Bangladesh stocks bounced back on Monday following relaxation market-cooling measures by the regulator, a day after the market suffered the steepest drop in 14 years.

The decision of the Securities and Exchange Commission (SEC) to raise the exposure limit of brokerage houses to individual investors to Tk.100 million helped the market to return to a positive territory, market operators said.On Sunday, the country??s capital market watchdog decided to increase the single-client borrowing limit to BDT 100 million )US$1.44 million) from BDT 50 million (0.72 million) for stockbrokers and extend the deadline for adjusting the margin loan for those clients whose credit exposure is over BDT 100 million ($1.44 million) to September 30 this year from August 31.

Turnover at the Dhaka Stock Exchange (DSE), however, continued to slide on Monday, totalling at BDT 1 2.86 billion ($186.3 million), down over 11 percent over the previous working day.

On the other hand, the benchmark DSE General Index (DGEN) shot up by 125.56 points or 2.02 per cent to end at 6325.76, recovering from previous session when it plunged 3.19 per cent or 204.75 points — its highest single-day drop since November 6, 1996.

On Sunday, Bangladesh??s stocks nosedived with the DSE suffering the highest single-day fall since the 1996 crash because of the regulators’ market-cooling tightening of credit.

Chittagong stocks marked a sharp rise on the day with the Chittagong Stock Exchange (CSE) Selective Categories Index increasing 1.91 percent to 12,13

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The first — Bangladesh scored quite low as a foreign direct investment catcher in South Asia, even much lower than Pakistan. And the second, the comments of the Board of Investment executive chairman who found not energy but red tape as a determining factor for investment decisions.

It was a shock that foreign investors still prefer Pakistan as their destination rather than Bangladesh. In Pakistan, suicide bombings no more elicit any shocked look from observers, as it does not for Afghanistan or Iraq either. Pakistan is today torn by sectarian strife. Whether it will be run over by the Taliban any time soon is a current speculation, and world leaders are rather more concerned with what will happen to its nuclear arms –whether those will fall into the hands of militants.

Bangladesh, in comparison, offers a far greater safe place for investment. It did not suffer from a terrible anti-insurgency fight like Sri Lanka did, and for which Sri Lanka’s FDI flow also dipped sharply. The remnants of the militant bands in Bangladesh are on the run and the government is firmly committed to fight extremism. Bangladesh’s economic health is also quite stable in the region, and it has made reasonably commendable advancement in social index. And yet we scored low — we need to think hard about it.

Why countries like Pakistan and Nigeria — you would find it hard to book a ticket to Lagos because of passenger pressure — are still preferred by investors, needs to be looked into carefully. It is the policies, opportunity to make money, and image that matter most.

When Bangladesh passed a new telco law that threatens stringent punishments such as Tk 300 crore fines (which is much higher than the capital of many telcos), and arrest without bail for delinquency — it sends the wrong signal to investors across the board. And a country’s image is built up on such signals put together.

Then there are the Board of Investment chief’s comments. Since he took over as the board’s boss, Dr SA Samad has been repeatedly denying the fact that energy crisis is a big deterring factor for investment. It may be a conscious denial from him, since he once sat at the energy ministry, and knows very well what a crucial role energy — both electricity and gas — plays in investment. He also must have realised that the Awami League-led government in fact wasted its first one and a half years regarding the energy front, and that energy will emerge as a crucial issue for Awami League in the next election about three and a half years away.

Any entrepreneurs’ gathering, be it formal or informal, is replete with talks of how their businesses are suffering due to load shedding and gas crisis. An investor, who runs a big dyeing factory in Gazipur, was recounting only last night how judicious he was to have his factory shut down because of gas crisis.

“I am lucky. I paid off my bank liabilities earlier, and so it was an easy decision to shut,” he said.

The person sitting next to him claimed he is even luckier. His factory’s gas supply came through the same line as that of a BNP leader’s. The BNP man’s connection was snapped as he defaulted on bills. That boosted gas pressure for his sari factory which is now running at full steam. Others around him are not that lucky, he said.

So, downplaying a problem would not help the situation, as the BoI chief is trying to do. Rather it might send wrong signals to policymakers, and the government’s efforts in solving the energy crisis might slacken.

The second comment the BoI chief made is even more curious. He said bureaucracy is the major problem for investment. True. But then the question comes, what the government has done to reduce red tape? The Regulatory Reforms Commission has been let to die only because it was conceptualised and formed during the caretaker government. And so is the fate of the Better Business Forum. The recommendations these two platforms made remain largely unimplemented. Finance Minister AMA Muhith, in his first budget, after the Awami League-led government came to power, promised that a new body would be formed to push through regulatory reforms.

That promise is forgotten today.

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According to the World Investment Report 2010, which was launched on Thursday, the country only received $700.16 million in FDI in 2009 compared to $1086.33 million in 2008.

The report says Bangladesh stands fourth on the list of eight South Asian countries receiving FDI.

Dr. M Ismail Hossain, a Jahangirnagar University economics teacher, unveiled the United Nations’ report at the office of the Board of Investment (BoI).

Hossain attributed the decline to the gas crisis in the country and global economic recession.

BoI executive chairman SA Samad, who also spoke at the launch, said he believed that FDI had declined as a result of bureaucratic tangles and lack of the board’s unitary power.

He claimed gas, water and political unrest had no impact in the reduction of the inflow of the investment.

Samad said he was optimistic that the country would receive greater FDI in 2010.

Also speaking at the press launch, BoI secretary Sultan Mahmud said there were already signs of recovery and that joint and foreign direct investment in January to June 2010 was larger than the level of investment that took place in the same months in 2009.

Mahmud said in the first six months of 2010, there had already been a total of 93 new projects, amounting to investment of Tk 23,911.922 million and the creation of around 25,000 new jobs. This compared to 129 projects, accounting for investment of Tk 46,896.015 and the creation of 33,000 new jobs in the whole of 2009.

The BoI secretary also expected the rate of investment to increase further, as investments tend to increase in the closing months of the year.

Privatisation Commission chairman Mirza Abdul Jalil, and BoI members, among others, were present at the launching ceremony.

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But this is no mere rural backwater. It is the sort of place to which foreign manufacturers may increasingly turn, if the rising wage demands of factory workers in China prompt companies to seek new pools of cheap labor elsewhere.

Already, in factories behind steel gates and tall concrete walls, tens of thousands of workers, most of them women, spend their days stitching T-shirts, pants and sweaters for Wal-Mart, H&M, Zara and other Western retailers and brands.

One of the Bangladeshi companies here, the DBL Group, employs 9,000 people making T-shirts and other knitwear. Business has been so good that the company is finishing a new 10-story building with open floors the size of soccer fields, planted with row after row of sewing machines.

??Our family needed the money, so we came here,?? said Maasuda Akthar, a 21-year-old sewing machine operator for DBL.

As costs have risen in China, long the world??s shop floor, it is slowly losing work to countries like Bangladesh, Vietnam and Cambodia ? at least for cheaper, labor-intensive goods like casual clothes, toys and simple electronics that do not necessarily require literate workers and can tolerate unreliable transportation systems and electrical grids.

Li & Fung, a Hong Kong company that handles sourcing and apparel manufacturing for companies like Wal-Mart and Liz Claiborne, reported that its production in Bangladesh jumped 20 percent last year, while China, its biggest supplier, slid 5 percent.

??Bangladesh is getting very competitive,?? William Fung, Li & Fung??s group managing director, told analysts in March.

The flow of jobs to poorer countries like Bangladesh started even before recent labor unrest in China led to big pay raises for many factory workers there ? and before changes in Beijing??s currency policy that could also raise the costs of Chinese exports. Now, though, economists expect the migration of China??s low-paying jobs to accelerate.

And while workers in Bangladesh and other developing countries are demanding higher pay, too ? leading to a clash between police and protesters earlier this week in a garment hub outside Dhaka ? they still earn much less than Chinese factory workers.

Bangladesh, for instance, has the lowest garment wages in the world, according to labor rights advocates. Ms. Akthar, who is relatively well paid by local standards, earns about $64 a month. That compares to minimum wages in China??s coastal industrial provinces ranging from $117 to $147 a month.

??The Chinese firms that are beginning to get into trouble are producing textiles, rubber footwear and things like that,?? said Barry Eichengreen, a professor of economics and political science at the University of California. ??And there are lots of countries in South Asia and East Asia and in Central America that would like to fill this space.??

But Bangladesh has its own challenges to overcome.

China??s combination of a vast population of migrant workers, many with at least elementary school educations, along with modern roads, railways and power grids in its industrial provinces, has bestowed it with manufacturing capabilities that countries like Bangladesh cannot offer. Beijing also provides low-cost loans and other incentives to its industries that other countries have trouble matching for theirs.

Most of Bangladesh, meanwhile, suffers blackouts six to seven hours a day because it has not invested enough in power plants and natural gas fields ? deficiencies that the government is working on but that will not be eliminated quickly.

The country has a literacy rate of only 55 percent ? compared with more than 92 percent in China. As a result, workers in this country are only one-fourth as productive as the Chinese in making shirts, jackets and other woven clothes, according to a report by the Center for Policy Dialogue, an independent research organization based in Dhaka.

Despite its handicaps, Bangladesh nearly doubled garment exports from 2004 to 2009. And the industry now employs about three million people, more than any other industrial segment in this largely agrarian country of 160 million. From June through November last year, garment exports accounted for more than 80 percent of the country??s total exports of $7.1 billion.

Among developing countries, Bangladesh is the third-biggest exporter of clothing after mainland China, which exported $120 billion in 2008, and Turkey, a distant No. 2, according to the World Trade Organization.

And with nearly 70 million people of working age, Bangladesh could probably absorb many more of China??s 20 million garment industry jobs.

Still, some of the changes in China could prove to be mixed blessings for Bangladesh. If China allows its currency, the renminbi, to trade more freely, Bangladeshi exports would become more competitive.

But a stronger renminbi could also hurt Bangladesh by raising the price of machinery and fabric imported from China, its biggest supplier, said Ahmed Mushfiq Mobarak, an assistant professor of economics at the Yale School of Management. Over time, Bangladesh could buy more from other countries, like India, but those countries first would need to build up significant production capacity.
And as in China, workers in Bangladesh have started demanding higher pay. In recent weeks, labor protests have periodically shut down garment factories as thousands of workers battled police in Dhaka and other garment hubs like Gazipur. Late last month, police clashed with about 15,000 protesters on a busy Dhaka street lined with garment factories. In one exchange, a clutch of protesters lobbed bricks at police officers from an alley opposite the Outright Fashion factory, before fleeing as the officers charged at them with batons, tear gas canisters and the hot, colored water used to both disperse protesters and mark them for later identification.

Garment workers are demanding a 200 percent increase in the minimum wage, to 5,000 taka (about $71) a month ? which is how much workers with several years of experience now earn. The government, which plans to announce a new minimum wage soon, last increased it in 2006, to 1,662.50 taka (about $24). Since then, inflation has been as high as 9.9 percent a year.

??Most garment workers live in slum areas where one room costs 2,000 to 3,000 taka,?? said Mushrefa Mishu, president of the Garment Workers?? Unity Forum, an association that claims to represent more than 60,000 members.

Labor leaders want the government to make it easier for workers to form unions ? very few factories are unionized today ? and to require higher safety standards and better working conditions.

In January, H&M, Wal-Mart, Gap, Tesco and other Western clothing buyers asked the Bangladeshi government to raise the minimum wage and reset it every year, although the group did not specify what the wage should be. A spokeswoman for H&M, Malin Bjorne, said the company was willing to pay more for clothing to help support higher wages. It is unclear whether other companies would do the same.

But factory owners here argue that a big increase in wages would make them uncompetitive against Vietnam and other big producers, which have higher labor costs but also have better infrastructure and are more efficient producers. If that happened, Bangladesh??s China opportunity could prove all too fleeting, they say.

??If it??s 5,000 taka, I would close all my factories,?? said Anisul Huq, a former head of the Bangladeshi garment industry??s trade group and a factory owner whose customers include H&M and Wal-Mart. ??Even if it??s 3,000 taka, lots of factories will close within three or four months.??

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Through a wholly owned subsidiary, EHII signed the deal with the Bangladesh Power Development Board for a single cycle electrical power generation plant with room to expand to a 450 MW combined cycle facility.

Houston-based EHII (NYSE: EGYH) is currently talking with a handful of engineering, procurement and construction contractors to build the plant while EHII will serve as the independent power producer.

About the company

Energy Holdings International, Inc. is a U.S. based, American-Saudi Arabian company; focused on acquiring, developing and managing energy assets in the Middle East, Asia and the Americas. Its website is http://www.energyhii.com. Four of its Board of Directors are from Riyahd, Saudi Arabia.

SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995

This press release contains certain forward-looking information and statements that are intended to be covered by the safe harbor for forward looking statements provided by the Private Securities Litigation Reform Act of 1995. Forward-looking statements are statements that are not historical facts. Readers are urged to carefully review and consider the various disclosures in EHII’s SEC periodic and interim reports.

SOURCE Energy Holdings International, Inc.

RELATED LINKS
http://www.energyhii.com

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Fast Retailing will become the first Asian company to set up a ??social business?? ? a term given to companies formed to address a social cause and whose profits are ploughed back into the company ? in the region. It will own 99 per cent of the new company withsocial business the other 1 per cent. It will begin operations in September.

Muhammed Yunus, Nobel peace prize-winner and the founder of Grameen Bank, said: ??It [sends] a big message to Japanese companies to use their technology to solve the problems of the people.??

Fast Retailing, whose president, Japanese companies , is Japan??s richest man, joins companies such as Adidas in creating a social business in Bangladesh. It is the first time Grameen participates in a venture that focuses on bringing clothes to the impoverished.

Bangladesh is one of the world??s poorest countries with 36.3 per cent of the population living below the poverty line of $1.25 per day.

However, it has an economic growth rate of 5.6 per cent and is benefiting from a shift out of relatively high-cost production bases, such as southern China.

The Japanese government this year established a new study group with the aim of creating public-private partnerships in developing countries to target middle- and low-income groups as developed country markets stagnate.

The venture, which has a temporary name of Grameen Uniqlo, will sell products such as underwear, blankets, raincoats and school uniforms to families living in poverty at affordable prices ? likely to be about a $1 or less. This will demand the most efficient and low-cost production.

Grameen Uniqlo is planning to employ 1,500 people within three years, the vast majority of whom will be sales people, who will use techniques such as door-to-door selling and education about the importance of sanitation and cleanliness. The venture also aims to nurture entrepreneurs through their sales training and employment.

The venture will benefit from access to Grameen??s 8m borrowers and the use of its well-known brand in Bangladesh.

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The assurance came at a conference on “Investment in Power Sector of Bangladesh: Opportunities and Challenges” at Sonargaon Hotel in Dhaka. The government also suggested doubling the price of CNG.

More than 100 potential local and international investors gathered at the hotel to show their interest in Bangladesh government’s call for investment in the power sector.

Addressing the daylong conference, top government executives also assured them of every incentive and the right price if they invest in generating power.

The conference was a follow up of the road shows the government organised in London in 2009 and Singapore and New York this year to attract entrepreneurs from across the world into investing in the power sector.

The Power Division organised the conference, which was the first of its kind in Bangladesh, to reflect the government’s commitment to move forward with the ongoing activities in the power sector.

Speaking at the inaugural session as the chief guest Finance Minister Abul Maal Abdul Muhith said despite many hurdles, the economy of Bangladesh is growing reasonably and there is a huge potential of investment in various sectors, including power.

He said about 40 percent of the country’s power plants are over 40 years old and not in a position to produce at their capacity. “The gas shortage is also causing problem,” he said.

He suggested to double the price of compressed natural gas (CNG) as the present CNG price is one-fourth of liquid fuel. However, he reaffirmed that the government would continue the subsidy to keep electricity within the reach of common people.

“Please do not expect we will double the price, but we will adjust the price in phases,” he said.

“We need huge subsidy to meet the urgent demands by generating electricity with some costly resources,” said the minister.

The government has taken initiatives for setting up rental power plants, which will be very costly, said the finance minister.

“I am sure gas supply will eventually increase with concerted and sustained efforts in exploration, which will help attract more investment in the power sector, and eventually ensure growth of much higher than the present rate.”

He said investors in the power sector have long been sceptical about the government’s ability to pay for purchasing the power they will generate.

Muhith said the government is working to prepare a coal policy to extract the country’s coal deposit for power generation. He hoped that the policy would be finalised by the year.

The finance minister emphasised the need for introducing regional energy trade and said Bangladesh should not have power crisis from mid 2012 as the government ha taken many projects to mitigate the shortage.

“We can easily take the country’s growth rate up to eight percent by quickly solving the power crisis,” he observed.

Chairman of Power Development Board (PDB) SM Alamgir Kabir gave details of the country’s present power situation, the demand and supply gap, and the scope for investment, the government mega plan and financial challenges in generating power.

Giving a year-wise projection of power generation, he said the government has planned to generate about 10,000 megawatts of electricity by 2015 by setting up of power plants in private and public sectors. “The government is promoting private sector investment in Bangladesh,” he added.

Energy adviser to the prime minister Towfiq-e-Elahi Chowdhury said all the organisations of the government are making concerted effort to achieve the target. “We are very open to you,” he told the investors.

He invited investors to come forward and take the benefit of investing in the power sector and help meet the huge present and future power demands.

Executive Chairman of the Board of Investment SA Samad said the energy sector needs 24 percent growth if the country’s economy grows at eight percent.

Summit Group Chairman Aziz Khan came up with the drawbacks of re-tender of bidding and delays. He said this costs a lot to the investors of Bangladesh and abroad.

He identified the large difference between cost of electricity and the sale price as a major challenge.

Chairman of Parliamentary Standing Committee on Power, Energy and Mineral Resources Mohammad Shubid Ali Bhuiyan, State Minister for Power Enamul Huq and power secretary Abul Kalam Azad also addressed the inaugural session.

In the first working session titled “Investment Opportunities”, the government executives, investors and representatives of development partners meticulously explained the investment opportunities in power, gas, liquid fuel and transport sectors.

Genting Energy, Daewoo International, Getco Ltd, Sinha Power Generation, Dutch-Bangla Power, Dana Engineerings, Bangla Cat, GBB Power Ltd, Spectra Group, Vito Asia Private Ltd, Cap Asia, New Line Groups and Tek Energy were among about 80 local and foreign companies that took part in the conference.

Different ministries also set up stalls at the conference venue highlighting their activities and the opportunities of investment.

The conference ended with one-to-one meeting between government officials and potential investors.

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Bangladesh’s Finance Minister, A.M.A. Muhith, signed the deal with the Jeddah-based development lender in the capital of Azerbaijan last week. The facility would help unload both crude and refined petroleum from mother vessels in the deep sea without landing in the port, said the finance minister on his return from Azerbaijan Saturday, adding that the unloaded oil would be brought ashore via pipeline.

BPC currently pays $5.50/mt to small vessels owned by the state Bangladesh Shipping Corp. to ferry petroleum ashore from larger vessels moored at the outer anchorage in the Bay of Bengal. The platform would save BPC around $8/mt incurred by the vessel transfer.

The floating platform would be built southwest of Kutubdia Island in the Bay of Bengal, 70 kilometers from the port of Chittagong. A 77-km, 36-inch diameter pipeline would link Bangladesh’s lone state-owned Eastern Refinery with the single point mooring.

The facility would help meet growing demand for fuel as Bangladesh’s annual oil imports are expected to grow 33% from 3.65 million mt/year to 4.85 million mt/year as Bangladesh’s new gasoil- and furnace oil-run power plants are expected to start operation shortly.
Bangladesh has approved installation of over a dozen oil-fired power plants to help ease the country’s electricity crisis within the shortest possible time.
We will float an international tender shortly for building the off-shore platform,” said the BPC official. Construction of the platform is targeted for 2011, he said. Forecast

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The credits from the International Development Association (IDA), the World Bank’s concessionary arm, have 40 year

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2010 will be a very challenging and important year for global development. Nearly every multilateral development bank simultaneously has requested billions of dollars of new donor money at a time when donor countries are grappling with staggering economic challenges. It’s a perfect storm for aid budgets.

Donor governments and multilateral aid agencies don’t have the funds to maintain the business as usual approach to development, but that’s not an excuse to do less for poor people. It’s an opportunity for development institutions to create innovative ways to maximize existing funds.

I have one such idea that would free $7.5 billion for the poorest countries without changing existing budgets.

I propose that the World Bank’s two lending arms, the International Development Association (IDA) and the International Bank for Reconstruction and Development (IBRD), rebalance how they finance aid programs in a select group of low-income countries.

IDA typically issues low-interest loans and grants to the world’s poorest countries and the IBRD typically issues market-term loans to middle-income countries. But some countries, the so-called IDA-blend countries such as India and Vietnam, receive loans from both IDA and IBRD.

I propose that the IBRD assume responsibility to provide those countries with the same volume of loans traditionally dispersed by IDA. This would free IDA to use the money otherwise committed to these IDA blend countries for their poorer clients, such as Bangladesh and Tanzania.

Granted, the IBRD would now have to issue more loans which means they need more money. As it happens, the World Bank shareholders just agreed to an $86-billion capital increase for the IBRD in April. So, it has the capacity to take over IDA’s share of loans without limiting the IDA-blend countries’ access to finance.

Rebalancing the World Bank’s loans in this manner would change the source — but not the volume of lending to countries like India and Vietnam. To ensure that they receive roughly the same terms as IDA currently provides them, IDA would provide grants to cover their interest payments and loan fees.

By better leveraging the IBRD’s balance sheet, IDA then could re-allocate the resources that it otherwise would have lent to these credit-worthy countries. The savings come out to roughly 75 cents for every dollar of lending shifted to the IBRD. The other 25 cents would be used to cover the interest payments and loan fees.

If the proposal had been applied to IDA’s current three-year funding period, it could have mobilized up to an additional $7.5 billion for education, health and infrastructure projects in the world’s poorest countries. That’s the equivalent of a 30-percent increase over existing funding levels, which is on par with some of the most historic increases in donor aid budgets. Of this amount, African countries could have received about $5.5 billion. This is serious money in a seriously challenging time.

One of the World Bank’s sister organizations — the Inter-American Development Bank — already successfully utilizes a similar approach for its lower-income clients.

It is time for World Bank shareholders to seriously consider the same resource-maximizing model. And they have a brief window of opportunity to take action. This week donor governments are assembling in Bamako, Mali, to negotiate a new funding framework for IDA, which will span the next three years. In addition, World Bank shareholders still have to secure legislative approval for the agreed IBRD capital increase.

By pursuing this creative approach, donor governments will be able to turn this perfect funding storm into a manageable, passing rain shower that neither inundates their budgets nor poor countries’ hopes for a prosperous, sunny future.

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