During the last few months, Bangladesh observed a flurry of events around the e-commerce business. It came to a wider public attention when the banks and mobile financial services stopping transactions with ten e-commerce companies in the last week of June 2021. Then the CEOs and [...] Read more]]>
E-commerce, a fairly recent phenomenon globally, and by all plausible indicators, seems to become the very ecosystem of retail and wholesale commerce in near future, if not already for some niche markets, has also gained currency in Bangladesh, gaining strength with increasing rates of mobile internet penetration, number of smartphone users, and mobile financial services.

During the last few months, Bangladesh observed a flurry of events around the e-commerce business. It came to a wider public attention when the banks and mobile financial services stopping transactions with ten e-commerce companies in the last week of June 2021. Then the CEOs and other top officials of some of these companies got arrested in the middle of September 2021 on charges of fraud and embezzlement of money. In July 2021, the Ministry of Commerce published a policy guideline for regulating e-commerce business. This set of guidelines has the clear purpose of improving transparency, and protecting consumer rights. There are reasons to believe that if implemented properly, this new policy framework will bring transparency and better governance in the e-commerce sub-sector in Bangladesh. In addition to the policy guidelines, there have been a number of propositions to streamline the e-commerce sector. There are some questions that need to be answered clearly before e-commerce in Bangladesh can find a clear growth path ahead.

Escrow Account and its Implications: One notable feature of these guidelines is setting up an escrow account under the supervision of the central bank, to receive advance payments from the consumers against their purchase orders. No more than 10% of the invoice amount can be collected from the consumers in advance, as per the newly announced guidelines. The money collected from the consumers would remain deposited in the escrow account, only to be released to the e-commerce company after confirmation of delivery of the purchased product. Indeed, an excellent measure to cut down the false promises made by some of these e-commerce companies. It’s been learned that Bangladesh Bank will not operate the escrow account directly but will outsource the service, and the terms are not ready yet. Once the terms are ready, tendering process will start. Hence, it is reasonable to say it will be at least 18 to 24 months before the escrow account system will be in place. Meanwhile, mostly ‘Cash on Delivery’ mode of payment will be applicable for retail e-commerce business. Cash on Delivery is a widely accepted method, but often leads to revenue and income figures kept undisclosed, and the applicable VAT amounts undeposited by the businesses. Additionally, the growth and profitability of this sector is likely to remain under-reported in a ‘cash only’ environment, deterring further local and foreign investments. Any possible charges and fees for the escrow account services, whenever it might become operational, needs to remain reasonable, any monopolistic environment for such services needs to be avoided.

Unique Business Identification (UBID): Another notable feature is the requirement to obtain a Unique Business Identification (UBID) number for e-commerce companies. This implies, e-commerce specific Business Identification Numbers (BIN) will have certain criteria. What will be the qualifying criteria? What will be the business rationale behind the qualifying criteria? If the purpose of this new ID is to curb the scams, and protect the consumer interests, then what the other specific laws and agencies already existing for the purpose will do? The major laws governing commercial activities include company law, tax and VAT laws, intellectual property related laws, competition law, and consumer rights protection law. In addition, criminal procedural codes can be applied to curb fraudulent activities. How likely it is that the proposed UBID would end up as another tool restricting the budding e-commerce industry of the country? A pertinent question here would be, what will happen to the other standard registrations, and licenses, such as Tax Identification Number, trade license, VAT registration, or the regular Business Identification Number? Would any of these requirements be exempted, if an enterprise obtains UBID? All precautions need to be exercised against increased administrative barriers and rent seeking for creating a conducive business environment for e-commerce in Bangladesh.

Separate Tax Treatment: So far, e-commerce businesses are registered as IT Enabled Services (ITES) at the time of incorporation with the Registrar of Joint Stock Companies and Firms, and for issuing trade licenses from the municipalities or city corporations. ITES companies enjoy a tax exempt status till 2024, and so are e-commerce enterprises riding on the back of the ITES. Under the proposed separate tax treatment, would an e-commerce company still be exempted for tax obligation in the initial years? If so, for how many years? While it is a good policy intervention to offer tax exemptions to new and promising industrial sectors, Bangladesh unfortunately has a number of examples where perpetual inefficiency is nurtured by continued fiscal incentives and protection measures for over five decades. Frozen shrimp, ceramics, and accumulator batteries are some examples. If tax exemption is withdrawn, what will be applicable tax rates? Or they would be subject to turnover tax in form of a fixed amount taxed over declared revenues? As mentioned earlier, revenue from ‘cash on delivery’ can remain under-reported, and forensic of all sales reports will be difficult for tax officials, paving way for e-commerce companies to evade taxes. In short, if tax exemption is withdrawn, transparency in financial reporting, and governance of the tax administration must be assured.

Separate Regulatory Authority: We hear that a new regulatory body will be set up to regulate e-commerce business in Bangladesh, as it was mentioned by the Minister of Commerce in the 3rd week of September, 2021. If a new regulatory body becomes a necessity for the right kind of functioning of the e-commerce enterprises, then so be it. But would the new body be constituted by a fair representation of the government agencies, private sector, intelligentsia, and domain experts, or only by a few clueless administrative bureaucrats? What would be the regulatory and overseeing role of that body? Who would define the roles, responsibilities, and jurisdiction? How would they handle complaints and grievances? Would that not be overlapping with the roles of Consumer Rights Protection Authority? Moreover, it may take a couple of years more for the proposed body to be formed, and who would regulate e-commerce in the mean time? How would the e-commerce remain unhindered from too much and too many regulations, and administrative restrictions?

The many questions raised here are to provoke intrigue and start dialogues amongst the stakeholders, because e-commerce is here to stay and will definitely shape not only the retail and wholesale commerce, but a wide array of other economic activities – distribution, transportation, employment generation, internet use, and will bring the necessary changes in vocational demand. Bangladesh should get ready for future.

Shaquib Quoreshi
Enterpriser, Business Intelligence Limited (www.bisntel.com)
Contact: shaquib.quoreshi@bisntel.com

https://www.tbsnews.net/thoughts/zinc-nutrition-bangladeshi-population-and-pandemic-305398

Zinc nutrition in the Bangladeshi population and the pandemic

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The government’s outreach to its neighbours included initiatives such as Prime Ministerial visits, resolving long pending issues like Land Boundary Agreement with Bangladesh, opening land visa with Myanmar, implementing decades old connectivity proposals, addressing trade logistics issues and offering soft loans and aid at an unprecedented scale.

Though trade was not the only objective of this initiative, it gained prominence in recent years, despite stiff competition from China.

From 2.86 per cent [...] Read more]]> Despite the often fractious political relations, India’s trade with its neighbours has surged in recent years

Large financial institutions, with their years of experience and access to data and customers, and fintech start-ups, with their agile approach to creating dynamic solutions and financial tools, have learned to leverage each other’s strengths to mutually capitalize on emerging opportunities in the market.

These changing dynamics in the business behind technology was one of the topics [...] Read more]]>

People have overlooked technology in terms of dividends and the changes some companies have made regarding the cash they generate, Van Valen told the Reuters Global Investment 2018 Outlook Summit in New York.

“Within the tech sector you have seen a slight shift in appreciation towards the discipline of returning cash to shareholders. That’s something people don’t expect,” [...] Read more]]> Dividend-seeking investors should check out technology: Epoch

(Reuters) – Investors seeking steady income flows may have ignored the technology sector and the unexpected impact technology is having on companies in other industries, Kera Van Valen, a portfolio manager at Epoch Investment Partners, said on Friday.

People have overlooked technology in terms of dividends and the changes some companies have made regarding the cash they generate, Van Valen told the Reuters Global Investment 2018 Outlook Summit in New York.

“Within the tech sector you have seen a slight shift in appreciation towards the discipline of returning cash to shareholders. That’s something people don’t expect,” she said.

Texas Instruments Inc (TXN.O) is now part of Epoch’s high-dividend-based “shareholder” yield strategy as the chipmaker has committed to returning 100 percent of free cash flow through dividends and share buybacks, she said.

The company targets free cash flow to be somewhere in the range of 20 percent to 30 percent of their revenue, said Van Valen, who helps oversee Epoch’s U.S. and global dividend strategies, which account for half of its $48.6 billion in assets under management.

Epoch’s Shareholder Yield strategy is invested in a number of companies that use technology to improve their productivity, asset utilization and to reduce capital requirements.

The result is an increase in return on equity and a company’s ability to return more capital to shareholders in the form of dividends, share repurchases and debt reduction.

Increased efficiency through technology also has been unrecognized by investors in unforeseen places such as utilities, where Epoch owns utility holding company PPL Corp (PPL.N).

PPL is spending $500 million on a smart meter replacement program that will modernize the power grid to make it smarter and more resilient, Van Valen said.

PPL can be more efficient when deploying people to deal with outages as a result of smart meters, she said. They will no longer need people to look for the outages.

Another technology play investors may have missed is McDonald’s Corp (MCD.N), which has partnered with UberEATS and the use of a mobile app offer delivery in 3,700 restaurants, Van Valen said. McDonald’s is touting its technology to increase efficiency, which flows to a company’s bottom line, she said.

“You don’t necessary think of a large global fast food chain as a technology company,” she said. “It’s helping with the growth in the revenues, profits and cash flows, which, from our perspective, that means growth in the dividends.”

Epoch is “quite constructive” on the outlook for 2018 as the market shifts from a period of central bank-driven low interest rates to one focused on profit growth and margins.

Another overlooked stock is Red Electrica (REE.MC) in Spain, where the utility is unlikely to see changes in the regulatory environment and Epoch expects the dividend to grow 7 percent to 8 percent a year, Van Valen said.

“It’s a regulated utility so it falls within that boring mantra that we like so much,” she said.

Another name Epoch likes is Altria Group Inc (MO.N) because of the strong pricing power and tremendous cash flows enjoyed by tobacco companies, she said.

Altria is “very consistent about returning cash to shareholders through dividends and share buybacks and debt reduction,” she said.

Source URL: https://www.reuters.com/article/us-investment-summit-epoch/dividend-seeking-investors-should-check-out-technology-epoch-idUSKBN1DH2FB

The futures traded in NASDAQ and International Commodities Exchange (ICE) show that US and international market prices of some key primary commodities, such as, cotton, soy, and maize are already experiencing [...] Read more]]> President Donald Trump had long been warning that the USA would impose higher tariffs on selected imports from its major exporters like China, the European Union (EU), and India.  He has now carried out the threat against China, the European Union (EU), Canada, Mexico and India who have also retaliated in kind by imposing higher tariffs on US exports to them.  By June, a veritable global trade war has started.

The futures traded in NASDAQ and International Commodities Exchange (ICE) show that US and international market prices of some key primary commodities, such as, cotton, soy, and maize are already experiencing a steady fall in prices.

For Bangladesh, these three commodities are very important – cotton for textile and readymade garments (RMG) industries, and soybean and maize for edible oil, poultry, fish, and livestock industries.

NASDAQ and ICE data show that since the middle of June 2018, the futures prices of #2 Cotton, a major US produce, have fallen from US $ 95 to US $ 85 per bale (480 lbs) – a fall by more than 10 per cent.

The futures prices of maize, another major US produce, have come down from over US$ 400 per ton in the third week of May to below US$ 350 per ton by the end of June. In other words, corn futures have depreciated by about 12.5 per cent in a span of just five weeks.

For soybean, another staple produce of the USA, has been hit the hardest. The futures of soybean, which were traded for around US$ 1,040  per ton in the 3rd week of May, have come down to US$ 860 per ton by the end of June 2018. Soybean futures have suffered a whopping 17 per cent decline.

A closer look at the import statistics reveals the importance USA as one of the major sources of direct and indirect imports for these three commodities in Bangladesh.

For cotton (HS 5201), the largest source of import has been India, Australia, USA, Uzbekistan, UAE, Singapore, and Malaysia, during 2008-2017 period. The UAE, Singapore, and Malaysia are not cotton producers themselves and simply re-exported cotton imported mostly from the USA, as the reports by the Global Agricultural Information Network (GAIN) from the United States Department of Agriculture (USDA) suggest. During this period, direct imports of cotton from the USA  ranked between the 3rd and 5th position for Bangladesh. According to mirror data available in the UN Comtrade Statistics, Bangladesh imported 6.2 million bales or 723,235 tons of raw cotton worth US$ 1.3 billion in 2017, out of which 152,144 tons worth US$ 283.67 million or 21 per cent was imported directly from the USA, while India and Australia commanded 32 per cent and 22 per cent share of Bangladesh’s raw cotton import in 2017. But if raw cotton sourced from the master brokers located in Singapore, UAE, Malaysia is considered then the market share of US cotton in Bangladesh is more than 21 per cent. It is important to note that Bangladesh domestically produces only 2.0 per cent of its raw cotton requirement, and the rest 98 per cent is imported, according to 2018 GAIN Report. Besides, there is need for import of cotton yarns of various categories.

For maize, a major requirement for the high growth poultry and fish farming sectors of Bangladesh, the largest source of imports have been Brazil, USA, and India during the 2008-2017 period, with the USA steadily keeping its 2nd position after Brazil. China’s requirement for American maize being stifled due to increased tariff, the major global suppliers like India, Brazil, and Argentina will look for expansion into the Chinese market. Hence, Bangladesh may expect to source more of its maize from the USA. During 2017-2018 (May-April), Bangladesh imported a total of 1.247 million tons of maize valued at US $ 220.94 million, out of which 119,999 tons or about 9.6 per cent of the volume worth US $ 30.88 million (commanding about 14 per cent of the import value) was sourced from the USA, according to the mirror data available in the UN Comtrade Statistics. Bangladesh produces domestically about 76 per cent of the maize it requires and needs to import the rest 24 per cent, according to the 2018 GAIN Report.

The USA was the largest source of imported soybean in Bangladesh during 2008-2017 period, with Uruguay and Paraguay remaining a distant second and third source. Soybean is used as feed for the fresh water fish farming industries, poultry and other livestock farms, and for extracting edible oil. Bangladesh needs to import about 90 per cent of its requirement for soybean grain, as domestic production of 156,000 tons constitutes only 10 per cent of the market demand, as per 2017 GAIN Report. According to the mirror data of UN Comtrade Statistics, Bangladesh imported grain soybean worth US $ 402.11 million, out of which 1.047 million tons valued at US $ 385.23 million or 95.08 per cent was from the USA in 2017.

In the context of falling prices of these three commodities and the major market share of the USA in Bangladesh’s imports, it is likely that Bangladesh will import more of these commodities from the USA in the coming months.

The question remains, how the cheaper and larger volume of imports from the USA will affect the productivity, competitiveness, consumption, and exports of Bangladesh.

Maize and soybean are extensively used for domestic consumption in poultry, live stock, fish, and edible oil industries as feed and raw material. It would therefore be rational to assume that savings from cheaper import of these raw materials will result in cheaper production cost and increased competitiveness of these industrial sub-sectors in Bangladesh, with everything else remaining unchanged.

Analysing the impact of cheaper cotton prices is much more complex. Trade experts and analysts need to figure out such important questions, such as, if China stops buying US cotton, then how long are the cotton prices likely to remain cheap in the medium and long term? What is the possible price and demand elasticity? How about yarn prices? What will be the frequency and scale of trade diversion and deflection through other countries?

According to the reports of Bangladesh Textiles Mills Association (BTMA), Bangladesh needs to import about 60-65 per cent of its yarn demand for export-oriented woven products, mostly from China and India. Yarn production in China and India will be costlier, as they also largely depend on US cotton as their raw material to produce yarns.

Bangladesh is not ready at all to replace the Chinese and Indian yarn manufacturers and consume the US cotton supply as raw material for the domestic spinning mills to substitute yarn imports. At least it will not be possible overnight. Increasing the number of spindles in the spinning mills is also fraught with many other challenges, including those of access to finance, gas and electricity, port handling capacity, road and other transport infrastructure, and trade facilitation capacity of customs and other relevant government agencies, and maintaining the desired quality and variety of yarns.

To face these uncertainties, Bangladesh needs to further examine the strategic needs of its textiles and RMG sub-sector in the backdrop of the ongoing global trade war. There is not much time left, for competition is keen from countries like Vietnam, India, Pakistan, and others.

Shaquib Quoreshi is an enterpriser at Business Intelligence Limited.

shaquib.quoreshi@bisntel.com