interest from previous 2.5% and for saving deposits, the rate is now set at 4.5% instead of previous 4%.

2) Cost of production will be increased.

And in FDR the rate is 8% from previous 6.50% for three month term deposits, 8% for six month term deposits from previous 6.75%, and 8.5% for deposits with one year or above term from previous 7%.

5) Indiscipline will be made in the economy.

Banks and Financial Institutions when started to increase the deposit interest rate, on the other side they also started to increase the lending interest rate.

Countries largest private commercial Bank, Pubali Bank Ltd. increased its lending rates by 0.5 percentage point on all loan products in January and if the liquidity crisis continues then the management has decided to change the rate again.

Exim Bank also increased their lending rate by two percentage. Thus all other commercial banks also increase their lending rate if they want to make minimum profit.

Impact of Liquidity Crisis in the Bangladesh Economic Perspective 1) In order to make minimum profit, banks have increased the lending interest rate. But the sudden increasing in lending rate has not been supported by the Merchant Associations. For the last few years different Merchant Associations like BGMEA, BKMEA, and FBCCI demanded to reduce the interest rate specially to keep the rate within a single digit. But due to the sudden increase in deposit rate,

3) Economic hampered.

growth

will

be

4) Cost of investment will be increased.

6) Large investment will not be possible to start.

7) Inflation will be increased.

Public trust will be decreased.

Guidelines of Basel Committee regarding Sound Liquidity Management With a view to strengthening the banking industry, the Basel Committee on Banking Supervision (BCBS), a committee whose secretariat is located at the Bank for International Settlements (BIS) situated in Basel city of Switzerland, framed guidelines and standards for implementation of Basel Accords (Basel I and II). These were formulated in response to deficiencies in financial regulation revealed by the financial crisis of 2007-08. The latest in the Basel Accord had been set out by unveiling 'Basel III' in September 2010 which is intended to strengthen bank capital requirements by increasing bank liquidity and decreasing bank leverage.

The most important feature of Basel III implementation is introduction of requirements on liquid asset holdings and funding stability, thereby seeking to mitigate the risk of a run on the bank. These requirements have been rolled out by commencing two international liquidity standards, which are Liquidity Coverage Ratio (LCR) and Net Stable Funding Ratio (NSFR). Ideally, banks borrow for

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« short term and lend for long term, meaning it mobilises deposits for short term and utilises these for long-term lending. Doing this, the bank has to efficiently manage its balance sheet gaps (e.g. tenor-wise gap like 1 month/3 months/6 months/1 year/2 years etc between assets and liabilities) resulting from mismatch in tenors since the outflow from maturing deposits in short term has to be accommodated whenever it fall due. Those newly implemented liquidity requirements penalise excessive reliance on short term, interbank funding to support longer dated assets so that a sound liquidity risk management is ensured.

enough to judge the strength of a bank. During the early 'liquidity phase' of the financial crisis that began in 2007, many banks, despite having adequate capital levels, still experienced difficulties because they did not manage their liquidity in a prudent manner. The crisis drove home the importance of liquidity to the proper functioning of financial markets and the banking sector. Prior to the crisis, asset markets were buoyant and funding was readily available at low cost. The rapid reversal in market conditions illustrated how quickly liquidity can evaporate, and that illiquidity can last for an extended period of time.

LCR aims at promoting short-term resilience of a bank's liquidity risk profile by ensuring that it has sufficient high quality liquid resources to survive an acute stress scenario lasting one month. NSFR is to promote resilience over a longer time horizon by creating additional incentives for a bank to fund its activities with more stable sources of funding on an ongoing structural basis. Both LCR and NSFR have to be beyond 100 per cent to satisfy the regulatory requirement.

Conclusion Recommendation:

Till now, the regulator has not penalised banks which failed to keep these ratios beyond the required parameter but anytime in near future, imposition of penalty could be introduced. By only seeing these ratios, a person can determine the liquidity position of a bank. For example, an LCR of 120 per cent-140 per cent may indicate that a bank seems very strong in terms of liquidity status and in a very stress situation, it is able to withstand any kind of liquidity shock. Obviously, capital adequacy is a strong parameter in measuring a bank's financial health.

But only capital position is not

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and

Liquidity is fundamental to the well-being of financial institutions particularly in banking sector. It determines the growth and development of banks as it ensures proper functioning of financial markets Inadequacy of liquidity causes effect on the market value of asset. The success and failure of a bank depends mostly on its liquidity position. If any Bank falls liquidity crisis, then its impact will fall in the whole economy.

Grassroots depositors will loose their confidence from the banking sector. If this crisis continues for uncertain period then the economic growth will be hampered. The present liquidity crisis in banking sector should be handled technically so that no artificial humor & panic can spread in the economy.

Bangladesh bank being the central bank should monitor the overall situation seriously and also should provide all sorts of assistance to overcome this crisis.

The current liquidity crisis is not an isolated happening. Basically it is the

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result of the continuation of different indiscipline’s that is available in our banking sector for the last few years. In order to establish sound liquidity management, economic experts have given some recommendations. These are: 1) Banks should operational cost

reduce

their

2) Should open ‘no cost deposit A/cs’ 3) Should emphasize on short term investment 4) Money laundering and terrorism financing should be stopped.

5) Credit rating by reputed credit rating agencies.

6) CAMEL rating should conducted regularly.

be

7) Non-performing Loan (NPL) should be reduced.

8) Central bank should impose to have asset liability management tools to do proper liquidity risk analysis.

References 1)

BCBS (2006). The Joint Forum – The Management of Liquidity Risk in Financial Groups. Bank for International Settlement. May, 2006.

2)

Campbell, CollinD. 91987 ) . An Introduction to money and banking.5th Edition, The Dryden Press

3)

Chorafas, N. D. (2007). Risk Management Technology in Financial Services; Risk Control, Stress Testing, Models and IT Systems and Structures. (1st Edn.), UK. Elsevier, Oxford

» About the Author Qualified CS of the Institute

January - March 2018

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ONE BELT ONE ROAD (OBOR) INITIATIVE: OPPORTUNITIES FOR BANGLADESH - Rahat Mahmud

C

hina’s One Belt One Road (OBOR) Initiative is an ambitious and multi-faceted strategy aimed at boosting the flow of trade, capital and services between China and more than 60 other countries, including Bangladesh. The vision is to create or improve the infrastructure, capital-raising and trade alliance conditions that will facilitate greater trade and investment.

In September and October 2013, Chinese President Xi Jinping put forward the proposal of jointly building a Silk Road Economic Belt and a 21st-Century Maritime Silk Road, popularly known as the One Belt and One Road (OBOR) initiative. OBOR links countries and regions that account for about 60 percent of the world's population and 30 percent of global GDP. From its inception, OBOR has gained sincere attention from policymakers, the academic community and other concerned stakeholders across the world. China's OBOR initiative basically seeks to economically, socially and culturally connect Asia, Europe and Africa by creating road and sea routes. In fact, some experts identified the initiative as “the greatest human endeavor ever to connect countries and cultures”.

Bangladesh formally joined the Chinese OBOR initiative during President Xi Jinping's visit to the country in October 2016. Within the larger framework of OBOR, economic integration between Bangladesh and China is expected to January - March 2018

grow. China matters a lot to Bangladesh, considering the growing volume of trade along with other dimensions. Besides, cargo transport time is expected to be reduced across OBOR-aligned countries, which will positively impact on Bangladesh's trade with China.

In Bangladesh, infrastructure is a key priority for the government which can create significant opportunity in the private sector. The government plans to invest USD40 billion in infrastructure development including Power, Railway, Bridges, Roads, Port, Terminals and Telecom projects in the next 5 years. During the Chinese President’s visit to Bangladesh, 27 agreements were signed, with a value expected to exceed USD25 billion.

This will allow to generate business opportunities in private sectors such as transportation and logistics, construction and energy, whilst also improving the financial framework for cross-border trade by oiling the wheels of capital investment and infrastructure financing.

The five major goals of the One Belt One Road (OBOR) Initiative are: 1. Policy Co-ordination, 2. Facilities Connectivity, 3. Unimpeded Trade, 4. Financial Integration, 5. People-to-people Bonds.

In terms of specifics, “Policy Co-ordination” means that countries along the belt and road will, via

consultation on an equal footing, jointly formulate development plans and measures for advancing cross-national or regional co-operation; resolve problems arising from co-operation through consultation and jointly provide policy support to practical co-operation and large-scale project implementation.

“Facilities Connectivity” refers to prioritizing areas of construction as part of the OBOR strategy. Efforts will be made to give priority to removing barriers in the missing sections and bottleneck areas of core international transportation passages, advancing the construction of port infrastructure facilities, and clearing land-water intermodal transport passages. The connectivity of infrastructure facilities, including railways, highways, air routes, telecommunications, oil and natural gas pipelines and ports, will also be promoted. This will form part of a move to establish an infrastructure network connecting various Asian sub-regions with other parts of Asia, Europe and Africa.

In order to facilitate “Unimpeded Trade”, steps will be taken to resolve investment and trade facilitation issues, reduce investment and trade barriers, lower trade and investment costs, as well as to promote regional economic integration. Efforts will also be made to broaden the scope of trade, propel trade development through investment, and strengthen co-operation in the industry chain with all related countries.

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« With regard to “Financial Integration”, action will be taken to enhance co-ordination in monetary policy, expand the scope of local currency settlement and currency exchange in trade and investment between countries along the route, deepen multilateral and bilateral financial co-operation, set up regional development financial institutions, strengthen co-operation in monitoring financial risks, and enhance the ability of managing financial risks through regional arrangements.

In terms of “People-to-people Bonds”, efforts will be made to promote exchanges and dialogues between different cultures, strengthen friendly interactions between the people of various countries, and heighten mutual understanding and traditional friendships. This will all form the basis for the advancement of regional co-operation.

Implementation of the OBOR initiative will help Bangladesh to transform its geographical position into economic advantage and other benefits of the scheme in the following manner:

i)

The construction of the Silk Road-Economic Belt and 21st Century Maritime Silk Road will bring new opportunities for China-Bangladesh cooperation.

Both sides may take the opportunity of celebrating the 40th anniversary of their establishment of diplomatic relationship last year to strengthen cooperation in trade, agriculture, education, human resource development, cultural cooperation, infrastructure development, ocean exploration and in other fields, and deepen traditional friendship.

ii) It is estimated that in the next five years, China will invest an additional $500 billion in other countries, import over $10 trillion of products and send 400 million tourists abroad.

Bangladesh, as China’s close neighbor and trusted friend, may be able to make good use of “Chinese Opportunities” if the OBOR Initiative is firmed up. iii) The OBOR Initiative will promote trade and connectivity of Bangladesh with China along belt bloc countries.

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iv) Free trade facilitation will help Bangladesh access to markets in China, India and elsewhere. v) Energy cooperation will ease Bangladesh’s energy and power problems. vi) Establishment of exclusive as well as special industrial zones for China and other Belt countries in Bangladesh will attract foreign direct investment (FDI) from China and other countries and contribute to more balanced trade for Bangladesh. vii) Bangladesh has already joined the AIIB as a founding member.

It is expected that Bangladesh will get multidimensional cooperation and assistance from this newly formed Bank for participation of its entrepreneurs in projects along the OBOR. viii) Regional connectivity network will help Bangladesh emerge as a transportation hub in the Asia-Pacific region. ix) The construction of OBOR could speed up the current process of poverty alleviation as well as the dynamics of development of Bangladesh with support and assistance from China. x) Bangladesh may benefit from relocation of Chinese industries on account of rise of wages in China as that country may transfer some of its manufacturing base abroad to other countries like Bangladesh. xi) Bangladesh may acquire expertise and advanced technology by working with China and improving capability to address climate change and disaster management.

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xii) Bangladesh is potentially China’s strategic cooperation partner in South Asia and the Indian Ocean Region.

Construction and expansion of the Bangladesh-China-India-Myanm ar Economic Corridor (BCIM-EC) at the apex of the Bay of Bengal and in the intersection of the ‘Belt & Road’ is bound to open up immense opportunities for trade, traffic and industrial growth. Since 2013, the initiative of BCIM-EC has maintained good momentum. If the BCIM Corridor is realized, it will have a deep impact on Bangladesh-China trade, and traffic, connect Bangladesh with the Western parts of China. The current route of Maritime Silk Road is not directly linked at any point with Bangladesh. But with the development of a deep sea port in the Chittagong-Cox’s Bazar development area linked to Sonadia-Matarbari islands

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Bangladesh will be a significant part of the Maritime Silk Route.

The ancient silk routes acted as arteries of trade and the conduits of knowledge between East and West.

In reviving and expanding these routes, the One Belt One Road (OBOR) initiative has the potential not only to develop much-needed infrastructure and promote international trade, but also to facilitate the economic journey of more than 60 countries which lie along the six different economic corridors. The tangible and intangible ecosystems within each infrastructure program offer the potential to impact the lives of over two-thirds of the world’s population by creating thousands of new jobs, whilst simultaneously enhancing the skilling and the capability of local enterprises.

The One Belt One Road (OBOR) initiative is a vast and ambitious program, which foreign companies

ought not to ignore as a purely Asian affair, but instead embrace. It is possibly the largest transcontinental infrastructure program the world has ever known and it is only just beginning!

References 1.

Rubiat Saimum, (October 31, 2017), What One Belt One Road means for Bangladesh, Dhaka Tribune.

2.

Md. Shariful Islam, (May 19, 2017), How Bangladesh can be benefited, The Daily Star.

3.

Rumman Uddin Ahamed, (October 08, 2016), Great opportunity for Bangladesh, Financial Express.

4.

HKTDC Research, (September 13, 2017), The Belt and Road Initiative.

» About the Author Student, Professional Level-I of ICSB

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TODAY’S GLOBAL ECONOMIC CHALLENGES: AN OVERVIEW - Razia Sultana

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cope of development cannot be outlined without diagnosis of both global and local challenges because a combined effort among government, educational institutions, humanitarian Companies, business enterprises can achieve a trans-institutional solution by beating the challenges those are in transitional nature. Since the beginning of 21st century, climate change has been ranked top where sustainable development along with the global ethics have also been hold a significant consideration in the global economic atmosphere.

Alternatively, geopolitical events like national elections in few European countries in 2017 and commencement of Brexit in the Euro-zone have severe impact on economic potentiality(s) and consequently, instable balance of payment and trade in terms of currencies across the world, decline the corporate investment, damage of the European economy, etc. For this reason, world’s four largest Central Banks are preparing to tighten the monetary policy and have strong possibility to pull back on government bond buying. Then again, with the increasing government spending in the developed economies and upcoming tight fiscal policy worldwide have been made the economic critics worried for an ineffective monetary policy though China is still expected a politically acceptable economic growth soon. Besides this, recently, IMF reported that, rising star economies from 2016 have low possibility to recover commodity

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prices and hence, emerging economies will face disappointment and their contribution to the global economy will face huge downfall. In short, if the Organization of the Petroleum Exporting Countries (OPEC) policy cut the oil production, the sub-Saharan Africa, South America, the Middle East, Commonwealth of Independent States (CIS) will pass through huge disturbances though the emerging Asia has appeared with sound flexibility. In consideration of the said issues, the global leaders will face considerable challenge in recovering global economy where job market, food security, advance technology, gender equality, health issues and so on will matter. A snapshot of these challenges is –

A Correlation among Climate Change, Food Security and Scarcity of Water One of the prime global economic challenges will be food security and scarcity of pure drinking water.

Within 2050, the world will be required to arrange food for approximate 9 billion people and compare to today’s scenario, it will be 60% higher. Recently, the United Nations (UN) has been set a target to achieve food security, encouraging sustainable agriculture for balance nutrition and ending hunger and conflict by the year 2030. To meet the target, host of issues are required to address and a productive agriculture sector can establish only when the agro based countries able to adopt an

efficient business models in attachment with public and private partnership. Moreover, this initiative is also requires to address greenhouse gas emissions and effective use and waste of water. The sustainable agriculture has to consider following issues.

Challenges for the Contemporary Job Market International Labour Organization (ILO) assessed that, 61million people have lost their job due to global economic downturn and currently, 200 million people are jobless around the world. Moreover, 500 million new job opportunities are required by 2020 for the existing unemployed people with the potential young people are wishing to start their career. In contrast, lots of industries are suffering from lack of qualified and skilled candidates. It has to be noted that, youth unemployment accession the world is now 3 times higher than total population and around 90% of this unemployment status is exists in the developing world specially, in Asia and Africa.

Despite the shortfall in the job market and lack of proper skill, significant number of aging people, backward education system, advance technology, poor assessment in industry-wise labour market trends, inverse relation between education and labour policy are core challenges in the modern job market. In brief, human resources, chain of education and skills are the key pressures in this regard.

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Key Indicators

Probable Challenges

Population Size Though population size varies among the countries, additional urban resident projects requirement might be reach to 2.5billion for 2billion new born around the world where (Both Domestic Asia and Africa is the most risky zone. and International) Change of the Taste

Expected Time to Face the Crisis 2050

Demand for processed meat, dairy and other foods is going to be high and hence, a significant change in human diet will occur.

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A research report by Food and Agricultural Organization (FAO) addressed that, though India is a emerging economy, 47% of their manpower is engaged with farming, 18% of their annual economic output crafted from agro business but 15.2% of their aggregate population are suffering from severe malnutrition that hamper their normal life and one third of the world’s malnutrition child born and grow here. In the light of this examination, hunger and malnutrition in any geographic segment urgently requires dramatic improvement in productivity and sustainable agro businesses where rural farming communities are required to pay most prudent treatment. Moreover, use of energy and water in irrigation and other farming should control wastage problem since 30% greenhouse emission and 70% fresh water put away every year and to consume one third food of aggregate production waste US$ 750 billion.

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Currently, global atmosphere along with scarcity of resources are the most vital challenge. Noted that, scarcity of water due to climate change is the top risky factor in recent time and 40% island around the world is not properly moisturized and the rising temperature will easily turn those lands into dessert in near future. Therefore, half of the global population will suffer from food crisis in near future. More elaborately, since 1970 yearly global greenhouse gas emission reached 80% that influence global warming.

Therefore, more intense and frequent weather events have been occurred namely, change in rainfall patterns, storms, droughts etc. Conversely, Insurers reported that water related economic losses have tripled over the past few decades. Consequence of this, the historic agreement to protect the climate changes held in December 2015 committed to take initiatives against the global warming soon.

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Nowadays, parity in gender issue represents an economic sense than a moral issue since health, education, earning potentiality and political power are the fundamental issues to thrive in the society. Alike an Organization, a Country’s competitiveness represents by its human talent, skills and productivity. In addition, 50% of the world’s population is female and undoubtedly, an indispensible part of domestic and international business.

Few renowned Forums reported that, only 4% female around the world can avail the Gender Equality said basic human needs with sound nutrition. Here it has to be noted that, with the commencement of the global financial crisis, progress of equal wage has been slow (Areas to pay down though more female than male enrolled in university but hold the senior roles in Attention) the workplace and engage with the agro business / faming is rare yet. Conversely, sound health, better education, economic and political empowerment have strong bonding in this globalization era. So, to increase awareness regarding gender parity can be promoted by the civil society, governments and domestic and international business Organizations where sound nutrition, pure drinking water, satiation, better education and entanglement in economic activities have to the top priority.

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Geographic Segments (Undeveloped, Developing and Developed)

Change in Climate

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« Key Indicators

Article Expected Time to Face the Crisis

Probable Challenges

Another impending crisis is pure drinking water though 28% of agriculture lies in the water stressed regions which require 17,500 liter of water to produce 1kg wheat and 1kg beef, this requirement might be double in near future. Scarcity of pure drinking water can be define as – one third of the world’s population are currently resides in the water stressed areas where approximately 1billion people can’t manage pure drinking water.

Elaborately, 95% of the global safe water is now stored in the underground and the use Scarcity of Water of this resource is faster than its replenishment and in near future, demand for safe water will be double for world’s food and 70% of aggregate stock of water will be needed. Besides food production, demand for water is also necessary for producing electricity, processing fuel, mine minerals and so on. Consequently, after 20years from now demand for water to produce energy will be increased by 85%. Therefore, for a sustainable planet, the concept of the Planetary Boundaries might be work effectively.

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Only 2% people in the developed countries engaged with agro and dairy production and tendency to choose farming as a profession is very poor. As a result, uplifting food price, degradation of soil by over farming, lost of arable land are the top challenges for existing and potential farmers.

2050

With the beginning of the global economic downturn stubborn unemployment, uplifting inequality, average GDP growth has been slow down the emerging markets.

To revive the global economic growth, it has to be ensure that everybody in the society get benefited by substantial increase of wealth since today’s’ socio-political and Entire Areas of economic systems encourage inequalities and socio-political unrest and damage Economic and potential economic safety. Alternatively, significant improvement in living standards, it Societal Issues is important to set a long term-term target with effective policy. The UN’s Sustainable Development Goal announces top priority on poverty elimination and hunger. And to implement the target and socially inclusive economic policy, they desperately coordinate with the civil society across the world, governments and private organizations.

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Challenges for the Farmers

Challenges for the Information Technology and use of Internet Being in the age of forth generation industrial revolution, the Internet is the key driver of technological transformation.

Effective management is the prime challenge in this sector since all aspects of our daily life has been changed by the Internet. Then again, digital technologies have been disrupted many government projects as well as existing business models. Though data is the heart of the Internet, bulk amount is now curse for e-garbage management. Annually, 40% data is growing and there has a strong

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possibility increase the frequency fifty times by 2020. Major number of Internet users are live in Asia region where China (1.30 million) and India (0.91 billion) are representing the largest subscribers respectively.

Moreover, 4.90 billion people across the world are connected with devices that are widely used in their household activities, transport and industrial appliances and have a strong prospect to reach the number 25 billion within couple of years. A research on Internet use by the World Economic Forum identified both challenges and opportunities where – i) Transformation, ii) access, iii) Governance and iv) Security are the four pillars to outline the effective and efficient use of Internet prevent

and protect the existing and potential cyber threat and crimes.

Challenges for the Future Healthcare For the past few decades, people are enjoining healthier and long life but nowadays, it is a serious challenge for the global health to protect and prevent Non-communicable Diseases (NCDs), bear the cost of care in the developing countries.

Population size of the world might be reached at 9.7 billion in 2050 where 2billion will be more than 60 years old. Build a global health care system and efficient manage of massive demographic shift are two major challenge at present.

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Additionally, adjust with the massive population growth in the low income economy are already facing several challenges like – unsustainable hospital centric model, high cost of treatment, lack of efficient human capital and logistic support in the healthcare sector, poor health ecosystem, lack of coordination between health technology and health systems and so on.

Challenges for the Global Finance Prime challenges of the global finances are flexibility, handy financial system which will be capable to earn peoples’ trust easily.

Furthermore, financial products for sustainable economic growth and development namely, savings, investments, education and health, schemes to protect the environment fundamental infrastructural support like transposition and power supply, Corporate Social Responsibility (CSR) and so on. People are always preferred reliable and accessible January - March 2018

financial services whether it requires either for the household purposes or running a business. Point has to be noted that, pension funds and the Insurance Companies are now struggled to invest on infrastructure projects and globally, US $15.00 trillion has been unfunded due to numerous obstacles are find in the institutional investors and few of them are short-term political cycles, variations in currency and lack of viable financing structures. There have lots of established example that Governments can attract the private sectors for infrastructural development where as the public-private partnerships have high frequency to make complicated the development projects. Alternatively, the use of technology and the innovative business models in the financial industry is now defined as the Fintech is disrupting the financial industries. Thus, the demand for financial services for all level of income is became lower and the equity investment dropdown by US $ 12 billion within last 5years though

the Fintech Companies are capable to adopt fast with low cost. The global recession has been revealed some significant drawbacks of the financial systems those are directly influence the global market. For instance, the growing inequality in income level and its negative impacts on the socio-economic factors are the prime challenges against the global property where 2billion people have no access into the affordable financial services and globally, more than 200 million SME (Small and Medium sized Enterprises) have no attachment with the formal financial services.

Challenges for the Global Trade and Investment Two indispensable ingredients of the economic growths are international trade and investment. With the growth of the digital economy, the volume and shape of the global economy are changing dramatically where the effectiveness of the regulatory framework is only challenge. Broadly, the booming

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ÂŤ service sector has been spread its production networks in the domestic and international markets and established as a game changer.

Moreover, not only trading with the domestic and international partners but also many Companies have bought the controlling stakes in the host markets. But the rising uneasiness around the world, the trade and investment sectors are undeniably required to reform the world trade framework where employment, environmental issues, taxation, etc. have to clearly outline and in addition, the international trade and investment regulations have to pay significant attention on competitive advantages, sustainability, and scope of digital trade in term of global supply networks.

In light of aforesaid observations, the

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global economy is suffering from a slow growth productivity crisis for a decade long. In the matured economies labour shortage where as the emerging markets are in crisis of skill deficiencies are two new addition of the global economic challenge.

Few research bodies examine on the increasing uncertainties along with the risk factors for durable growth as well as investment and identified that the developed economies are driven by financial recovery where growth rate is 3.2% in 2017 but the anti-globalization along with the trade protectionism are two core threats those might damage the potentialities of the development of the global economy and trade.

Sources 1)

Top Ten Global Economic Challenges: An Assessment of

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Global Risks and Priorities, available at: < https://www.brookings.edu/researc h/top-ten-global-economic-challeng es-an-assessment-of-global-risks-an d-priorities/ > [Accessed on March 8, 2018] 2)

What are the 10 biggest global challenges?, available at: < https://www.weforum.org/agenda/ 2016/01/what-are-the-10-biggest-gl obal-challenges/ > [Accessed on March 8, 2018]

3)

The 5 Biggest Challenges the Global Economy Faces in 2017, available at: <http://nationalinterest.org/ feature/the-5-biggest-challenges-the -global-economy-faces-2017-18144 > [Accessed on March 8, 2018]

Âť About the Author Student, Professional Level-II of ICSB

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