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October - December 2017

DEVELOPMENT DRIVING TOWARDS THE FUTURE


ECONOMIC
BANGLADESH
Bangladesh Economic Development : Driving Towards the Future October - December 2017
The Bangladesh Accountant

EDITORIAL BOARD CONTACT US


Chairman CA Bhaban
100 Kazi Nazrul Islam Avenue
Dr. Jamshed S A Choudhury FCA
Dhaka 1215, Bangladesh
880 2 9115340, 9612612100
Co-Chairman 9117521, 9137847 (Off.)

Harun Mahmud FCA 880 2 9125266


secretary@icab.org.bd
facebook.com/icabdhaka
Members
icab.org.bd
Akhtar Sohel Kasem FCA
A F Nesaruddin FCA
Nasir Uddin Ahmed FCA
Md. Shahadat Hossain FCA
Published by the Editorial Board of the Council

The Institute of Chartered Gopal Chandra Ghosh FCA


ISSN 1993-3649
Accountants of Bangladesh (ICAB) Moddassar Ahmed Siddique FCA
Amanullah Khan FCA
M Idris Ali FCA
Masih Malik Chowdhury FCA
Dr. Md. Abu Sayed Khan FCA
Md Abdus Salam FCA
Mohammad Zahid Hossain FCA
S. M. Rafiqul Islam FCA
Dr. ASM Hossain Tayiab FCA
Mohammad Redwanur Rahman FCA
Sk. Md. Tarikul Islam FCA
Dhali Tanvir Ahmad Siddiqui ACA
Anika Sultana ACA
Bidhan Chandra Mandal ACA
Ismat Jahan ACA
Afratul Kawsar ACA
Mustaq Ahmed ACA
Chairman DRC-ICAB

Member Secretary
Mohammed Emdadul Haque FCA
DISCLAIMER Technical Adviser, ICAB
"The opinions expressed in this
publication are those of the
respective authors themselves
and do not necessarily reflect the
views of the Editorial Board of the Design & Print
Institute of Chartered Dominant Printing & Packaging
Accountants of Bangladesh M 01794550916
(ICAB) or ICAB itself." E alamgir.dominant@gmail.com

OCTOBER - DECEMBER 2017 | The Bangladesh Accountant 1


ICAB PUBLICATIONS P6
ICAB publications include, inter
alia, a quarterly journal titled 'The
Bangladesh Accountant' and a
monthly mouthpiece 'ICAB News
Bulletin'.

In the quarterly journal articles of


ICAB Members, Members from
other Accountancy bodies,
Academics and Business Leaders
from home and abroad are
published. These articles cover an
wide area of our profession, i.e,
Auditing, Accounting, Financial

Contents
and Economic.

The monthly news bulletin


publishes latest ICAB events
mostly of the month it is October - December 2017
published. This bulletin also acts
as an information hub for the
Members to keep up to date what
is happening in and around ICAB.

In addition to these two regular


P4 Editorial P7 Income Inequality on the Rise:
publications, ICAB also publishes A Thwack to World Economy
books, monographs, booklets and and Social Cohesion
Students Study Manuals regularly. P6 President’s Desk M Jalal Hussain FCA

P13 Efficacies in SOCBs


Myths, Realities & Remedies
Masih Malik Chowdhury FCA

P17 Bangladesh Towards


Sustainable Food Security:
Contribution of Agribusiness
Md. Mustaq Ahmed ACA1
Md Abdullah Al Mamun2

P25 Critical Analysis of Transfer


Pricing Regulations in
Bangladesh
Md. Kamruzzaman ACA

P31 The Paradox of Growth


and Inequality
Md. Shahadat Hossain FCA

P35 Resolving Ambiguity in


Calculating Workers’ Profit
Participation and Other Funds
Md. Saiful Islam FCA

P41 Continuous Accounting:


The Pathway to Modernization
for more details, please visit of Accounting Services
www.icab.org.bd S M Ashfaqur Rahman ACA

2 OCTOBER - DECEMBER 2017 | The Bangladesh Accountant


The Bangladesh Accountant

Digital Highlights
www.icab.org.bd

P49 Exchange Rate Policy P107 Myanmar Pushouts Fiasco News & Events
Bangladesh Perspective in Bangladesh
Foyed Ahmed ACA Aleya Ferdous Circular & Notice

P53 E-Commerce and E-Commerce News Bulletin


P115 Productivity in RMG:
Scenario in Bangladesh Continuous Improvement is Key to Journal
Sayed Ashraf Mohammed Iqbal ACA Achieve USD 50 Billion Landmark
Mohammad Zahid Hossain FCA
P59 Financial Markets of Bangladesh
Development and Challenges
P119 PPP’s Role on Country’s
M A Wahab Akanda ACA
Development
M. Idris Ali FCA
P69 Corporate Social and
Environmental Reporting (CSER)
The Development of
Theoretical Framework
Muhammad Omar Faruk ACA1
Dr. Md. Ali Noor2

P79 Literacy Rate and Primary


Education: A Study on 64
Districts of Bangladesh
Sujan Chandra Paul ACA1
Dr. Anup Kumar Saha2

P91 Economic Trends and


Prospects in Developing
Bangladesh
Arif Hossain ACA

P101 Journey Towards 2050:


Prospect of Bangladesh
Economy
H M Ashraf-uz-Zaman FCA

OCTOBER - DECEMBER 2017 | The Bangladesh Accountant 3


Editorial
“economy
Bangladesh
now
is progressing
its pace of
growth in a
progressive
manner and
has
undergone a
major
transformation
over the past
two decades.” The October-December issue of population growth led to higher
the Bangladesh Accountant food availability per capita.
encompasses a wide variety of Macroeconomic stability was
current and burning topics as there maintained in the past 5 years. The
was no fixed theme for this issue. inflation rate dropped, the fiscal
We have endeavored to collect deficit was kept in check, foreign
views and opinions of writers on exchange reserves showed robust
economic development prospects growth, the exchange rate stayed
and current issues of Bangladesh. broadly unchanged and external
debt as a percentage of gross
Bangladesh economy now is
domestic product (GDP) steadily
progressing its pace of growth in a
decreased. Bangladesh is
progressive manner and has
undergoing substantial economic
undergone a major transformation
and social change, and this will
over the past two decades. Growth
intensify in the coming decades. The
was fueled mainly by a rise in
result has been a sustained increase
readymade garment exports,
in per capita income. It is important
overseas workers' remittances, and
to recognize that Bangladesh is
domestic consumption. In the past
making important progress towards
2 decades, growth was steady and
its goal of middle-income status.
inclusive creating jobs for
Dr. Jamshed Sanyiath low-skilled workers and women. A Bangladesh has successfully
Ahmed Choudhury FCA large increase in food production stepped towards SDGs from MDGs.
Chairman – Editorial Board
Council Member - ICAB together with a sharp decline in It has become a role model in South

4 OCTOBER - DECEMBER 2017 | The Bangladesh Accountant


The Bangladesh Accountant

'investor-friendly' environment so as
to attract foreign trade. For
achieving the growth rate of 7% to
8%, the country needs 32% of GDP
from 10 years’ indigenous
investment with a significant
GOVERNMENT amount of FDI. Investment in the
HAS SET TARGETS TO power sector is the number one
BRING DOWN POVERTY TO priority of the government to meet

13.5 PERCENT the growing infrastructure needs.

The government and the people of


IN THE POPULATION Bangladesh have their eyes fixed on

BY 2021 the horizon, working hard to realize


the twin dreams of eradicating
poverty and achieving
middle-income status by 2021. The
country’s success in achieving the
Millennium Development Goals has
Asia and in the world in achieving
shown that this is not only possible,
the MDGs. Our Government is
but highly likely. In this journey, we
persistently working hard to
achieve SDGs though we have all citizens of our beloved nation
limitations that need to be must come forward and work
overcome. These are not easy to together to reach our dreamed
achieve, lots of internal and destination.
external challenges are there. As always, we all must try to enrich
Government has set targets to our fellow members and honourable
bring down poverty to 13.5 percent readers with the scholarly thoughts
in the population by 2021 and also and insight shared by the writers.
achieve universal literacy by the This journal is a means to grow the
end of this decade. writing skill of prospective writers of
Encouraging foreign investment in our members. And thus, helps
Bangladesh has had significant develop our profession.
success - particularly in the power Improvement is a continuous
generation, gas production, process, so like always we solicit
pharmaceutical, textile and cellular your suggestions to uphold the
telephony sectors. The government advancement of the Bangladesh
has also made efforts to create an Account at home and abroad.

OCTOBER - DECEMBER 2017 | The Bangladesh Accountant 5


President’s Desk
“urgeI strongly
our
members to
make the
effort and
put in the
time to
contribute to
the contents
of this
Journal, and
encourage
the As members of ICAB, we should
take pride in our quarterly Journal.
is a source of information for those
within and outside our profession. It
publication The Journal tends to have a rich is part of our identify; it is a
team to content of a wide range of topics component of the CA brand. I
continue to ranging from technical accounting strongly urge our members to make

the good issues to National Budget


developments in management and
to the effort and put in the time to
contribute to the contents of this
work they technology. I am delighted that in Journal, and encourage the
have been 2017 this prized document has publication team to continue to the
doing.” received commendable face lifting good work they have been doing.
under the leadership of Council
Best wishes.
Member Dr. Jamshed Sanyiath
Ahmed Choudhury FCA.

This Journal is not just a key


mouthpiece of our profession, but

Adeeb Hossain Khan FCA


President-ICAB

6 OCTOBER - DECEMBER 2017 | The Bangladesh Accountant


ARTICLE

Income Inequality on the Rise


A Thwack to World Economy and Social Cohesion

M Jalal Hussain FCA

I
ntroduction development agenda, etiolating
inequalities across and within
“The greatest country, many countries have been an
the richest country is not that important part of the
which has the most capitalists, discussions at different
monopolists, immense international colloquiums.
grabbings, vast fortunes, with There’s an ever-increasing
its sad, sad soil of extreme, deference among sponsors that
degrading, damning poverty, economic growth is not
but the land which there are the adequate to sustainably reduce
most homesteads, poverty if it’s not wide-ranging.
freeholds-where wealth does When world leaders adopted
not show much such the Millennium Declaration in
contrasts-high and low, where 2000, they promised to
all men have enough-a modest generate a more equitable
living and beautiful necessities” economic world. So far, in many
The Author is a said Walt Whitman, a renowned countries, the hierarchy of
Chartered Accountant and American essayist and prospects and opportunities
a Fellow Member of the journalist. have become much stiffer to
Institute of Chartered Accountants scramble. Huge disparities are
of Bangladesh-ICAB Flared income inequality is the there in health and education
crucial test of our time. In services, land and other
advanced economies, the gap productive assets between the
between the rich and poor is at richest and the poorest
its highest level in decades. households.
Inequality trends have been
more mixed in emerging and Wealth inequalities are braided
developing countries, with directly with income inequality.
some countries experiencing They are inherited from
declining inequality, but generations and are intensely
ubiquitous inequities in access seen across many locations
to education, health care, and around the globe, ensnaring
finance are ongoing. The extent large pouches of society in
of inequality, its diverse, its poverty and deprivation. Across
recusant effect on the economy the globe, people living in
and the society-have become poverty and vulnerable social
some of the most fiercely groups have been hit hard by
deliberated issues by the global financial and
economists, policymakers and economic crisis and its
researchers. repercussion, adding urgency to
the need to discourse
The concept of rising income inequalities and their
inequality and its global consequences. There’s growing
residuum has brought the global conciliation on the need
attention of the world leaders, to abridge the high-gap
business communities and between those ‘haves’ and
economists. The international those ‘have-nots’.
communities silhouette its
vision for a post-2015 global As underscored in the

OCTOBER - DECEMBER 2017 | The Bangladesh Accountant 7


Income Inequality on the Rise
A Thwack to World Economy and Social Cohesion

conclusion document of the United Nations trends that will determine the shape of
Conference on Sustainable Development, finding the world in the next decade.
ways and means to successfully down-size
income inequality will necessitate a The WEF said it had been pointing out
transformative modification and an the threats of rising inequality and
all-encompassing slant to the three actinoids of political polarization for more than a
sustainable development – economic, decade, but that the slow pace of
environmental and societal. Properly balanced recovery from the deep recession of
social, economic and environmental policies and 2008 had intensified income gaps within
institutions can help decrease income inequalities countries. Emergency measures such as
when they warrant equality of opportunity, quantitative easing – the creation of
irradiate job creation and guarantee entree to money by central banks – had become
permanent features of economic policy,
and had aggravated inequality by
The concept of rising income boosting the returns of those holding
financial assets. It added that the trends
inequality and its global residuum of recent years had come into sharp
has brought the attention of the focus in 2016 with rising discontent and
dissatisfaction evident in the UK
world leaders, business communities referendum and in the US with Trump’s
and economists. The international victory over Hillary Clinton.

communities silhouette its vision “Urgent action is needed to overcome


for a post-2015 global development political or ideological differences and
work together to solve critical challenges
agenda, etiolating inequalities across as income inequality,” said Margareta
and within many countries have been Drzeniek-Hanouz, head of global
competitiveness and risks at the WEF.
an important part of the discussions (Source WEF Risks Report 2017).
at different international colloquiums.

passable social protection for all. Aplenty can be Maps – Current World Income Distribution
erudite from those economies that managed to
reduce substantially inequality even under an
erratic, dicey and fierce global environment. The
international community can play a significant
role in providing backing to policies that help cut
down income inequality.

Assessments of World Economic Forum 2017 on


Inequality of Income

The WEF’s annual global risks report –


hand-picked from 700 experts from the world–
found that rising income and wealth disparity, and
increasing polarization of sectors of society, were
ranked first and third among the underlying
Source: World GDP density map, 1990 and 2025–SEDAC (NASA)

8 OCTOBER - DECEMBER 2017 | The Bangladesh Accountant


ARTICLE

Inequality... bizarre combination pattern in


which opulence is booming for
How much richer are the richest 20% in CEOs and Wall Street
speculators, while the rest of the
each country than the poorest 20% economy – particularly workers,
Income gaps the middle-income class, and
How may times richer 9.7
are the richest 11th than small businesses – have
the poorest 11th? 8.5
8.0 undergone a predominantly
7.2
6.7 6.8 6.8 7.0 rancorous cycle. Productivity
6.1 6.2
5.3 5.6 5.6 5.6
5.7 has grown massively, but wages
4.6 4.8 5.2 have festered. Consumption has
4.3
3.9 4.0
3.4 3.7 remained reasonably high
because, in an effort to maintain
their standard of living, working
people have: a) added hours,
an

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ly

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d
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an
an

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US
Ita
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became two-income families,


rw
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Sp
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lgi

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rm

rla
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eal
Au

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often with two and even three


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jobs per person; b) increased


household debt c) retroactions
Wikins on & Pickett, The Spirit Level www.equalitytrust.org.uk
and ricochets of globalization
and technology advancement.
Economic, Social and Both vicious and virtuous cycles Inequality has skyrocketed
Natural Causes of have befallen in various because effective tax rates on
Income Inequality economies at several times and the 1% have dropped, while their
under numerous economic income and profits have risen
A “tour d’horizon“ of the origins theories and policy pressures. steeply.
of inequality started with the But, for the last 30 years, the
convergence and divergence global economy in general and Some people born with a silver
since 1950. The review of the the American economy in spoon and rich inheritance
causes of income inequality will particular have witnessed a makes them more rich and
show that various archetypes
are ostensible in the
progression of inequality at the
country level. Depending on the
inequality concept used, those
outlines are sometimes hard to
resolve, except if one
appreciates that different
sources may lead to different
assessments. Overall, the
conclusion is that inequality is
higher today in a large number
of countries than it was some 25
years ago. The reason is simple:
People who already grasp
wealth have the resources to
reinvest or to leverage the
reaping of wealth, which
procreates neoteric wealth.

OCTOBER - DECEMBER 2017 | The Bangladesh Accountant 9


Income Inequality on the Rise
A Thwack to World Economy and Social Cohesion

quick-witted life. On the who have started to say that technology has replaced many
contrary some people born technology, like globalization, is white and blue-collar jobs that
landless, homeless and adversely affecting the lives of paid well. Workers in the
penniless as their parents die many people. The manufacturing sector have to
with huge burden of debt finally internationally acclaimed British switch to other lower paying
shifted to the unfortunate physicist, Stephen Hawking has jobs. In a recent interview, the
inheritors. So long the system of warned that technology is Honeywell CEO said half of their
inheritance continues, partly to blame for the rise in manufacturing jobs are actually
inequalities are bound to be income inequality; and, that in software and not the physical
perpetuated in the society. great technological advances assembling of parts. But
Inequality of income also causes can leave most people Honeywell is considered as one
due to natural reasons as some “miserably poor.” He said: of the biggest manufacturers in
people are endowed by nature “Everyone can enjoy a life of the world.
with superior talent, intelligence, luxurious leisure if the
better physique and greater machine-produced wealth is The rise of populism and the
capability than others. In shared, or most people can end electoral victory of populists like
additions, governments’ policies up miserably poor if the Trump and the Brexit vote are
on wage structures, minimum machine owners successfully actually partly the result of
wages, education policies and lobby against wealth anger of people at the loss of
facilities, taxation policies, etc. redistribution... so far the trend jobs due to technology.
are the deep-rooted reasons for seems to be toward the second According to Stephen Hawking:
income equalities in an option with technology driving “The automation of factories
economy. ever-increasing inequality.” has already decimated jobs in
traditional manufacturing and
Technology Pullulates Professor Erik Brynjolfsson of the rise of artificial intelligence is
Income Inequality the MIT Sloan School of likely to extend this job
Management, recently wrote: destruction deep into middle
The tech CEOs of Apple, “My reading of the data is that classes, with only the most
Microsoft, Amazon, Facebook technology is the main driver of caring, creative or supervisory
are resounding the world that the recent increases in roles remaining.”
they are making the world a inequality. It is the biggest
better place. But there are those factor.” The problem is that The loss of jobs in the
manufacturing sector due to
technology is now beginning to
happen in the service sector.
Amazon is the largest
distribution company in the
world. In 2016, the company
announced that it now has
45,000 robots across 20
fulfillment centers. A year
before, it announced it had
30,000 robots. This means that
in a single year, Amazon had
increased its robots from
30,000 to 45,000 or a 50
percent increase and the end
result is loss of jobs of humans.

10 OCTOBER - DECEMBER 2017 | The Bangladesh Accountant


ARTICLE

Inequality is a Vicious social unrests in the forms of has been connected with
Cycle for the Economy riot, protest, shooting, looting intentional homicide and
and the Society and loss of many people’s lives. robbery, violent crime well as a
higher prevalence of other
“The rich get richer; the poor Nigeria has one of the world’s social problems such as drug
get poorer” is not just a cliché. biggest populations, the abuse and mental illness.
The concept behind it is a country is overflowing with oil Besides, this increase in social
theoretical process called reserves, and a starving young tensions have been found as a
“wealth concentration.” Under workforce busting with formidable blockade for the
certain conditions, newly innovative ideas. Why is the strengthening of democratic
created wealth is concentrated West African Giant still so poor institutions and a source of
in the possession of that almost 100 million people political unpredictability.
already-wealthy individuals. The live on less than $1 per day? The
process of wealth concentration oil rich country is submersed
with inequality of income,
Income Inequality in the
arguably makes economic
inequality a rancorous cycle. according to a global index, Context of Bangladesh
The effects of wealth which ranks Nigeria at the very
There’s no doubt that the GDP
concentration may extend to bottom of 152 countries in terms
growth and per capita income
future generations. Children of their commitment to fight
of Bangladesh have been
born in a rich family have an inequality.
increasing during the last few
economic advantage, because years. At the same time income
Inequality of income has been
of wealth inherited and possibly gap between the rich and the
strongly linked with crimes and
education, which may increase poor widened though per capita
social conflicts. In particular it
their chances of earning a
higher income than their peers.
These advantages create Income Inequality
another round of the malicious Chile, Mexico and the U.S. top the OECD’s list
cycle. Gini Coefficient

Growing inequality and flaring Chile


Mexico
income gaps will lead to social U. S.
Turkey
unrest and chaos in many Israel
Estonia
U.K.
developed and developing Lithuania
Latvia
countries. In practical terms, Spain
Greece
according to an analysis by Portugal
Australia
Standard & Poor’s, as the New Zealand
Japan
income gap has amplified, it has Italy
Canada
created an undercurrent of OECD Average
Ireland
Korea
social unrest that, should the Poland
Switzerland
trend continue, will worsen – France
Germany
perhaps even to the point of Hungary
Netherlands
civil unrest, conflicts and Luxembourg
Sweden
societal onslaught. The Austria
Slovak Republic
backlashes of income inequality Belgium
Czech Republic
had been visible in the world’s Finland
Slovenia
Denmark
1st largest economy-USA since Norway
Iceland
long time back. Starting from
the Springfest Riot, April 10, 0.00 0.05 0.10 0.15 0.20 0.25 0.30 0.35 0.40 0.45 0.50
2010 to St. Louis Protests, Bloomberg
Source: Organization for Economic Cooperation and Development
September 15, 2017, the country
faced 29 serious and miasmatic

OCTOBER - DECEMBER 2017 | The Bangladesh Accountant 11


Income Inequality on the Rise
A Thwack to World Economy and Social Cohesion

income increased significantly, As a result, extreme inequality is Conclusion


according to the preliminary being created in our society
report of the Household Income between the rich and the poor. Income inequality is now one of
and Expenditure Survey-2016. Majority people are also being the most ebullient public,
The report shows that Gini deprived of good medical political, and intellectual issues
co-efficient, which is used to treatment, nutrition and of the time. This is mostly
measure income inequality, because the facts have
entertainment which lead to
increased to 0.483 at national changed. In most nations,
intensify social tensions, income gaps have widened, and
level in 2016 from 0.458 in 2010 conflicts, political and social the United States is no more an
meaning that the rich became unpredictability. As the exception. The clamor of the
richer while the poor became inequality in a county increases, “we are the 99%” occupy
poorer during the period. the loss in human development movement has quieted. But the
also increases, according to the study of income distributions
Per capita income in the country Human Development Report, over time and between places
grew swiftly in the past three has advanced considerably.
released jointly by the UNDP
decades with economic growth, Thomas Piketty’s Capital,
and the General Economics
but failed to prevent spreading Anthony Atkinson’s Inequality
Division of the Planning
inequality. Economists blamed and Robert Reich’s Aftershock
Commission in 2016.
lack of good governance, have helped to draw greater
widespread corruption and attention to the red-hot issue.
Business policy, minimum
poor institutional capacity for wages policy, taxation policy
the unpleasant situation. The Rising income inequality has
and education policy are very taken place between country to
per capita income in the county important to reduce income country and within the country
grew five folds to $1602 in heterogeneity and economic and reached at an alarming and
2016-17 from $330 in 1994-95,
disparity in the county. There dangerous level. The
thanks to the inflow of repercussion of income
was a news in the local
remittance, growing exports at inequality had already started in
newspapers recently that
the cost of low-priced labor and the developed economies and
fetched the attention of the
inside consumption. The rich, were spreading from Main
scribe that one restaurant is
however, became richer and the Street to Wall Street, from Latin
opened in the capital city of
poor became poorer day by day America to Asia to Africa.
Dhaka where ‘robots” were used
amid unequal distribution of the Despite the grim prognosis,
to serve customers replacing there’s hope. The world leaders
economic gains over the years.
“hotel boys/girls”. Bangladesh is and economists have taken the
The impacts of inequality on a country of 161 million people, issue in their top-urgent agenda
different sectors of the society millions of skilled and educated and included in the agenda of
have become acute as only a people are unemployed and different international seminars
small section of people is under employed in the country. and forums. The world economy
getting high quality education In this economic scenario, how should come out from the
could business owner get pestilent cycle of unsustainable
and health care, while the
permission/license to use inequality where 1% of the world
majority people are being population owns more wealth
deprived of it. The huge number “robots” in restaurants? What’s
than the remaining 99%.
of workers have been working the government policy about
Inequality- income- trapped
in garments and textile this? This type of economic countries may follow the
industries for the last few activity will surely create examples of Nordic countries
decades with skimpy wages unemployment, income where income inequality is less,
that don’t support them to inequality and end up with people live in peace and
educate their children properly. social instability, chaos and maintain decent and high
conflicts. standard of living.

12 OCTOBER - DECEMBER 2017 | The Bangladesh Accountant


ARTICLE

Efficacies in SOCBs
Myths, Realities & Remedies

Masih Malik Chowdhury FCA

W
ay back in 1972 the all public limited companies.
banking sector was in These have brought a visible
an absentee ownership paradigm shift in the post
regime. Alike the industries in liberation policies of state
the country Bangladesh principles. The global changes in
Government at that time faced policies had great impact on
or more appropriately was policies of Government that
encountered with the started within the multiparty
management & ownership politics practice. As a sequence
problem of banks. In the post to it, the banking sector started
liberation months banks were growing in the competitive
unattended by any ownerships. landscape – Private vs Public.
At that critical juncture Gradually PCBs were extended
Bongobondhu’s leadership took in number & quantum of
the decision for Government to banking finance occupying
take over all the Banks. Starting larger piece of cake in national
The Author is a with Sonali, Janata, Agrani and bank financing volume. Their
Chartered Accountant & Rupali, Pubali and Uttara as slice is bigger mainly for small
a Fellow Member and names, all the banks were taken scale of Capital Market which is
Past President of the under full control & ownership very slowly grooming despite
Institute of Chartered Accountants of the Government. These banks enormous fund needs in
of Bangladesh-ICAB were in other words development & industrialization.
nationalized by the Government Resultantly alternative source to
of Bangladesh. Consequently banking loans for funds cannot
these got a nomenclature of be availed by entrepreneurs
NCBs- nationalized commercial while causing high cost in
banks. borrowings from Banks.

More so for the circumstances During 1991 to 1996, 1996 to


rather than socialistic approach 2001, 2001 to 2006, and 2008
control of those banks were to 2017 many new PCBs came in
taken by the Government. to banking business getting
Subsequently however Uttara government nods. Capital
Bank & Pubali Bank were market had started seeing new
denationalized. Uttara was PCBs heating the price
transferred to original owners interactions in stock market.
while an entrepreneur group PCBs are fostering competition
took over the Pubali bank under in the banking sector. And those
the lead of ex-IGP Mr. E.A. grew in a faster speed gradually
Chowdhury in early eighties. earning laurels from
The first 4 private sector banks entrepreneurs for business
came in around 1983 during growth. The control of Central
Ershad regime. Those 4 took the Bank was less regulated &
lead in the onslaught of private especially the NCBs were
sector banks – PCBs, a practically favoured by
paradigm shift. These are IFIC, regulator, Central Bank. These
Arab Bangladesh Bank (now AB favours to NCBs being into the
Bank Ltd.), Islami Bank ownership of state had started
Bangladesh Ltd. and Social to lead them to delinquent
Islami Bank Ltd (SIBL) which are bankers in management. These

OCTOBER - DECEMBER 2017 | The Bangladesh Accountant 13


Efficacies in SOCBs
Myths, Realities & Remedies

banks are now called State Owned Commercial measures to recruit new generation
Bank. These 4 SOCBs have been getting constant bankers into the SOCB stream. A
favours from government. These however bankers’ selection committee came in to
created bankers who left NCBs/SOCBs to join recruit for the SOCBs to meet the dearth
PCBs. These bankers however performed with of professional bankers. Those who were
immensely professional excellence in private recruited also shifted or are mostly in the
sector. Being in NCB sector they could not excel process for search of scope to move
well due to either regulated regime or profitably out.
government controlled intervention scenario. But
NCBs gave birth to a new generation of bankers The SOCBs are now offering competitive
who performed with excellence in PCBs. Such remuneration packages for employees in
transformation of bankers’ community from the backdrop of recent 100% rise in the
within a state control to private sector gave them pay scales. The AGMs, DGM & above in
impetus to perform enormously better. This these banks are getting car loans, with
growth in professional bankers left the private extra allowances not relating to
sector grow at a much better and faster pace performance. These policies of incentives
were resembled from PCBs but equal
operational efficacy in SOCB like PCBs is
still a far cry. These should have been
The SOCBs are now offering linked with performance. The branches
competitive remuneration packages mostly opened at the behest of
bureaucracy & politics without viability
for employees in the backdrop of study are mostly liabilities to the bank’s
recent 100% rise in the pay scales. branch network. Less than 10% of the
branches earn profit from portfolio loans.
The AGMs, DGM & above in these Deposit based branches lend funds to HO
banks are getting car loans, which in turn lends to the loan disbursing
branches. Indeed bankers in SOCBs by
with extra allowances not relating and large hardly think about individual
to performance. branch profits rather than safely lending
to HO. The loan portfolios are
concentrated in 5% or less branches in all
SOCBs. While 3/ 4 incentive bonuses are
compared with their tenure in Government sector paid on the basis of base pay to all
banks. Profit motive in them with performance employees whether or not he/she is a
incentives took the PCBs to newer heights. performer. These have left NPL (non
Contrary to this NCB/SOCBs fell apart in performing loans) to rise recklessly. The
bureaucracy & lack of commercial aptitude in term NPL has become a word of phobia
protected regime & based upon welfare motive as for readers. This percentage is reported
Government Banks. Inefficiency of employees at 10+% but leaving apart the colossal
was often not dealt with disciplinary actions volume of loans disbursed which are
which has in turn aggravated (SOCB) banking consistently being re-phased or
sector. restructured only to be prevented from
being categorized as classified loans.
Government sector banks were left in shambles With increased volume of these into
due to absence of professionals who moved at classified loans NPL would have soared
higher attractive packages to private sector. to shameful heights. The delinquent
Those who remained in SOCBs were mostly borrowers avail easiest resort to courts
reluctant to take new challenges in the private obtaining verdicts in their favour. The
sector. Gradually however Central Bank took SOCBs’ law enforcements are deplorably

14 OCTOBER - DECEMBER 2017 | The Bangladesh Accountant


ARTICLE

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 of 20% or over
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 Such fund
injections bring in concerns not
complacence for these banks
often further downgrading
persistent negative public
perception about those. These
funds come actually against free
services from these SOCBs. Yet
it leaves SOCBs into dire
defamation only adding fuel to
the fire as these banks are living
on blood circulations from the
government allegations are
poor due to absence of excellence when accountability, rampant.
monitoring transparency & reward & penalty stood ready
accountability. The for the professional It also gives upper hand to IMF,
managements are also not free delinquencies & WB, ADB & all self-claimed
of cronyism & nepotism. The accomplishments. The SOCBs global financial pivots to speak
regulatory regime- Central Bank were turned into limited for privatizing these SOCBs.
gives them, being owned by the companies but the control These SOCBs & their
government, inordinately remains with the owners, the management are having more
lenient scope of compliance. government. The Boards are foes than friends. Even the
These favours have made them made of government’s government wants them to run
uncompetitive & made them a nominations but not with well but does not leave them
non-professional banking liberty, accountability & onus of with liberty & accountability to
regime. They do not largely feel earning profit. Those banks perform. Consequently welfare
the urge to earn instead of render various kinds of free motive dominates over profit
depending on HO interests from services to the government. but the non-performing SOCB
safely lending out the idle Again cost of funds are not bankers’ accountability remains
deposits. Yet very contrarily cushioned to these banks by a far cry and utopia.
they perform well in PCBs- a government when these are
great contradictory having obligatory requirements In different locations 4 SOCBs
professionalism. to invest in treasury bills, bonds have more than one branch. It is
etc. which bear a modest 2.5% very often that 4 branches from
The same banker shifting from to 5% rate of interest. The cost 4 banks exist in same Upazilla or
SOCB to PCB sector has of fund is over 8% again mainly locations. Almost 90% if not
demonstrated capability with due to NPL while lending into more of these branches are run

OCTOBER - DECEMBER 2017 | The Bangladesh Accountant 15


Efficacies in SOCBs
Myths, Realities & Remedies

at loss by its own operational visible profit, attention to profit seriously & professionally by the
earnings. It is now high time to rather than welfare, free SOCB management. The
gradually reduce the branch government services replaced relationship developed over the
network by 20% per year over by reasonable charges should years between NPL borrowers &
atenure to run the networks into be introduced. A task force bankers in SOCBs has never
profitable one. Government is composed of 4 SOCBs can be been pro- profit & recovery.
the owner & hence it should formed to bring forth changes Rather these bankers promote
expect better & cheaper for welfare based banking to be the causes of NPL groups most
services from SOCBs. But free replaced by profit based one. often getting employment in
services to government & Task forces must include private PCBs soon after retiring from
getting new injections of funds sector bankers of excellence & SOCBs. Thus with the insider
into capital from budget looks prominence with reformist information in SOCBs those
like a dual policy. So an thinking. employees get attractive
alternative can be, to pay these packages in private banks as
SOCBs service charges at a The NPL has been increasing in CEO/MD etc. only to the
reduced rate & not inject any an alarming pace sourcing into deterioration of NPL to persist.
sum into its capital. Instruction it wider volume of loans every
to all the SOCBs to replenish year. It has been kept low by Retirees at GM & above level
new capital to meet capital ventilation and artificial must be refrained from joining
inadequacies, can be strictly respiratory system for SOCBs. PCBs as DMD/MD etc. Many
given. Giving them a standard & Even in PCBs, NPL scenario is SOCBs have favoured large
strict time frame like 3 years to vividly dissatisfactory & number of new generation bank
find own sources with reduced dismaying but yet better than promoters by leveraging or
branch network will reduce the SOCBs. Let, however, these impacting upon loan
operational cost. Options to SOC banks are not favoured in disbursements to them. The
employees for voluntary the application of legal DMDs/GMs of these SOCBs
retirements can have easier way regulations by central bank. have joined in those PCBs at
for profit search by these large. This is unethical for
branches. The lending from HO The NPLs should be separately employees of SOCBs and
to branches can be transferred dealt with keeping in view the debars independent decision
to inter branch transactions Indian experience. It is said that making often in favour of SOCB
along with a HO levy like .25%. In when the Going gets tough, the banks. These bankers remaining
that case all such inter branch tough gets going. This is high in transition to PCBs after
lending should be profit based & time that government in retirement in SOCBs often take
HO must not take responsibility association with central bank, wrong decision for their
of NPL etc. The branches are to based on its lessons learned so would-be employers (PCBs)
be held accountable for far, go ahead & drive anew and while still serving in the SOCBs,
individual NPL, profit earnings & afresh for SOCBs. Its NPL even against the stake their
for that networks of branches should be minimised by public current employer (SOCBs). This
are to be made narrower than means, fanfare & unfolding re-employments should be
now. The viability of opening publicities against the NPL stopped by regulations. One
new branches must be checked holders who are brave (?) sons such option could be for at least
with regulator and not on of the soil. 3 years after retirement no
political or bureaucratic employment in PCBs for SOCB
considerations as it happened The SOCBs having been in employees will be allowed. Or
before & happening now. enduringly protected retirement age of SOCBs can be
environment, its bankers have raised to 62 or so for the above
The blame game of inefficiency, developed personal relationship SOCB employees. Alternatives
non-banking performance, NPL, with NPL delinquents. The NPL could be many more however.
big overhead without any borrowers are not even taken

16 OCTOBER - DECEMBER 2017 | The Bangladesh Accountant


ARTICLE

Bangladesh Towards Sustainable Food Security


Contribution of Agribusiness

Md. Mustaq Ahmed ACA1 | Md Abdullah Al Mamun2

E
xecutive Summary Gross Domestic Product (GDP).
The Authors are: The performance of this sector
By 2050, global food has an overwhelming impact on
requirement will increase major macroeconomic
significantly, driven by a objectives like employment
population increase to 9.8 generation, poverty alleviation,
billion (UN DESA). In order to human resources development
meet the expected increase in and food security. Agriculture in
demand for food and improved Bangladesh averaged 8,622.84
nutrition, particularly in Million BDT from 2006 until
emerging markets, farmers 2016, reaching an all-time
around the world will have to highest of 9,922.80 BDT Million
increase crop production by in 2016.
70%. As a result, food security
turns into a global burning issue. There is no doubt agribusiness
Food security is one of the industry has grown significantly
1
Chartered Accountant and
fundamental rights of the during the past few years by
an Associate Member of the
Institute of Chartered Accountants citizens stated by the crop diversification in many
of Bangladesh-ICAB Constitution of Bangladesh. parts of the country. In order to
Food security exists when all target the continuing food
people, at all times, have access security threats, the
to sufficient, safe and nutritious government of Bangladesh has
food to maintain healthy and developed a number of high
productive lives. The level policy initiatives, including
government of Bangladesh has Vision 2021 and related
identified food security as an Perspective Plan. Achieving
important factor contributing to food security is also a key
its socio-economic stabilization objective of the country’s
and development. Bangladesh poverty reduction strategy and
has made a steady progress in has been recognized to be the
expansion of food production. highest risk in the Bangladesh
Despite the growth in food Climate Change Action Plan.
production and its availability, For increasing food production
food security is still a major and attaining food sufficiency, a
problem for the ultra-poor sustainable growth of the
FIBP Executive
2
community mainly for lack of agricultural sector is required.
Syngenta Bangladesh Limited purchasing power and Bangladesh cannot sustain
inconsistent movement of long-run macroeconomic
commodity prices. stabilization and economic
progress without having a
Agriculture is the largest strong agricultural sector
employment sector in accompanied by a dynamic
Bangladesh. Around 90 per agribusiness sub-sector.
cent of the rural population of However, Bangladesh is yet to
Bangladesh is directly involved achieve comprehensive food
in agriculture. As of 2016, 47% of security that resolves the
the total labour force is problems of inadequate food
engaged in agricultural intake and chronic malnutrition
activities and it contributes among poor people. It would be
around 17% of the country's a great challenge to attain food

OCTOBER - DECEMBER 2017 | The Bangladesh Accountant 17


Bangladesh towards Sustainable Food Security
Contribution of Agribusiness

security while maintaining sustainable agriculture fundamental rights of the citizens has
practices. Moreover, decreasing arable been enshrined in the Constitution of the
agricultural land, together with constantly country. In idealistic proposition ‘food
increasing population and changing climatic security’ exists when all people, at all
conditions, has made this challenge more acute. times, can enjoy access to sufficient, safe
Solving these problems will require concerted and nutritious food to maintain healthy
action by the government, the private sector and and productive lives. The key elements of
individual households. Continuous efforts need to food security are: (a) availability of
be made in developing and diffusion of improved enough food from domestic production
crop varieties and natural resource management and/or imports to meet the demand, (b)
to generate adequate supply of food to meet the access to the food for all irrespective of
needs of the growing population. level of income and affordability, (c)
proper hygiene and sanitary practices
and safe water for utilisation of food to
have optimum impact on health and
The global food system today is nutrition, and (d) a regulatory framework
in place and its proper implementation
beset by serious challenges and for controlling contamination to ensure
risks. Major demographic shifts are food safety.

increasing and changing the Agribusiness industry plays a pivotal role


demand for food, with a rapidly to ensure food security.When we hear
the word “agribusiness,” we think about
growing population expected to ‘agriculture/ farming’. Though, farming is
reach 9.8 billion people by 2050 at the heart of agribusiness industry, it
includes all the various businesses
and drive global demand for involved in food and fiber production,
food by 60%. including farming, seed supply,
agrichemicals, farm machinery, wholesale
and distribution, processing, marketing,
and retail sales. There is huge scope for
Key Words investment in backward and forward
linkages in the agriculture sector.
Agribusiness Industry, Food Security, Gross Therefore, the Agribusiness industry
Domestic Product (GDP), Sustainability, Macro includes businesses that directly engage
Economy, Socio-economic, Vision 2021, in or directly benefit from agricultural
Constitution of Bangladesh, Sustainable activities. Businesses in this industry may
Development Goals (SDGs), New Vision for produce agricultural commodities, buy
Agriculture (NVA), High-yielding Crop agricultural produce or supply goods and
services to farms and the agriculture
Preface industry. This industry focuses on the
food-supply chain up to, but not
Ensuring basic necessities of life including food to necessarily limited to, the point of retail
its every citizen is the fundamental responsibility sale.
of the state by article 15 of the Constitution of
Bangladesh. Besides, Article 18 states that the Global Scenario on Food Sector
state is obligated to regard the raising of the level and Food Security
of nutrition and improvement of public health.
Thus food security for all as one of the The global food system today is beset by
serious challenges and risks. Major

18 OCTOBER - DECEMBER 2017 | The Bangladesh Accountant


ARTICLE

improved nutrition, and


promoting sustainable
agriculture as the second of its
17 Sustainable Development
Goals (SDGs) for the year 2030.

The World Economic Forum’s


System Initiative on Shaping the
Future of Food Security and
Agriculture seeks to develop a
long-term strategy and ways of
working across the public,
private and social sectors to
achieve a 20% improvement
each decade in food security,
environmental sustainability
and economic opportunity. This
will be achieved through a
market-based and
demographic shifts are will have to feed five. Feeding multi-stakeholder approach, in
increasing and changing the this rapidly expanding line with the New Vision for
demand for food, with a rapidly population nutritiously and Agriculture (NVA).
growing population expected to sustainably will require
reach 9.8 billion people by 2050 substantial improvements in the The key initiatives global leaders
and drive global demand for global food system – one that are considering proactively to
food by 60%. In order to meet provides livelihoods for farmers face widely spoken challenges
the expected increase in as well as nutritious products are the followings:
demand for food and improved for consumers. The United
nutrition, particularly in Nations has set ending hunger, • Eradicating hunger from the
emerging markets, farmers achieving food security and earth, they suggest to
around the world will have to
increase crop production by
70%. These shifts are driving
new challenges to our
populations, systems and
environment. The agri-food
sector is responsible for 30% of
greenhouse gas emissions
contributing to climate change
which is termed as an ominous
threat for eco-system. At the
same time, some 795 million
people go hungry every day,
with 2 billion people lacking the
nutrients required to live a
healthy life. Meanwhile,
urbanization and soil erosion are
reducing available farmland. So
while one hectare could feed
two people in 1950, by 2030 it

OCTOBER - DECEMBER 2017 | The Bangladesh Accountant 19


Bangladesh towards Sustainable Food Security
Contribution of Agribusiness

ensure not only sufficient to those of secondary and as a low-income developing


food production to feed a tertiary sector workers in country. Since the
world population that will their respective countries. independence in 1971, the
grow by 60 percent and country has been striving to
reach 9.8 billion by 2050, • Mobilizing substantial improve economic performance
but also to find ways to additional public and private and reduce poverty and to
guarantee that everyone sector investments in become a middle-income
has access to the food they agriculture and rural country. In this striving, the
need for an active and infrastructure and ensuring agricultural sector in general
healthy life. farmers’ access to modern and the agribusiness in
inputs to boost food particular has the potential to
• Putting in place a more production and productivity perform a number of critical
coherent and effective in the developing world, roles in transforming the
system of governance of particularly in low-income country to the desired direction.
food security at both and food-deficit countries. The sector can ensure food for
national and international the rising population and the
levels. • Ensuring that countries are rising urban sector, generating
prepared to adapt to income and employment
• Making sure developing climate change and mitigate opportunities for rural
countries have a fair chance negative effects. population, supplying labor as
of competing in world well as materials for the rising
commodity markets and Role of agribusiness in the manufacturing and service
that agricultural support Macro economic Environment sectors, providing a market for
policies do not unfairly of Bangladesh the country’s growing industrial
distort international trade. sector, and generating
Bangladesh is primarily an investable surpluses and foreign
• Finding ways to ensure that agrarian country with a very low exchange earnings that could
farmers in both developed level of economic development be utilized for developing the
and developing countries and the country is still country-side as well as the
have earnings comparable designated by the World Bank entire economy.

Agriculture is the largest


employment sector in
Bangladesh. As of 2016, it
employs 47% of the total labour
force and comprises around 17%
of the country's GDP. The
performance of this sector has
an overwhelming impact on
major macroeconomic
objectives like employment
generation, poverty alleviation,
human resources development
and food security. With the
intense global pressure on food
production and prices, including
rice, Bangladesh has no
alternative but to increase
agricultural productivity to feed

20 OCTOBER - DECEMBER 2017 | The Bangladesh Accountant


ARTICLE

sector’s growth. Bangladesh has


made substantial progress in
enhancing food security by
increasing production of food
grains, particularly rice,
improving infrastructure,
making food delivery to the
poor more efficient and
liberalizing agricultural input
and output markets. Besides,
removal of food rationing and
abolishment of the monopoly in
import and export of food
grains has also strengthened
the food security of the country.
Rice has contributed most to
self-sufficiency in food grain,
its ever growing population. Bangladesh is well known for its
currently accounting for 71
With the continuous political progress in human
percent of the gross cropped
unrest throughout the year, development. But its
area and for 94% of the food
farmers also suffered a lot for achievements in agriculture
grain production.
poor crop price specially remain an untold story despite
vegetables. being key to reducing poverty
since 2000. Agriculture plays a The Potential of
GDP from Agriculture in key role in Bangladesh’s Bangladeshi Agribusiness
Bangladesh increased to economic growth. Extensive
9,922.80 Million BDT in 2016 irrigation, high-yielding crop Bangladesh has great potential
from 9,748 Million BDT in 2015. varieties, more efficient to increase
GDP from Agriculture in markets, and mechanization, agriculture-generated incomes,
Bangladesh averaged 8,622.84 enabled by policy reforms and escalate agriculture
Million BDT from 2006 until investments in agriculture productivity and make it more
2016, reaching an all-time research, human capital, and resilient to climate change, and
highest of 9,922.80 Million BDT roads have driven agriculture improve the nutritional value of
in 2016 and a record low of
7,017.10 Million BDT in 2006.
BANGLADESH GDP ROM AGRICULTURE
The obvious reason of increased
9922.8
GDP is that everybody needs 9748
10000

food. But the complexity of 9515.1


9500
delivering sufficient food to a 9165.6
9033.2
national population and to the 8820.6 9000
whole world’s population shows
8490.4
BDT Million

why food security is such a 8500

priority for all countries, 7968.2


whether developing or 7729.2
8000

developed. In short, this is a 7441


7500
global challenge because it’s
not just about food and feeding 7000
2006 2008 2010 2012 2014 2016
people but about practically all
aspects of an economy and SOURCE: WWW.TRADINGECONOMICS.COM | BANGLADESH BUREAU OF STATISTICS

society.

OCTOBER - DECEMBER 2017 | The Bangladesh Accountant 21


Bangladesh towards Sustainable Food Security
Contribution of Agribusiness

area by the new needs for


dwellings, infrastructure-
building purposes, urbanisation
etc. Furthermore, the river
erosion problem continues to
cause a sizeable loss of
landmass in different parts of
the country.

There is tremendous untapped


potential in agribusiness, which
is currently languishing in
darkness. Investment in this
sector can turn the lives of
crores of farmers as well as the
investors. To get the best out of
our agribusiness sectors, we
crops. The share of agriculture addition, Bangladesh can also
need immediate actions to
in Bangladesh is quite large and exploit the global market place
overcome below obstacles.
significant but the size of the in exporting agribusiness
agribusiness sector in the products that can provide • Inadequate core
domestic economy is quite further contributions to infrastructure like high-tech
small and growing only slowly. economic development controlled production
Further, the share of including improving the facilities, grading,
agribusiness in country’s total country’s balance of payment packaging, logistics,
exports is also negligible. With a position and in reducing foreign warehousing, integrated
large current population of exchange constraints. Thus, processing units,
about 160 million people which there are ample opportunities transportation and power
is growing rapidly along with for the country in developing supply;
rising income and rapidly the agribusiness sector for
growing urbanization, it could domestic and export markets. • Insufficient capital for
be safely argued that the need agricultural activity;
for food and various other Challenges for Ensuring
agricultural and agribusiness • Unreliable supplies of raw
Food Security materials in terms of quality
products in the country would
rise rapidly. For similar reasons, and quantity;
Bangladesh is a land-scarce
the demand for food and
country. The density of • Decreasing arable land;
agribusiness products would
population of the country, given
rise at the global stage, thus • Uncertainty of getting fair
the geographical size, is the
opening up more export price of agricultural
highest in the world among the
opportunities for the country. In commodity due to
nation-states. Given the need
this context, a growing and underdeveloped marketing
for keeping, at least,
vibrant agribusiness sector can system;
one-seventh of its land size for
help to achieve food security,
forest coverage in one way or
rural employment and income • Production affected by the
other, the arable land in the
generation, poverty reduction, severity and pace of climate
country gets further limited. The
and thereby contribute to the change due to factors like
scarcity of land for agricultural
commercialization of extreme events (e.g. flood,
use is becoming a serious
agriculture with concomitant drought), changing
problem because of competing
industrialization and economic seasonal pattern, salinity
demands on the existing land
development of the country. In intrusion, etc.

22 OCTOBER - DECEMBER 2017 | The Bangladesh Accountant


ARTICLE

• Formulation of National
Agriculture Policy 2013

• Expanding agriculture loan


facility.

• Introducing new species.

• Introduction of drought
tolerant new rice “Narika”.

• Introduction of super hybrid


rice “SL-8H”

• Information revealed on
Genome sequencing of Jute

• Price reduction and


management of fertilizer

• Special loan facilities


Government Initiatives • Establishing a large seed available to set up an
growing farm in the country. agri-business venture
Ensuring Food security in
Bangladesh highly depends on • E-agriculture or digital • Declaring tax holidays for
agricultural production, in a agricultural management Agri-business industry
broader sense, on agriculture and crop zoning map
sector. Currently, agriculture formulation. • Cash incentives for the
sector contributes around exporters in various
one-fifth of the total Gross • Development of SAARC sub-sectors.
Domestic Product (GDP) of the seed bank.
country. The importance of
agriculture sector has been
reflected into Vision-2021. The
development initiatives taken
by government in agriculture
sector are the following:

• Ensuring fair price of


agricultural products.

• Providing research tools


that will help to expand
agriculture modernization
including genetic
engineering development,
new technology innovation
and commercial agriculture
development to face the
globalization challenges.

OCTOBER - DECEMBER 2017 | The Bangladesh Accountant 23


Bangladesh towards Sustainable Food Security
Contribution of Agribusiness

Reference
1. Hossain, Dr. Mahabub, Food
security in Bangladesh
Achievement and Challenges
2. FIDA – Syngenta Fellowship
Program
3. The Daily Star (Daily
Newspaper)
4. The Financial Express (Daily
Newspaper)
5. www.businessnews24bd.com
(Online News portal)
6. www.Syngenta.com
7. Foresight. The Future of Food
and Farming (2011) Executive
Summary. The Government
Office for Science, London.

Conclusion potential to play a strong role in


providing rural income,
Despite many initiatives being employment, food security,
taken, the global food system poverty alleviation, and
between now and 2050 will face improved external balance
enormous challenges, as position, and thereby contribute
tremendous that it never to overall industrial and
confronted in the past. This is economic development of the
why, the food system must country. As Bangladesh suffers
assume a much higher priority from serious unemployment
in political agendas across the problems due to The country's
world. The way things are going over-population and given that apparel export
on in agricultural sector, it must food availability is becoming
go through a radical change to scarcer in the country over time to USA declined
address the most critical thanks to continuous population by 4.93 per cent
growth, prospects for
challenge the world is going to
agribusiness in the country
to $4.35 billion
face. The challenge seems to be
more intense when maintaining should be viewed and explored during January
ecosystem through green as critical for the development to October
revolution and of the country. However, very
environment-friendly difficult decisions lie ahead and period of 2017
technology comes into play at bold actions by politicians, calendar year.
the same time. business leaders, researchers
and other key decision makers
Although the challenges are will be required, as well as
enormous, there are real engagement and support by SOURCE
grounds for optimism. If individual citizens everywhere, The Financial Express
7th Dec 2017
properly encouraged, to achieve the sustainable and
promoted, and managed, equitable food system that the
agribusiness must have the world so desperately needs.

24 OCTOBER - DECEMBER 2017 | The Bangladesh Accountant


ARTICLE

Critical Analysis of
Transfer Pricing Regulations in Bangladesh

Md. Kamruzzaman ACA

I
ntroduction ensure that income arising from
an international transactions
Globalization creates between associated enterprises
unified businesses with shall be computed having
enormous Cross-border regard to the Arm’s length
transaction whilst corporate tax price. Any cost or expense
systems in Bangladesh remain allocated, reimbursed or
nationally focused. Government apportioned between two or
insists that globalization more connected/associated
provides Multi-national Entities enterprises under a mutual
(MNEs) with more scopes to contract/agreement or
manipulate transfer prices and arrangement shall also be at an
reduces taxes than in the past Arm’s length price.
thus the need for tighter
regulation. So there is an Legal Basis for the
increased desire amongst tax Transfer Pricing
The Author is a authorities faced with tight Guidelines
Chartered Accountant and situations to protect and
an Associate Member of the enhance their revenue base The Arm’s-length Standard
Institute of Chartered Accountants encouraging tighter regulations and Transfer Price Approaches
of Bangladesh-ICAB of MNEs.
The following methods have
That is why, Transfer Pricing been prescribed by Section
(TP) becomes a red-hot issue 107C of Income Tax Ordinance,
nowadays in Bangladesh due to 1984 for the determination of
revenue leakage in the the arm’s-length price:
international transactions. The
main motto of implementation i. Comparable uncontrolled
of Transfer Pricing regulations is price (CUP) method.
to ensure fair share of tax
revenue to respective ii. Resale price method (RPM).
jurisdictions and to protect
shifting of profits outside iii. Cost plus method (CPM).
Bangladesh by manipulating
prices. iv. Profit split method (PSM).

The rationale for transfer pricing v. Transactional net margin


regulations derives from the method (TNMM).
fact that multinational
enterprises are integrated vi. Such other methods as may
businesses. The primary be prescribed.
objectives of most MNEs remain
profit maximization which can National Board of revenue
be achieved through internal (NBR) has noted that the ‘other
advantages, assets specifically method’ for determination of
and cost advantages. the arm’s-length price in relation
to an international transactions
The provisions of transfer shall be any method which takes
pricing have been introduced to into account the price which

OCTOBER - DECEMBER 2017 | The Bangladesh Accountant 25


Critical Analysis of
Transfer Pricing Regulations in Bangladesh

would have been charged or paid or has been downward revision in the income
charged or paid, for the same or similar chargeable to tax in Bangladesh that
uncontrolled transaction considering all the means downward revision/adjustment is
relevant facts and circumstances with or between not allowed in Transfer Pricing regulation
non-associated enterprises under similar in Bangladesh.
circumstances.
Selection of methods are very
There are no methods noted a greater or slighter judgmental and requires detailed
significance. The most appropriate method for a knowledge about performing of proper
particular transaction would need to be transfer pricing functional analysis which
determined having regard to the nature of the ultimately helps finding our proper entity
transaction, the availability of reliable information, characterization.

What are Relationship Denotes


Associated Enterprises
Transfer Pricing (TP) becomes The definition of associated enterprises is
a red-hot issue nowadays in broad and associated enterprises means
Bangladesh due to revenue leakage an enterprise if one
participates in the management or
enterprise

in the international transactions. control or capital directly or indirectly, or


The main motto of implementation through one or more intermediaries of
the other enterprise or the same person
of Transfer Pricing regulations is to and/or persons participates in the
ensure fair share of tax revenue to management or control or capital directly
respective jurisdictions and to or indirectly, or through one or more
intermediaries of the both enterprise.
protect shifting of profits outside That means in an international
Bangladesh by manipulating transaction, there will be two or more
associated enterprises shall be engaged
prices. and among them, either of both of whom
will be non-resident. The transactions
between local associated enterprises has
been kept out of the transfer pricing law.
functions performed, assets employed, risks
assumed or such other factors assumed relevant. Besides the above relationship certain
significant conditions mentioned in TP
There are clear practical difficulties in regulations that two enterprises are
implementing the arm's length principles. For deemed to be associated enterprises.
items other than goods, there are rarely
undistinguishable items. Terms and conditions of However, there are practical challenges
sale may vary from transaction to transaction. of identification of an associated
Market and other conditions vary geographically enterprises in transfer pricing study. Full
or over time. Some systems give a first choice to disclosures on the group structure,
certain transactional methods over other connection tree or ownership profile
methods for testing prices. needs to be reviewed carefully by an
auditor who are engaged for audit of TP
In addition, transfer pricing provisions will not documentation.
apply if the arm’s-length method would result in a

26 OCTOBER - DECEMBER 2017 | The Bangladesh Accountant


ARTICLE

documents and information, if in


aggregate book value of
international transactions
exceeds Taka 30 million in the
income year.

It will make easier for tax


author¬ities to review a
taxpayer’s transfer pricing
analysis, justification and
thereby con¬tribute to avoiding
a dispute or to a timely
resolution of any transfer
pricing disputes that may arise if
necessary and appropriate
documentation are kept and
maintained as per Bangladesh
TP regulation. Adequate
documentation is
character¬ized by the
sufficiency of the details
indicating the taxpayers’
compliance with the arm’s
International Transactions Documentation Obligations length principle as well as the
Covered in Bangladesh TP timely manner in which such
Regulation Per section 107E and rule 73, it is details are prepared and
mandatory for every person submitted to tax authorities.
Those transactions entered by who has entered International
the person with associated transactions required to be kept It also provides guidance to
enterprises, either or both of and maintained such assist taxpayers in identifying
whom are non-resident, in the
nature of purchase, sale or lease
of tangible or intangible
property, or provision of
services, or lending or
borrowing money, or any other
transaction having a bearing on
the profits, income, losses,
assets, financial position or
economic value of such
enterprises.

Direct or indirect cross-border


transactions are included and
domestic transactions between
associated enterprises are
excluded in Bangladesh TP
regulation.

OCTOBER - DECEMBER 2017 | The Bangladesh Accountant 27


Critical Analysis of
Transfer Pricing Regulations in Bangladesh

documentation that would be important factors to be taken those adopted or obtained by


most helpful in showing that into account are: independent parties engaged in
their controlled transactions similar transactions.
satisfy the arm’s length principle 1. The degree of comparability
and hence in resolving transfer between the controlled and This concept of comparability
pricing issues and facilitating uncontrolled transactions; analysis is used in the selec¬tion
tax examinations. and of the most appropriate transfer
pricing method, as well as in
Picking the Suitable Transfer 2. The coverage and reliability applying the selected method
Pricing Method of the available data. to arrive at an arm’s length
price. It thus plays a central role
Therefore, there are no methods Which is the “Best” Method? in the overall application of the
in itself right or wrong for any arm’s length principle.
given set of facts and The most appropriate method
circumstances. Rather, the for determining the arm’s length The main challenges of the
selection of the most price of an international comparability analysis is to find
appropriate pric¬ing method to transaction shall be the method out reliable and accurate
be used to determine the arm’s that provides the most reliable comparable data relating to the
length character of a controlled measure of an arm’s length uncontrolled international
transaction is based on a price in relation to the transaction in the same industry
determination of the method international transaction under in Bangladesh. However, our TP
which, under the facts and the facts and circumstances. regulation allow us to use out of
circumstances of the country databases. Using of out
transaction under review, Rationale for Comparability of country data, it raises
provides the most reliable Analysis questions to the users on
measure or best estimate of an reliability, accuracy and
arm’s length result. The arm’s length principle is consistency of the databases
based on a comparison of the and data used.
In determining the reliability of a prices or margins embraced or
method, the two most obtained by related parties with Moreover, there are limitations
on publicly available financial
data which are mostly scattered
in Bangladesh. But
Comparability analysis in
transfer pricing study requires
databases in a specific forms
and manner.

Choice of Tested Party for the


Comparability Analysis

In order to select the most


appropriate method for
determining the arm’s length
price or operating results, it is
first necessary to select the
“tested party”. The tested party
is the participant in a related
party transaction whose prices

28 OCTOBER - DECEMBER 2017 | The Bangladesh Accountant


ARTICLE

charged or paid or whose profit identify and compare the increased and decreased in an
margins will be tested using the economically significant income year.
most appropriate method. The activities and the
tested party is ordinarily the responsibilities undertaken by Chartered Accountant’s or
party whose prices or profits the independent and the Cost Management
can be verified using the most associated enterprises. Accountant’s Report
reliable data and requiring the
fewest and most reliable Statement of International It is not mandatory for every
adjust¬ments and for which Transactions (TP Return) person to obtain report from a
reliable data regarding Chartered Accountant or Cost
uncontrolled comparables can Every person who has entered Management Accountant in
be located. into even a single international respect of International
transactions shall furnish a Transactions, if aggregate book
The tested party normally statement of international value of international
should be the less complex transactions along with the transactions exceeds BDT 30
party to the controlled return of income. National million between associated
transaction and should be the Board of Revenue prescribed a enterprises for now. If TP audit
party in respect of which the specific format rule 75A for initiates by tax authority and if
most reliable data for submission of such return. they feel that certain
comparability is available. section/documents/
The statement has two parts information needs further
Challenges in Comparability one part mostly deals with investigation and confirmation,
Analysis (Functional analysis) revenue and expenses items tax authority may ask by notice
related to profit and loss in writing the company to get
To suit the functional analysis in accounts and another part deals the information/documents
comparability analysis is the with balance sheet items that attested or verified by a
main challenges ever faced by means capital nature which has
the assesse in practice.
Functional analysis is the
cornerstone of any transfer
pric¬ing exercise. Its purpose is
to obtain an understanding of
the operations of an enterprise
with its associated enterprises
and of the respective roles of
the parties to the controlled
transaction under scrutiny.

Functional analysis is utmost


and foremost important for the
comparability analysis which
typically includes
documentation of func¬tions
performed, assets employed
and risks assumed (also called
FAR analysis) with respect to
the international controlled
transactions of an enterprise.
Functional analysis seeks to

OCTOBER - DECEMBER 2017 | The Bangladesh Accountant 29


Critical Analysis of
Transfer Pricing Regulations in Bangladesh

Chartered Accountant or Cost information or data used in the


Management Accountants computation is not reliable,
accurate or correct.
Tax authority requires this
report from a Chartered As Transfer pricing regulations
Accountant or Cost is new to Bangladesh and the
Management Accountant in practice has not been started
respect of authentication of yet,Bangladesh, being the
Statement of International dvelopping country there will be
Transactions entered into by some challenges initially to The country's
the assesse with its associated implement full-fledged Transfer
enterprises which seems to be Pricing concepts. However, remittance
challenging for the auditor who every new challenges create inflow has
are going to issue such report. new opportunities and
witnessed a 4.47
Bangladesh will not suffer any
Burden of Proof tax losses due to systematic tax per cent rise in
management by MNEs. the month of
The burden of proof in tax
litigation refers to the necessity References November
of favorably proving the truth of compared with
facts alleged by a litigant on a 1. Chapter XIA, and sections 94 last month of
superiority of evidence. and 173 of Income Tax
However, it is important to be Ordinance (ITO), 1984
October 2017.
able to identify the party with The increase is
the burden of proof when a tax 2. Statutory Regulatory Order 27.68 per cent
audit is conducted or when the (SRO) 161/Act/Income
transfer pricing assessment is Tax/2014 higher than that
made; when a transfer pricing of November
assessment is disputed it may
ulti¬mately end up in court.
3. Rules 70 to 75A of Income Tax
last year.
Rules, 1984

The burden of proof to establish 4. Income Tax Paripatra 2014 (i.e.


the arm’s length nature of interpretation issued by NBR)
SOURCE
international transactions is The Financial Express
generally with the taxpayer. 5. OECD Transfer Pricing 3 Dec 2017
rd

Once the taxpayer discharges Guidelines for Multinational


this burden, the burden shifts to Enterprises and Tax
the tax authorities to establish Administrations 2010
that the arm’s length price has
not been determined in 6. UN Practical Manual on Transfer
accordance with the provisions Pricing for Developing
of the TP law or that the Countries

30 OCTOBER - DECEMBER 2017 | The Bangladesh Accountant


ARTICLE

The Paradox of Growth and Inequality

Md. Shahadat Hossain FCA

This article was published in of five per cent people was 0.77
The Financial Express and per cent. Based on this
is re-printed here
information, it can be estimated
that the portion of 10 per cent

T
he term "economic lower-income level people
development" typically (LILP) was more than 1.54 per
refers to the cent (assuming that income of
improvement in various second five per cent is higher
indicators such as literacy rate, than 1st five per cent). But
life expectancy, poverty rate, according to the Bangladesh
etc. In respect of all the Bureau of Statistics (BBS),
indicators, Bangladesh income of lower-income level 10
economy is developing. Present per cent people is only one per
literacy rate of the country is cent. In comparison to the years
61.5 per cent, life expectancy is 2005-2006 and 2016-2017, it
72 years which is higher than appears that the average
The Author is a the average world standard, income of lower-income level
Chartered Accountant and poverty rate is also on a gradual people of the country is
a Fellow Member of the decreasing trend. Within the decreasing.
Institute of Chartered Accountants last five years, poverty rate has
of Bangladesh-ICAB reduced from 31.5 per cent to If we analyse the increasing rate
22.5 per cent. of wages, rate of inflation in
general and inflation of food
But, one issue that is not in items, this grim reality is found
harmony with the development to be increasingly persistent.
of the country is growing Per capita income in the year
inequality in society. The 2005-2006 was Tk.34,502. Let
indicators that we consider to us consider that this per capita
measure economic income of Tk.34,502
development are based on the represented 98 lower-income
average of various numbers. If level people whose per month
we analyse the numbers income was Tk.893 and two
separately, it may be observed higher-income level people
that the gap between (HILP) whose monthly income
higher-income level and was Tk.100,000. As per this
lower-income level is widening. example per capita income may
In the year 2005-06, the be calculated as under:
position of lower-income level

Level of Income Monthly Income No. of Person Annual Income


Law Income Level 893 98 1,050,165
Law Income Level 100,000 2 2,40,000
100 3,450,160
Average per capita income 34,502

OCTOBER - DECEMBER 2017 | The Bangladesh Accountant 31


The Paradox of Growth and Inequality

After ten years, in the year 2015-2016, per capita times but average per capita income has
income reached Tk 108,378 which is 3.14 times increased 3.14 times. Now, question may
higher than per capita income for the year be raised how this gap has been filled up.
2005-06. According to the Annual Economic The answer to the question may be as
Review of 2017, the income of Tk. 3507 for the under:
year 2005-06 rose to Tk. 7680 in 2015-16. Based
on this, income of Tk. 893 of the year 2005-06 has
Level of Income Income of year 2005-06 Income of year 2015-16 Rate of increase
reached Tk. 1956. The income in the year 2015-16
Income of 100 people 3,450,168 10,837,800 3.14 times
has increased 2.19 times compared with the
Income of 98 LILP 1,090,168 2,300,256 2.19 times
income for the year 2005-06. Income of
Income of 2 HILP 2,400,000 8,537,544 3.56 times
lower-income level people has increased 2.19

The above calculation indicates that


income of high-income level persons
The indicators that we consider to increased 3.56 times. The income of
measure economic development are lower-income level people is increasing at
based on the average of various a lower pace compared with that of the
higher-income level people. It is also
numbers. If we analyse the numbers pertinent to mention that the
separately, it may be observed that lower-income level people are not only
being deprived in their earning end but
the gap between higher-income level also being deprived at their expenditure
and lower-income level is widening. end. Normally, a major part, almost 50
per cent of the earnings of lower-income
In the year 2005-06, the position of level people is spent on a single basic
lower-income level of five per cent need -- food. In 2005-06, a lower-income
level person spent Tk. 5358 on food
people was 0.77 per cent. items. Based on the index of food items,
the value of food items of Tk. 5358 of the

32 OCTOBER - DECEMBER 2017 | The Bangladesh Accountant


ARTICLE

year 2005-06 has reached Tk. income of higher-income level For the purpose of calculation, it
12579 in 2015-16. Increase in the people increases in two ways-- has been assumed that a
portion of income spent on food one is due to inflation and higher-income level person
items means capacity to secondly, due to income on spent 50 per cent of income on
purchase other important items savings through investment. food, education, shelter,
such as education, medicine, Normally, a major part of clothing, medicine and other
clothing and others has income of higher-income level comfortable and luxurious
decreased. The decrease of people remains unspent for goods, and the remaining 50
purchasing capacity, despite essential items and this unspent per cent was invested for
the increase of income, means amount is invested for further generating income. In the above
decrease in the real income of income. A calculation of example, annual income was Tk.
the person. Now, question may increasing income of 2,400,000 out of which 50 per
be raised how the income of higher-income level people is cent was spent for consumption
higher-income level people has presented below: and the remaining half i.e., Tk.
increased by 3.56 times. The 1,200,000 was invested which
has generated income @ almost
10 per cent and in ten years the
principal amount with income
Income in the Reason of Rate of Income in the
added to it has increased 2.73
year 2005-06 increase increase year 2015-16
times.
2,400,000 Inflation 2.19 5,256,000
1,200,000 Investment 2.73 3,281,544 The analysis clearly indicates
8,537,544 that during the last 10 years,
overall growth rate was

OCTOBER - DECEMBER 2017 | The Bangladesh Accountant 33


The Paradox of Growth and Inequality

of all walks of life, necessary


steps need to be taken to
reduce the gap between the
rich and the poor.

satisfactory resulting in most of the industries do not


The Federal
satisfactory average per capita pay the benefit of profit to the Reserve Bank of
income, which is more than six workers. As for the agricultural New York,
per cent but the gap between products, middlemen and
lower-income and business syndicates are major Bangladesh
higher-income level people is hindrances in fetching fair Bank (BB) and
widening. prices. SWIFT have
There are various reasons Another reason, as mentioned reiterated their
behind the increase of above, is the excessive commitment to
inequality, despite satisfactory dependence on indirect tax to
work together
growth. Inadequate wages, low meet government expenditure.
price of agricultural products, Every year major part of for recovering
abnormal loan default culture, budget, i.e., more than 70 per the remaining
excessive dependency on cent comes from indirect tax
indirect tax, lack of good and deficit financing. From
stolen money of
governance, etc., are some of economic perspective, indirect $65.75 million
the reasons. tax is regressive. Indirect taxes from the
make the distribution of income
Taking the opportunity of more unequal and it is Philippines.
prevailing unemployment in the inflationary in nature.
country, most industrialists do
not pay sufficient wages to the Loan default at abnormal rate is
SOURCE
workers. Although there is highly instrumental in increasing The Financial Express
labour law in the country to inequality. Normally, the 4 July 2017
th

protect the interest of the benefits of default loan are


workers, there prevails a serious enjoyed by the investors i.e.,
deficiency in overseeing the high income level people and it
practices on the ground. For contributes to widen the gap
example, as per prevailing between the rich and the poor.
labour law, workers are entitled There is no doubt that the
to get benefit of profit of the economy of the country is
industry in the form of `Workers growing, but to reach the
Profit Participation Fund' but benefit of growth to the people

34 OCTOBER - DECEMBER 2017 | The Bangladesh Accountant


ARTICLE

Resolving Ambiguity in Calculating


Workers’ Profit Participation and Other Funds

Md. Saiful Islam FCA

B
ackground of the [It has been observed that all
Study the establishments are not using
similar / Uniform basis for
Under Chapter XV of the calculating Workers Fund. Even
Bangladesh Labour Act 2006 the subsidiaries of Corporations
(BLA 2006), [any Company or are not maintaining uniform
establishment] complies with basis for calculating Workers
the conditions of section 232 of Fund. Some of them are using
BLA 2006 are bound to Profit Before Charging provision
establish Workers Fund (WF) for Workers Fund and some are
i.e. Workers Profit Participation using Profit After Charging
Fund (WPPF), Workers Welfare provision for Workers Fund.]
Fund (WWF) and Workers The fact may be defined
Welfare Foundation Fund numerically as follows:
(WWFF) out of its Net Profit.

The Author is a
Chartered Accountant and Amount in Tk.
a Fellow Member of the Particulars
Institute of Chartered Accountants Case-1 (Before) Case-2 (After)
of Bangladesh-ICAB Sales Revenue 100,000.00 100,000.00
Less: COGS 50,000.00 50,000.00
Gross Profit 50,000.00 50,000.00
Less: Admin & Marketing Expenses 20,000.00 20,000.00
Profit Before Charging Workers Fund 30,000.00* 30,000.00
Amount of Workers Fund 1,500.00 1,428.57
Profit After Charging Workers Fund 28,500.00 28,571.43**

In the above example, the case-1 It has also been observed that
reflects the calculation of [a Corporation has been
Workers Fund before charging calculating Workers Fund @5%
process and the case-2 reflects on Net Profit before charging
the calculation of Workers Fund tax and Workers Fund whereas
after charging process. To an argument has been raised
calculate @ 5% Workers Fund that the Workers Fund should
on Net Profit, under case-1 the have been calculated on Net
basis for calculation is Tk. Profit after tax and Workers
30,000 and the basis under Fund.] The fact may be defined
case-2 is Tk. 28,571.43 numerically as follows:
(30,000*100/105).

1
amended by Bangladesh Labour (Amendment) Act 2013
2
Source from ICAB (letter of organization Ref. No. 28.02.0000.026.33.001/13/410 dated 02 October 2013).
3
Source from ICAB (letter of Organization dated 09 July 2017).

OCTOBER - DECEMBER 2017 | The Bangladesh Accountant 35


Resolving Ambiguity in Calculating
Workers’ Profit Participation and Other Funds

CASE # 1 CASE # 2
WF Calculated on the Net Profit before WF Calculation on the Net Profit After
charging WF & Tax charging Tax and WF
Particulars Tk. Particulars Tk.
Sales Revenue 4,324,262 Sales Revenue 4,324,262
Less: COGS 2,373,721 Less: COGS 2,373,721
Gross Profit 1,950,541 Gross Profit 1,950,541
Less: Other Operating Expenses 548,552 Less: Other Operating Expenses 548,552
Operating Profit/(Loss) 1,401,989 Operating Profit/(Loss) 1,401,989
Add: Other Income 171,288 Add: Other Income 171,288
1,573,277 1,573,277
Less: Other Expenses 10,036 Less: Other Expenses 10,036
Net Profit /(Loss) Before Workers Fund & Tax 1,563,241 Net Profit /(Loss) Before Workers Fund & Tax 1,563,241
Workers Fund (1,563,241X5/105) 74,440 Less: Provision for Tax 586,215
Net Profit /(Loss) Before Tax 1,488,801 Net Profit /(Loss) After Tax 977,026
Less: Provision for Tax 558,301 Less: WF @ 5% 48,851
Net Profit After Tax 930,501 Net Profit After WF 928,175

Review of Bangladesh Labour


'Accounting Profit I.e. Net Profit Act 2006
After Tax' is the amount of profit The Chapter XV of The Bangladesh
which is calculated deducting the Labour Act 2006 is about the Workers
'Accounting Expenditures' from Participation in Organization, where
applicable, Profits and the Chapter
'Accounting Income'. includes section # 232 to Section # 252.
The 'Accounting Income' and The relevant sections for finding out the
outcome of the study are Section # 232,
'Accounting Expenditures' are Section # 233(f), Section # 234 and
determined for a reporting period Section # 244.

based on 'Accrual' or Application of Workers Participation in


'Cash' basis of accounting. Profits

[Section-232 (1) This Chapter i.e. Workers


Objective of the Assignment Participation shall apply to a company or
establishment which fulfils any one of the
The objective of the study is to find out an following conditions, namely:
UNIFORM BASIS for calculating Workers Fund i.e.
either the fund is to be calculated on Net Profit (a) the amount of its paid-up capital on
Before Charging Workers Fund and Tax or the the last day of an accounting year is not
fund is to be calculated on Net Profit After less than taka 1 (one) crore;
Charging Workers Fund and Tax.

36 OCTOBER - DECEMBER 2017 | The Bangladesh Accountant


ARTICLE

Provided that such board may,


subject to the prior approval of
the Government, make
regulations for carrying out the
proposes of this section.]

Definition of Profit

[Under section 233(f) of BLA


2006“profits”, in relation to a
company, means the net profit
as defined in section 119 of the
Companies Act, 1994 which are
attributable to its business,
trade, undertakings or any other
work in Bangladesh.]

Establishment of Participation
and Welfare Funds

[Workers Profit Participation


Fund (WPPF), Workers Welfare
Fund (WWF) and Workers
Welfare Foundation Fund
(WWFF) are established under
section 234 of the Act. The
section states that "Every
company to which Chapter XV
of the Act applies shall establish
(b) the value of its permanent sectors or hundred percent WPPF, WWF and WWFF within
assets on the last day of an foreign exchange investing one month from the date of
accounting year is not less than sectors, make, by rules, the which the Chapter becomes
taka 2 (two) crore. provisions for constitution of a applicable to it and it shall pay
fund, constitution of the fund every year @ 5% of its NET
(2) The Government may, by management board, PROFIT for these purposes. The
notification in the official determination of the amount of allocation of above amounts
Gazette, also apply this Chapter grant and manner of its among WPPF, WWF and
to any other company or collection and utilization of the WWFF will be 80:10:10.]
establishment specified therein. fund and the necessary
provisions for other ancillary The Act has not clearly defined
(3) Notwithstanding anything matters, centrally in each such Net Profit for calculating
contained in sub-sections (1) sector, consisting of the buyers WPPF/WWF/WWFF but it has
and (2), the Government shall, in and employers, for the referred to the section 119(3) of
the cases of hundred percent beneficiaries working in the the Companies Act, 1994 under
export oriented industrial respective sectors: section 233(f). Here, the clear

4
amended by Bangladesh Labour (Amendment) Act 2013.
5
amended by Bangladesh Labour (Amendment) Act 2013.
6
amended by Bangladesh Labour (Amendment) Act 2013.

OCTOBER - DECEMBER 2017 | The Bangladesh Accountant 37


Resolving Ambiguity in Calculating
Workers’ Profit Participation and Other Funds

definition of Net Profit means Expenditures under accounting the usual working charges,
"either the profit is considerable concept may not be interest on loans and advances,
before charging the amount of expenditure under tax concept repairs and outgoing,
provision for WF and Tax or the and consequently the tax base depreciation, bounties or
profit is considerable after may increase. On the other subsidies received from
charging the provision for WF hand, section # 244 of BLA Government or from a public
and Tax. 2006 dictates only about the statutory body profits by way of
tax benefit for the concerned premium on shares sold, profits
Fiscal Concessions organization for maintaining on sale proceeds of forfeited
WPPF/WWF/WWFF which is shares, or profits from the sale
Under section 244 of the Act, all irrelevant to the basis for of the whole or part of the
companies to whom this calculation (Net Profit) of these undertaking of the company,
Chapter applies shall be allowed Funds. The basis for calculating but without any deduction in
the allocation made to the Fund the WPPF/WWF/WWFF is respect of income tax or super
as a deduction to arrive at the absolutely the 'Accounting tax or any other tax or duty on
taxable income. Profit'. income or for expenditure by
way of interest on debentures
In the above, the word Review of Companies or otherwise on capital account
'deduction' means that the Act 1994 or on account of any sum which
expenditures for creating the may be set aside in each year
funds are allowable expenditure The definitions of Net profit, out of the profits for reserve or
for the concerned organizations Provision and Reserve are the any other special fund."
to calculate tax and relevant topics of Companies
consequently the accounting Act 1994 for getting the The Schedule XI, Part-III defines
profit and tax base will same. outcome of the study. 'Provision' as "any amount
written off or retained by way of
It is also pertinent to discuss Section 119(3) of Companies Act providing for depreciation,
here that the concept of 1994 defines 'Net Profit' as "the renewals or diminution in value
accounting expenditure and tax profits of the company of assets, or retained by way of
expenditure are not same. calculated after allowing for all providing for any known liability
of which the amount cannot be
determined with substantial
accuracy"

The Schedule XI, Part-III defines


'Reserve' as "any amount not
include any amount written off
or retained by way of providing
for depreciation, renewals or
diminution in value of assets, or
retained by way of providing for
any known liability"

Reviewing the definition of 'Net


Profit' in line with the definitions
of 'Provision' and 'Reserve', it is
understandable that the amount
of provision is a mandatory
expenditure against incomes

38 OCTOBER - DECEMBER 2017 | The Bangladesh Accountant


ARTICLE

under Accrual Basis of to any conditions and limits as organizations.


Accounting to calculate Net may be prescribed." i.e. any
Profit whereas 'Reserve' income arising from using the 'Tax Profit' means Tax Purpose
denotes an amount of WPPF/WWF/WWFF Profit which is calculated based
appropriation/distribution of is tax exempted. on the 'Accounting Profit'
Net Profit I.e. Reserve itself a applying the rules and
part of Net Profit. There will be Accounting Profit vs. Tax regulations of Income Tax
no amount of reserve if there is Profit Ordinance 1984.
no Net Profit.
'Accounting Profit I.e. Net Profit Recommendation
On the other hand, the After Tax' is the amount of
WPPF/WWF/WWFF should be profit which is calculated Based on the review of
defined as 'Provision' as the deducting the 'Accounting Bangladesh Labour Act 2006
creation of the Funds is a Expenditures' from 'Accounting under Section # 3, Review of
mandatory legal requirement i.e. Income'. The 'Accounting Companies Act 1994 Under
certain but the basis for creation Income' and 'Accounting Section # 4, Review of Income
of the Funds is not certain. Expenditures' are determined Tax Ordinance 1984 under
for a reporting period based on Section # 5 and Review of
Review of Income Tax 'Accrual' or 'Cash' basis of Accounting Profit vs. Tax Profit
Ordinance 1984 accounting. under Section # 6 of this study,
Net Profit Before Charging WF
There is no section in Income The Accounting Expenditures and Tax should be
Tax Ordinance, 1984 relevant to include both the amount of recommended as the basis for
the calculation of provision for WF and Provision calculating Workers Fund as:
WPPF/WWF/WWFF. However, for Income Tax. To calculate the
the Sixth Schedule, Part-A, accounting profit, the amount • the amount of provision for
Para-4(2) states, "Any income of provision for WF should be Workers Fund is a
accruing to, or derived by, deducted first from the amount mandatory expenditure for
workers participation fund of Profit before WF & Tax as the the organization;
established under the amount of WF is a mandatory
Companies Profits (Workers expenditure as well as • the amount of provision is an
Participation) Act, 1968, subject exempted expenditure for allowable expenditure for the

OCTOBER - DECEMBER 2017 | The Bangladesh Accountant 39


Resolving Ambiguity in Calculating
Workers’ Profit Participation and Other Funds

organization under Income Conclusion


Tax Ordinance;
In conclusion, it is mentionable
• without deducting the that the Profit Before Charging
amount of provision for Workers Fund and Tax can only
Workers Fund, the actual be the Uniform basis for
amount of net profit cannot calculating Workers Fund. An
be determined. example is mentioned below for
ensuring unambiguous
However, [calculation of application of the The National
Workers Fund on Net Profit recommended basis for
After Charging Workers Fund calculating WF: Board of
has been defined as malaise Revenue (NBR)
intention of organization
management to deprive
In calculating Net Profit After received over Tk.
Tax, the amount of provision for
workers by Barrister Mahbub Workers Fund must be 42.81 billion
Shafique] . deducted first. (4,281.32 crore)
as income tax
Particulars Amounts (Tk.) until November
Revenues 10,00,000 30, 2017, up by
Less: COGS 450,000 28.37 per cent
Gross Profit 550,000 over the
Less: Admin and other expenses 150,000 corresponding
400,000
time of 2016.
Add: Other Incomes 50,000
Profit Before Charging WF and Tax 450,000
Less: Provision for WF (450,000X 5/105) 21,428.57
Profit Before Tax 4,28,571.43 SOURCE
The Financial Express
Less: Provision for Tax (Current and Deferred) 1,99,571.43 2nd December 2017
Net Profit After Tax 2,29,000

4
The legal opinion was given by Barrister Mahbub Shafique on 28 October 2013 against a query of ICAB regarding the calculation
of Workers Fund.

40 OCTOBER - DECEMBER 2017 | The Bangladesh Accountant


ARTICLE

Continuous Accounting
The Pathway to Modernization of Accounting Services

S M Ashfaqur Rahman ACA

E
xecutive Summary a professional Chief Financial
Officer should be able to
Microeconomics is not balance the responsibilities of
only applicable for individuals stewardship and business
but also for organizations to partnership, act as an integrator
identify whether an and navigator for the
organization is effectively and organization, be an effective
efficiently managing resources leader in finance & accounting
which is one of the prime and bring professional qualities
objectives of a CFO. However, to role and the organization. For
the present Record to Report these objectives, the CFO is
Process is not allowing the required to ensure that
accounting and finance division resources available to
to perform their works properly. Accounting and Finance
This article tries to explain how Departments are being utilized
Continuous Accounting properly. However, at present in
The Author is a Approach would benefit an most of the cases the reporting
Chartered Accountant and organization in optimizing its procedure which is followed by
an Associate Member of the Accounting and Financing organization is of Traditional
Institute of Chartered Accountants works and provide internal & record-to-report nature where
of Bangladesh-ICAB external stakeholders with more reports are prepared after
relevant and timely information. certain periods has made the
work of a Finance team being
Keywords led by CFO not only
burdensome but also fruitless in
Continuous Accounting; Record certain cases where problems
to Report Process; Integrity; are not identified before it has
Assertions; Automation; Cloud impacted the organization
Technology. heavily. Now, for utilization of
resources more effectively and
Introduction efficiently, the finance team
should work on a real-time basis
Microeconomics, the social to identify problems
science that studies the immediately in order to solve
implications of individual human them before it has huge impact
action, specifically about how on the organization. This article
those decisions affect the tries to enlighten its reader on
utilization and distribution of how “CONTINUOUS
scarce resources, can also be ACCOUNTING” can help a CFO
used for business processes to achieve such objectives.
identify utilization and
distribution of scarce resources Traditional Record to
by a business. Now, as per Report Process
IFAC’s “The Role and
In order to understand how a
Expectations of a CFO” (IFAC )
business is performing, at

1
IFAC, The Role and Expectations of a CFO, https://www.ifac.org/system/files/publications/
files/ Role%20of%20the%20CFO.pdf

OCTOBER - DECEMBER 2017 | The Bangladesh Accountant 41


Continuous Accounting
The Pathway to Modernization of Accounting Services

present, traditional Record to Report Process is analyzingstrategic, financial and


followed where collection and processing of data operational performance of a business
is performed at first for the purpose of providing against set objectives. The detailed steps
relevant, timely and accurate information used for involved are:

Traditional Record to Report Process

Data transformation
Voucher posting (to
Data collection Data validation (generation of
general ledger)
voucher)

Generating user-
Generating account defined financial and
Storing vouchers
trial balance management reports

• In-depth interview;

The finance team should work on • Document review; and etc.


a real-time basis to identify problems In the next step of R2R process, the
immediately in order to solve them collected data is validated against works
before it has huge impact on the performed to confirm that this data
satisfies the following management
organization. This article tries to assertions:
enlighten its reader on how • Accuracy: The full amounts of all
“CONTINUOUS ACCOUNTING” transactions will be recorded, without
can help a CFO achieve such error.

objectives. • Classification: All transactions will be


recorded within the correct accounts
in the general ledger.
The first step of traditional record to report • Completeness: All business events to
process is collection of data using systematic which the company is subjected will
methods which would help users in preparing be recorded.
financial statements. There are different methods
of collecting data which includes: • Cutoff: All transactions will be
recorded within the correct reporting
• Observing and recording well-defined events; period.

• Administering surveys with closed-ended • Occurrence: Business transactions


questions; actually took place.

42 OCTOBER - DECEMBER 2017 | The Bangladesh Accountant


ARTICLE

These would ensure that the rules and regulations applicable.


period-end tasks are embedded
company will not face any Furthermore, if the financial
reporting includes multi into the daily activities of
problem in future regarding
unpaid liabilities or fail to enjoy subsidiaries or multi currencies Finance and Accounts
full benefit of its assets it becomes very tough for the Department so that check of the
including accounts receivables. preparers to prepare a financial agreements, contracts,
statement which would satisfy standards and other rules and
After the validation of Data, the needs of both internal and regulations applicable can be
vouchers are prepared for external stakeholders. performed in real-time. As a
approval of proper However, once the financial result, ledgers can be closed
management authority. Once, statements have been prepared, more efficiently and effectively,
the vouchers are authorized, the key performance financial statements can be
same is recorded in the ledger measurements such as ratio prepared more accurately and
system for record keeping, analysis, fund utilization and trust of both internal and
preparing of trial balance and others are prepared. As a result, external shareholders can be
financial statements. However, if any problem is observed in achieved by timely providing
at present the daily operation is this process, it sometimes them with relevant information.
limited to the preparation of become impossible to solve the
trial balance only to ensure that issue as Balance Sheet date has Principles of Continuous
all the debit and credit entries long passed and now only Accounting
are properly recorded. Financial adjustments that can be given
Statements are generally being to the financial statements are There are three principles of
prepared on need basis such as the identification of events that Continuous Accounting which
at the end of Quarter, Half-year had impact on the balance are given below:
or Year. Only then it is being sheet date as per the BAS 10
checked whether standards, Events after the reporting Proper Distribution of
laws, regulations and specific period. Hence, the core problem Departmental Workloads in
agreements, contracts and of Record to Report process is Preparation of Financial
orders have been properly that sometimes corrective Statements : The core objective
followed up or not. actions cannot be taken at the of Continuous Accounting is to
appropriate time. It also may ensure that Financial
Core Disadvantage of Record become too late to avoid Statements can be prepared
to Report Process qualified audit reports as frauds any time of the accounting
or errors were not identified in cycle. In order to do so,
As mentioned above in record time and in rare cases frauds or workload for regular posting of
to report process, reconciliation errors were not identified at all journal vouchers, validation of
and validation of ledger in the preparation of financial the same against contracts,
postings only begins after statement process. agreements, standards and
completion of all the postings at rules & regulations and
the end of quarter, half-year or Continuous Accounting: preparation of financial
year. Usually, the time allocated Solution to Disadvantage statements is distributed among
for preparation of financial of Record to Report departments. As a result, errors
statements from the trial Process and frauds can be identified in
balance is very limited for which real-time and corrective actions
the preparers have to work on a The core disadvantage of can be taken on due time
stiff timeline. In this very limited Record to Report Process can without affecting the
time, the preparers have to be solved by using Continuous effectiveness and efficiency of
check the agreements, Accounting process where the organization.
contracts, standards and other automation, control and

OCTOBER - DECEMBER 2017 | The Bangladesh Accountant 43


Continuous Accounting
The Pathway to Modernization of Accounting Services

Process Management to accounting works on daily basis In general, Bank Reconciliation


Enhance Efficiency and would allow the shortcomings should be performed at regular
Increase Data Integrity : of financial statements to be intervals in order to ensure that
Analysis of key processes of a identified in due time. On the the cash books reflect the true
company is important for basis of such information, view of the bank statements.
identification of scope for decisions can be taken which However, if bank reconciliation
improving efficiency and would improve the quality of is only performed at the end of
effectiveness. For this purpose, information provided through the accounting period
process management policy financial statements to internal (quarterly, half-yearly or yearly),
should be implemented by any and external stakeholders which is a general practice in
organization. It also helps in greatly and as a result it would the Record to Report Process,
identifying erroneous data and enable the CFO of the then the company may find
if corrective actions are taken, it organization to perform his/her itself in a position where
increases the integrity of data. responsibilities for the cheques have been issued for
(Data integrity is the stewardship of the organization payment to suppliers but
maintenance of and the
and business partnership. sufficient fund is not available in
assurance of the accuracy and
the bank statement resulting in
consistency of, data over its
Real Life Example not only bounced cheques but
entire life-cycle, and is a critical
also it may face reputational
aspect to the design,
As per AccountingTools.com , loss. On the other hand,
implementation and usage of
bank reconciliation is performed continuous accounting will
any system which stores,
processes, or retrieves data .). to match balances of an entity’s provide opportunity for the
Furthermore, through process accounting records of cash accounts and finance
management, an organization accounts with the bank department to detect any fraud
can identify the processes statements. The reason for or irregularities regarding
which could be automated by performing bank reconciliation clearing of cheques which in
using software specially is to identify any difference turn will help the company to
accounting software which between the two and keep a properly identify the timings of
would increase the efficiency of record of the same for cash inflows for matching cash
data and decrease the tasks accounting purposes. outflows.
time greatly.
The Key Benefits of
Adopt a Continuous Continuous Accounting
Improvement Approach : After
the achievement of enhancing The key benefits of continuous
efficiency and increasing data accounting include the
integrity through process following:
management and automation,
focus should be given to Balanced Workloads : as
continuous improvement of posting of Journal Vouchers
accounting cycle. In this and verification of the same
process, small developments against Contracts, Agreements,
such as reviews of key financial Standards and Other Rules and
data for performance Regulations are distributed
measurement and rigorous among different departments,

2
Wikipedia (none), Data Integrity, https://en.wikipedia.org/wiki/Data_integrity
3
Accounting Tools (2017), Bank Reconciliations, https://www.accountingtools.com/articles/2017/5/17/bank-reconciliation

44 OCTOBER - DECEMBER 2017 | The Bangladesh Accountant


ARTICLE

the workload for preparation of opportunity to ensure accounting system used by the
Financial Statements will be compliances of agreements, organizations would also
properly distributed. contracts, rules, regulations, require functionalities such as
laws and standards on regular preparation of financial
Increase of Efficiency : basis. Hence, any statements from trial balances.
Accounts departments get non-compliance would be As predicted by Jake Martin ,
more time to focus on ensuring identified immediately rather with the increase of integrity of
compliances with standards, than at the end of the data due to real-time validation
rules and regulations as they are accounting period and against contracts, agreements,
now free from the over-burden corrective actions can be take standards, rules and regulations
of works previously faced under on real time basis before the across cities or borders, present
Record to Report process after probability of misstatements style bookkeeping and
the end of the reporting period. exceeds the materiality level of accounting may become
Hence, the efficiency of the the auditors. Therefore, at the redundant and use of cloud
Accounts departments end of the period, the technology may increase
increases significantly. compliances of the standards significantly.
and others would definitely
Increase in Time for Analysis : increase significantly. Key Predictions in Support of
As accounting entries are Continuous Accounting
verified on regular basis and Scope for Cloud Technology :
thus trial balance and financial As information for financial As per David Axson’s analysis
statements can be prepared on statements such as journal the following trends as a result
daily basis, the time available for vouchers and trial balances are of change in accounting process
analysis of ratios and key prepared on regular basis, the will be observed by 2020:
financial data also increases
significantly. Furthermore,
actions can be taken against 90%
errors and frauds instantly 80%
which in turn provide scope for 70%
true and fair financial 60%
statements. 50%
40%
Better Financial Decisions : Due 30%
to the availability of information, 20%
Finance Managers can provide 10%
suggestions on the basis of 0%
real-time information which will Abolishment of Finance Staff's Finance Staff's
Transactional involvement in involvement in
be more fruitful.
Accounting decision support, Forward looking
predictive analytics, planning
Ensuring Compliance : As a and performance
result of continuous accounting, management.
Accounting and Finance
Impact of Continuous Accounting by 2020
Departments will have

4
Jake Martin (None), 5 Bold Small Business Accounting Predictions,
http://www.intuit.com.au/r/small-business-accounting/5-bold-small-business-accounting-predictions/
5
David Axson (2015), Death by Digital: Good-Bye to Finance as You Know It,
http://ww2.cfo.com/analytics/2015/10/death-digital-good-bye-finance-know/

OCTOBER - DECEMBER 2017 | The Bangladesh Accountant 45


Continuous Accounting
The Pathway to Modernization of Accounting Services

a. Transactional Tasks will be


automated which will abolish
40% of transaction
Analysis of
accounting works.
Current
Accounting
b. Finance staff can spend more
State
than 75% of their time, up
from 25% today, on decision Design Future
support, predictive analytics, Improve
Accounting
and performance Continuously
State
management.

c. 80% of the Finance team’s


time will be dedicated to
forward-looking planning
and analytics using an
advanced digital data Optimize
platform. Review Accounting
Process
Process of Achieving
Continuous Accounting

As per Blackline there are six Monitor


steps in achieving continuous
accounting which are given
below:

Analysis of Current Accounting


state to determine the unproductive and hazardous Vouchers and matching the
challenges that are required to accounting processes. For same against commercial
be overcome: In this step helps example: preparing plans for invoices and agreement with
from sub-ordinates may be overcoming obstacles for bank banks, the work can be
taken to rank accounting reconciliation should start from provided to Foreign Exchange
processes as sore, unproductive the stress-free obstacle, such as Department/Commercial
and hazardous. For example in recognition of LC charges. Department as they are the
bank reconciliation processes ones who deal with LCs.
one of the major obstacles is the Optimize Accounting Process
identification of outstanding by dividing processes among Monitor Accounting Processes
cheques whereas other different departments: This to identify scope for
obstacles include identification step ensures that regular improvements. Example:
of bank charges, LC Charges, LC posting of journal vouchers and monitor to ensure that journal
Commission, interests, bounced analysis of the same against postings for LC Charges are
cheques and etc. contracts, agreements, laws, recorded at the correct amount.
regulations and standards are
Design Future Accounting performed. For example for Review Accounting outcomes
State through planning of recognition of LC Charges, on regular basis preferably
overcoming the sore, preparing & posting Journal weekly, monthly or quarterly

6
Blackline (None), Continuous Accounting: The Future of Accounting and Modern Finance is Here
https://www.blackline.com/continuous-accounting

46 OCTOBER - DECEMBER 2017 | The Bangladesh Accountant


ARTICLE

with desired outcomes. financial statements. According • Review Process: An audit


Example: ensure compliance of to DeWayne L. Searcy and Jon involves multiple levels of
LC Charges posted in the B. Woodroof , different types of reviews which include review
ledgers with contracts and wastages can be eliminated by Audit Manager,
agreements on fortnightly or through continuous account Engagement Partner and
monthly basis. As a result, if any and continuous auditing. Con-current Partner. Due to
mismatch is found, Foreign continuous auditing, the
Exchange Division/ Commercial scope for review of audit
Division can immediately seek Audit work performed can be done
Waiting
clarification from Bank and thus Process piece by piece which may
subsequently the probability of result in identification of
misstatement in the financial major audit observations
statements reduces Review Erros & which would require more
significantly. Process Mistakes attention. As there is no
urgency for providing audit
Improve Continuously by using opinion in a continuous
the knowledge gathered from • Waiting: In continuous auditing process, the audit
review stage. Example: Once accounting, information for team can focus on areas even
Posting of LC Charges and though late identification of
Financial Statements are not
matching of the same against probability of misstatements
only posted in ledgers but
contracts/ agreements have has occurred which may not
also verification of the same
been distributed to concerned have been possible in Record
against contracts,
department and after periodical to Report Accounting
agreements, standards and
Process.
review satisfactory rules and regulations are
improvement has been performed on regular basis.
• Errors and Mistakes: Errors
observed, focus should be given As a result, instead of waiting
and mistakes may occur any
to more complex obstacles by for availability of audit team
time during an audit.
going back to the step Analysis members at the end of the
However, in traditional
of Current Accounting State. In year, the external auditors Record to Report Process
this process Bank Reconciliation can plan to verify the effect the time required from the
Process would produce of the transaction in the identification of errors and
real-time results which will financial systems on regular mistakes to correction of the
increase data integrity, basis by sending audit teams same may take up valuable
effectiveness of Financial and thus save time in time of audit and hence
Statements and Decision process. questions may arise
Makings. regarding the quality of
• Audit Process: When audit audit.
Benefit of Continuous team members visit a client
Accounting in Audit on regular basis, they will be
Impact on Economy
able to gather effective and
Audit can be performed more
efficient information
effectively and efficiently in As an aftermath of the
regarding work flow of the
ongoing basis over the year in accounting scandals which
client which would help them resulted in billions of dollars in
an organization where
to design audit process more corporate and investor losses,
continuous accounting method
is followed for preparation of efficiently. at Enron-due to the

7
DeWayne L. Searcy and Jon B. Woodroof (2003), Continuous Auditing: Leveraging Technology,
http://archives.cpajournal.com/2003/0503/dept/d054603.htm

OCTOBER - DECEMBER 2017 | The Bangladesh Accountant 47


Continuous Accounting
The Pathway to Modernization of Accounting Services

implementation of Merchant Availability of better If businesses report income


Model in revenue recognition, information to make decision properly, the income taxes paid
Market to Market accounting for by them would increase
Natural Gas Business and use of The auditors would have significantly which will result in
Special Purpose Entities, enough scope to follow more money for local
WorldCom-due to continuous auditing to find out governments to perform their
non-compliance of prevailing any misstatement due to fraud job efficiently and effectively.
accounting standard through or mistake. As a result, the
accrual release and expense quality of audit would also Conclusion
capitalization, Global increase significantly which in
Crossing-due to recognition of turn will provide the internal and In the era of modernization and
revenue in the initial years for external stakeholders with more digitalization, Record to Report
long term contract and reliable Financial Statements to process would not allow an
recognition of sale where only use as basis for their judgments. organization to use its Accounts
similar valued machines were and Finance Department
transferred, and Tyco-due to Scope for more savings/ effectively and efficiently as
commingling of Assets, the expenditure by citizens very little time is available for
users of financial statements analyzing of trial balance and
With proper information, the ledgers with contracts,
have begun to lose confidence investors would be able to
in this profession worldwide. agreements, standards and
decide which share to buy in the rules & regulations. However, if
For more clear understanding stock exchange for both short
the Scandal at Enron alone an organization can transform
term and long term benefits. its accounting process to
resulted in approx. 5% and 7% Consequently, when s/he will
decrease in DoW Index and Continuous Accounting, then
have additional resources either the analyzing would be done on
Nasdaq Index. for savings or for spending, the periodical basis (fortnightly,
circulation of money would monthly, quarterly or
Now, when an organization increase the economic
would follow Continuous half-yearly) which would
condition of the country. provide the Accounts and
Accounting Methodology, the
impacts on economy are as Finance Department with
More Resources for Local
following: sufficient time to correct errors,
Government
mistakes, misinterpretation and
others. Furthermore, external
auditors would be able to
perform continuous audit which
Impact of Enron Scandal on Nasdaq Index
DoW Index 2050 would allow flow of quality
10400 information to Internal and
2000 External Stakeholders via
10200
1950 Financial Statements. Hence, it
10000
is high time that organizations
9800 1900 transform their accounting
9600 1850 process from “Record to
Report” to “Continuous
9400 1800 Accounting” for moving with
Beginning End of the 2 Weeks Beginning End of the 2 Weeks later
Week Later
the trend of modernization and
Week
digitalization.
Source: TIME

7
TIME (2002), The Enron Effect, http://content.time.com/time/business/article/0,8599,197363,00.html

48 OCTOBER - DECEMBER 2017 | The Bangladesh Accountant


ARTICLE

Exchange Rate Policy


Bangladesh Perspective

Foyed Ahmed ACA

T
he exchange rate is one in foreign markets. A lower
of the most important currency makes a country's
determinants of a exports cheaper and its imports
country's relative level of more expensive in foreign
economic health. Exchange markets. A higher exchange
rates play a vital role in a rate can be expected to lower
country's level of trade, which is the country's balance of trade,
critical to most free market while a lower exchange rate
economies in the world. For this would increase it.
reason, exchange rates are
among the most watched, Numerous factors determine
analyzed and governmentally exchange rates, and all are
manipulated economic related to the trading
measures. Yet, the behavior of relationship between two
exchange rate is one of the countries. Exchange rates are
unresolved issues of research to relative and are expressed as a
The Author is a be dealt with. comparison of the currencies of
Chartered Accountant and two countries. Principal
an Associate Member of the An exchange rate is the price of determinants of the exchange
Institute of Chartered Accountants a currency in terms of another rate between two countries are:
of Bangladesh-ICAB currency. Exchange rate is
derived from base currency and  Differentials in Inflation
counter/quote currency. In
direct quotation foreign  Differentials in Interest Rates
currency is base currency and
the domestic currency is called  Current-Account Deficits
counter currency. US dollar is
widely used as base currency  Public Debt
with few exception like Euro,
British pound, AUS dollar etc.  Terms of Trade
Exchange rate is also
categorized as the Spot rate or  Political Stability and
Current rate and Forward rate Economic Performance
(adjusted spot rate for interest
rate differentials . An exchange Differentials in Inflation
rate can be floating or fixed.
Most major nations follow A country with a consistently
floating exchange rate norm, lower inflation rate exhibits a
where market force determines rising currency value, as its
the currency rate. Some nations purchasing power increases
say, Saudi Arabia prefer fixed or relative to other currencies.
pegged exchange rate. During the last half of the 20th
century, the countries with low
Exchange rate movements inflation included Japan,
affect a nation's trading Germany and Switzerland, while
relationships with other nations. the U.S. and Canada achieved
A higher currency makes a low inflation only later. Those
country's exports more countries with higher inflation
expensive and imports cheaper typically see depreciation in

OCTOBER - DECEMBER 2017 | The Bangladesh Accountant 49


Exchange Rate Policy
Bangladesh Perspective

their currency in relation to the currencies of their Differentials in Interest Rates


trading partners. This is also usually accompanied
by higher interest rates. Bangladesh’s inflation in Interest rates, inflation and exchange
September 2017 was 6.12% which was 5.53% in rates are all strongly correlated. By
September 2016. (Source: Bangladesh Bureau of manipulating interest rates, central banks
Statistics) exert influence over both inflation and
exchange rates, and changing interest
rates impact inflation and currency
Exchange rate movements affect a values. Higher interest rates offer lenders
nation's trading relationships with in an economy a higher return relative to
other countries. Therefore, higher interest
other nations. A higher currency rates attract foreign capital and cause the
makes a country's exports more exchange rate to rise. The impact of
higher interest rates is mitigated,
expensive and imports cheaper in however, if inflation in the country is
foreign markets. A lower currency much higher than in others, or if
additional factors serve to drive the
makes a country's exports cheaper currency down. The opposite relationship
and its imports more expensive in exists for decreasing interest rates - that
foreign markets. A higher exchange is, lower interest rates tend to decrease
exchange rates.
rate can be expected to lower the
country's balance of trade, while Current-Account Deficits
a lower exchange rate would The current account is the balance of
increase it. trade between a country and its trading
partners, reflecting all payments between
countries for goods, services, interest and
dividends. A deficit in the current account
Historical Inflation Rate (2000-2016) shows the country is spending more on
foreign trade than it is earning, and that it
Bangaldesh Inflation
is borrowing foreign currencies to make
12 up the deficit. In other words, the country
requires more foreign currency than it
receives through sales of exports, and it
9
supplies more of its own currency than
foreigners demand for its products. The
6 excessive demand for foreign currency
lowers the country's exchange rate until
domestic goods and services are cheap
3 enough for foreigners.

0 Public Debt
2000 2002 2004 2006 2008 2010 2012 2014 2016
2001 2003 2005 2007 2009 2011 2013 2015 Countries will engage in large-scale
deficit financing to pay for public sector
projects and governmental funding.
Source: TheGlobalEconomy.com, The World Bank While such activity stimulates the
domestic economy, nations with large

50 OCTOBER - DECEMBER 2017 | The Bangladesh Accountant


ARTICLE

Interest Rate Statistics:


currency (and an increase in the
Weighted Average Scheduled Banks currency's value). If the price of
End of Bank Call Money Market Weighted Average exports rises by a smaller rate
Rates Interest Rate Spread than that of its imports, the
period rate
Borrowing Lending Deposits Advances currency's value will decrease in
2017 relation to its trading partners.
January 5.00 3.54 3.54 5.13 9.85 4.72
February 5.00 3.50 3.50 5.08 9.77 4.69 Political Stability and
March 5.00 3.66 3.66 5.01 9.70 4.69 Economic Performance
April 5.00 3.76 3.76 4.97 9.62 4.65
May 5.00 3.81 3.81 4.93 9.66 4.73 Foreign investors inevitably
June 5.00 3.93 3.93 4.84 9.56 4.72 seek out stable countries with
strong economic performance
July 5.00 3.72 3.72 4.89 9.51 4.62
in which to invest their capital. A
August 5.00 3.77 3.77 4.93 9.46 4.53
country with such positive
September 5.00 3.91 3.91 4.90 9.45 4.55 attributes will draw investment
October 5.00 3.87 3.87 --- --- --- funds away from other
Source: Statistics Department, Bangladesh Bank countries perceived to have
more political and economic
risk. Political turmoil, for
public deficits and debts are country's exports rises by a example, can cause a loss of
less attractive to foreign greater rate than that of its confidence in a currency and a
investors. A large debt imports, its terms of trade have movement of capital to the
encourages inflation, and if favorably improved. Increasing currencies of more stable
inflation is high, the debt will be terms of trade shows greater countries. This is a most critical
serviced and ultimately paid off demand for the country's factor for Bangladesh as
with cheaper real dollars in the exports. This, in turn, results in developing nation and evolving
future. A large debt also may rising revenues from exports, as an emerging tiger.
prove worrisome to foreigners if which provides increased
they believe the country risks demand for the country's Following the independence of
defaulting on its obligations. Bangladesh, on January 03, 1972
Foreigners will be less willing to
own securities denominated in In the context of Bangladesh, the exchange rate policy has seen three
that currency if the risk of regimes since independence:
default is great. For this reason,
the country's debt rating (as Regime Period Remarks
determined by Moody's or Fixed 1972-1979 Bangladesh followed fixed exch ange rate
Standard & Poor's, for example) Flexible peg 1979-2003 A semi fixed regime. During this regime
is a crucial determinant of its new industrial policy was introduced,
openness of the economy increased
exchange rate.
substantially. The current account was
made convertible and also the capital
Terms of Trade account was convertible partially .
Floating Since 2003 - Since 2003 Bangladesh has adopted
A ratio comparing export prices floating exchange rate policy, but still
to import prices, the terms of Bangladesh Bank keeps eye on the external
trade is related to current value of the BDT and sometimes intervenes
to rein the volatility of the currency. This is
accounts and the balance of
why, the regime should be called a
payments. If the price of a “Managed Floating”

OCTOBER - DECEMBER 2017 | The Bangladesh Accountant 51


Exchange Rate Policy
Bangladesh Perspective

the exchange rate of newly days ( Tk. 80-84 per USD) The stability and economic
created currency (TAKA) was taka has been depreciating performance will be playing a
fixed with Pound sterling @ £1 against the US dollar since the key role in coming days in
=Taka 18.9677. During early middle of October mainly due context of Bangladesh.
years of Independence to a mismatch between the
Government adopted demand and supply of the References
expansionary monetary and greenback, according to
fiscal policies which eventuated bankers and an economist. 1. Working paper series: WP1502,
inflation @ 50% p.a. The Research Department &
Remittance and exports, the
Monetary Policy Department,
incompatibility between two major sources of foreign Bangladesh Bank.
expansionary monetary and currency for Bangladesh, are in
fiscal policy and a fixed the slow lane, while imports 2. An Assessment of Exchange Rate
exchange rate system made Policy under Floating Rate
have ballooned. As a result,
taka grossly overvalued and Regime, Monzur Hossain &
current account deficit is Mansur Ahmed (2009),
created a sustained trade deficit. widening. Bangladesh Bank Bangladesh Development
In 1983, pound sterling was (BB) has intervened by capping Studies.
replaced by US Dollar as the the exchange rate.
intervening currency. Exchange 3. The International Journal of
rate gradually shifted from fixed Social Sciences, Vol. 18 No. 1
Putting cap is an ad-hoc (2013)
peg to flexible peg. In May 2003, measures and it cannot resolve
in a balanced macroeconomic the exchange rate unrest. This 4. The Daily Star, Prothom-alo and
condition floating exchange rate short term control will hurt the world Bank publications
policy was put in place where market in long run. Long term
exchange rates are free to be policies for the foreign
determined by market forces. exchange market and “Check
But to avoid excessive volatility and balance” measures will be
in the exchange rate, ideal which can be achieved by
Bangladesh Bank could put diversifying export and
politic intervention. balancing exchange rate for
both exporters and importers to
Exchange Rate Volatility control the price fluctuation.
in 2017 Fighting against money
laundering and capital flights Government
The below table shows sudden will remain vital in this regard. estimates the
hike in dollar price in last 90 Most importantly political
number of
expatriate
workers will
cross 1 million
including 1,
13,009 women
during this year.

SOURCE
The Asian Age
13 December 2017
th

52 OCTOBER - DECEMBER 2017 | The Bangladesh Accountant


ARTICLE

E-Commerce and E-Commerce Scenario


in Bangladesh

Sayed Ashraf Mohammed Iqbal ACA

I
ntroduction Business to Consumers

The Internet has opened This segment grew through the


up a new horizon for commerce, growth of home-delivery of
namely electronic commerce, food, lifestyle products, books,
known as e-commerce which bus ticket, grocery, movies,
consists of the buying and electronic products etc. This
selling of products or services includes FoodPanda,
over electronic systems such as HungryNaki,Foodpeon,
the internet and other computer bagdoom.com, pickaboo.com,
networks. The Internet, through daraz.com, rokomary.com,
advanced mechanisms of data shohoz.com, BongoBD etc
transfer networks, establishes
global linkages between Consumer to Consumer
customers and suppliers
regardless of geographic There are a number of
The Author is a location. E-commerce entails companies that act as
Chartered Accountant and the use of the Internet in the classifieds, notable are Bikroy,
an Associate Member of the marketing, identification, Ekhanei, and ClickBd.
Institute of Chartered Accountants payment and delivery of goods
of Bangladesh-ICAB and services. It involves order Business to Employee
processing at company
Websites and securing There are a number of websites
Electronic Fund Transfer (EFT) such as BDJobs.com,
payment systems. prothom-alojobs.com,
chakri.com and jobsA1 that host
Types of E-commerce information about jobs in
Bangladesh.
In Bangladesh, there exist
several types of e-commerce Order
that can be categorized in the Placed
following manner. by user

Business to Business Shopping Credit card is charged


Cart

BGMEA, ready-made garment


Shipment sent to Customer

trade body, has utilized


business to business
eCommerce to receive orders
for garments from clients Order is completed
outside Bangladesh. Three
other popular sites are
Addressbazaar, Bangladesh
Business Guide, and Biz
bangladesh. Sindabad is
considered as the first B2B Shipping carrier Sent to Warehouse Email is sent to
picks up shipment for Fulfillment Customer and merchant
ecommerce platform in
Bangladesh.

OCTOBER - DECEMBER 2017 | The Bangladesh Accountant 53


E Commerce and E Commerce Scenario
in Bangladesh

Products Sold by E-Commerce barraging, order placement, physical


interaction etc
E-commerce companies sell variety of products
and services necessary for our daily life. These Benefit of e-Commerce from
include dress, shoes, foods, cosmetics, medicine, Buyers
electronics, home appliances, car, house, fashion
and home appliances, Cameras, Computers, The buyer perceived the following
Phones, Fashion Accessories, Music, Traveling benefits, which supposed to extent their
goods, books, bus ticket etc. business:

 The ability of placing purchase order


all over the world in 24/7
BGMEA, ready-made garment trade
body, has utilized business to  Availability and multiple options to
choose the desired product out of
business eCommerce to receive hundreds of required product and
orders for garments from clients having the facility of home delivery
service have made people free from
outside Bangladesh. Three other the hassle to go shop physically
popular sites are Addressbazaar,
 Buyer can choose any the available
Bangladesh Business Guide, and Biz method for making the payment for
bangladesh. Sindabad is considered the products he purchased.
as the first B2B ecommerce platform  It can save a lot of time and money
in Bangladesh. rather than go outside and spent
some extra money for shopping.

Benefit of eCommerce from Seller


 e-commerce reduced operating cost through
reducing transactions costs, minimizing
logistic costs and lowering the cost of
inventory management.

 Managing e-commerce is easy than the


traditional business. The seller receives
comprehensible order t from buyer through
website. Based on the order the seller make
arrangement to deliver the product at the
desired location of the customers.

 if the seller get the payment in advance after


confirmation the order, there will be low risk
related to the overdue payment.

 e-commerce marketing system save times of


seller in terms of product selection, price

54 OCTOBER - DECEMBER 2017 | The Bangladesh Accountant


ARTICLE

 Card payment (Visa card or


Master Card, American
Express Card etc.)

 Payza

 Paypal

Ecommerce Companies
in BD
The concept of online
marketplace was introduced in
2012/13 by akhoni and ajkerdeal.
From 2015 onwards Kaymu and
Daraz is disrupting the market
by investing a huge amount of
money in marketing for quick
sales, which eventually is proven
a wrong step and ultimately
kaymu merged with Daraz in
2017.
E-commerce Users in (CoD) which count for 90% of
Bangladesh the spending behavior.
Daraz BD is one of the online
Furthermore, the second major
shopping sites with a wide
E-commerce users in form of payment is MFS (Mobile
selection of electronics, fashion
Bangladesh are between 25-34 Financial Service). (Source:
and home appliances. They
years and over 80% of eCab)
offer great deals on discount
E-commerce traffic in offers, installment facilities and
Bangladesh comes from three warranty.
major regions. Dhaka leads the
chart with 35% of total traffic, PriyoShop.com is another
closely followed by Chittagong online shop in Bangladesh for a
at 29%, and Gazipur with 15% of vast option of clothing,
total e-commerce activity each footwear, jewelry, accessories,
year. When talking about the electronics, appliance, books,
gender divide, the report restaurants, health & beauty
observes that out of the total products etc. It is one of the
E-commerce activities carried best e-commerce solution
out, males are still the majority, All the payment systems are as
providing online sites for
comprising 83% of the follows:
shopping in Bangladesh starting
population. in 2013.
 Cash on Delivery
Payment Methods  Mobile Banking (bKash,
With a vast arrangement of
daily necessary products,
SureCash, IFIC Mobile
In Bangladesh the most popular ajkerdeal.com is also one of the
Banking, Dutch Bangla
payment method regarding familiar websites in online
Mobile Banking, UCASH etc)
e-commerce is cash on delivery shopping. Furthermore, they are

OCTOBER - DECEMBER 2017 | The Bangladesh Accountant 55


E Commerce and E Commerce Scenario
in Bangladesh

specialized in updating offers, various articles on lifestyle be exercised directly by the


current necessities etc. related topics. consumer who faces trouble
regarding product quality,
Rokomari.com is one of the Bikroy.com is one the top service reliability and their
known e-commerce sites in ranked online shop of personal information security
Bangladesh for purchasing Bangladesh. It gained the hype while doing online shopping.
books of different interest. It has when it arrived to the raising The Sale of Goods Act 1930, the
been operating since 2012 and moment of online shopping Consumers' Rights Protection
the most amazing part they ideas in other countries. This is Act 2009 and the Information
have their own home delivery an e-commerce website where and Communication
system in Dhaka, Chittagong, you can buy or sell everything at Technology Act 2006 seem to
and Rangpur. Besides books, all whole over the country. For be relevant with e-commerce in
they also sell electronics and local sale, you can take it as the Bangladesh. Although, the Sale
accessories at very reasonable best platform. You can of Goods Act 1930 sets out the
prices. advertise your product in more rights of customers if the
than 50 different categories product is sub-standard and the
Kiksha is another online without any cost. Site authority Consumers' Rights Protection
shopping site for different perceives all the advertisements Act 2009 deals with the
necessary products of our lives. to keep pace with the best offences and punishment if the
It was known as Biponee for the quality. product is not up to the quality
first time it releases. or if the buyer is cheated by the
clickbd.com is a renowned seller,, these two laws do not
Othoba.com is a sister concern online marketplace for declare it clearly whether its
of Pran-RFL group. It deals with Electronics, Cameras, provisions will be applicable to
accessories, daily groceries, Computers, Phones, Fashion the virtual buyer and seller.
medical kits and much more. Accessories, Music, and Moreover, the Information and
Traveling goods. Anyone can Communication Technology
pickaboo.com is another sell or buy almost every item of Act 2006 talks about the
trending site for online daily appliances. offences, investigation,
shopping. Oou can have great adjudication, and penalties that
deals, especially on electronic We have seen tremendous
could be used as a protection
gadgets and appliances, and development in delivery
regarding online shopping.
cheaply priced options here in industry during this period.
one site. With the benefit of Many companies opened just to
In UK if anyone sell goods or
home delivery and spot serve ecom merchants. Food
services online, must comply
purchase options, they provide delivery services like
with the Electronic Commerce
EMI payment, along with other HUNGRYNAKI started their
(EC Directive) Regulations
popular online payment operation in 2013 and doing
2002, the Data Protection Act
systems. amazing at present. Last but not
1998, the Distance Selling Act
the least, we have sheba.xyz,
2000, and ICO Cookie Law.
who are shaping the service
BAGDOOM.COM is a currently Likewise, in Australia, they have
industry using online channels.
trending website for online Privacy Act 1988 which cover
Nonetheless, Chaldal.com, has
shopping in Bangladesh. this area.
silicon valley investment,
Apparently, their main target
redefined grocery shopping for
customers are young. In this respect, Like UK and
us.
Bagdoom.com is the rebranded Australia, the government of
name of previous site Regulatory Framework Bangladesh can enact a new law
Akhoni.com. In addition, they or make provision under
have a running blog section on In the context of Bangladesh, existing relevant Acts which will
which one can easily find there is no specific laws that can specifically deal with the issues

56 OCTOBER - DECEMBER 2017 | The Bangladesh Accountant


ARTICLE

or dispute arise out of  Lack of specific Regulation • Cost of Bandwidth and


e-commerce business. for e-commerce industry. Internet Availability: Govt.
Moreover, government can has done a tremendous job
make a regulatory body who  Fear of security of personal regarding Bandwidth price.
will monitor, investigate and information of customers But unfortunately end users
dispose the issues in this are not able to get the juice
respect. Way out to Overcome of it. Still we are paying more
the Obstacles than 300 Taka for a GB in 3G.
Tax Implication For e-ommerce we need
• Centralized inventory internet users, and so we
As per SRO no. management: To solve the need internet in a much
224/Law/2017/774 VAT, online stock mismanagement cheaper rate for expanding it
sales are VAT exempted subject cases, we need to have a among rural population.
to some conditions. These solution like shopify, where
condition include maintaining merchants will control their • Merchant & Consumer
the VAT related books, VAT online and offline inventory Education: BASIS and eCAB
challan and submission of VAT from a single platform. If we has a huge role to play here.
return. can minimize out of stock They need to bring more
issue, 70% discomfort knowledgeable persons
Earlier income from regarding reliability will be regarding e-ommerce to
e-commerce was tax exempted solved. start campaigns to promote
as per 6th schedule, Part A, para e-commerce nationwide.
33 of income Tax Ordinance • Nationwide COD: The truth is They need to bring the
1984. But by the Finance Act you cannot eliminate COD. collective mind of ecom
2016, tax exemption has been So let's make it API system industry to make these
withdrawn from ecommerce. oriented. We should take the efforts a success.
Consequently, ecommerce help from industries like
companies has to pay income TELECOM, FMCG or POST • E Commerce Policy: We
tax on its income at the rate OFFICE to build up the don't need another policy
applicable for the companies. connectivity so that our dialogue rather need the
industry can use it to policy ASAP. Merchants
connect whole nation under need to know how govt. will
Obstacles of Ecommerce the same API system. allow them to do business in
in Bangladesh this sector
• Escrow System: To fix the
 Lack of countrywide delivery
channel
reliability issue once and for Prospects in BD
all, we need to implement
 Lack of confidence of the escrow system in our Based on the ongoing trend, it is
buyers payment methodology. not hard to anticipate that
Right now, we do not have consumers of Bangladesh are
 More dependency on such regulation or process. going to do online shopping just
FACEBOOK BB needs to come forward like the consumers in Western
and guide banks to countries and the Asia Pacific.
 Unavailability of affordable implement this as soon as Bangladesh will record 72
and un-interrupted internet possible. This will serve user percent growth a year in
all over the country interest and protect their e-commerce transactions in the
rights. Merchants will also be coming days, given the
 Lack of investment to run the
benefited by detecting fraud unprecedented increase in
business for few years before
transactions and internet use, according to a
having any kind of possible
unnecessary returns. study. Bangladesh has become
profit.

OCTOBER - DECEMBER 2017 | The Bangladesh Accountant 57


E Commerce and E Commerce Scenario
in Bangladesh

a potential market for global global, are eyeing the country's driver of future e-commerce
e-commerce giants due to its emerging e-commerce market. would be a sound logistics
large young population and This industry will need efficient framework: better
high rate of internet shipment and warehouse transportation, improved
penetration. management to cope with the delivery experience, order
growing demand of its management, inventory
Many companies, local and customers soon. The primary visibility and returns
management. Bangladesh and
other emerging markets are
Indicators for e-commerce growth Bangladesh recent statistics going to fuel the estimated
on ICT and telecom infrastructure
annual global e-commerce
Particulars July 2017 growth rate of 28 percent,
Population (2017) 165 million followed by Western Europe
Mobile internet subscribes (Millions) 70.174 and North American countries.
Fixed broadband internet usage 4.771
References
Mobile phone subscribers (Millions) 137.399
Internet subscribers (Millions) 75.024 1. https://en.wikipedia.org/wiki/
E-commerce_in_Bangladesh
Internet penetration 44.5%
2. h t t p : / / t e c h i n e w s 2 4 . c o m /
Coverage 64 districts
e-commerce-business-bangladesh/
Smart phones users of 3G 14
3. http://www.dhakatribune.com/
Laptops, Desktops, etc., 7
business/commerce/2017/03/0
Facebook users 21 million 5/e-commerce-boost-economic
Facebook penetration 12.7% -growth/
Cost of peck hour internet TK. 1.5-2.0 4. http://www.thedailystar.net/
Lowest call rate 1 paisa per sec business/bangladesh-see-72pc-g
rowth-e-commerce-sales-1315810
GDP Groth rate 2017 7.28%
5. http://www.theindependentbd.
GDP $249.86 billion
com/printversion/details/110219
Source: BTRC website, ICT: Information and communication technology
6. http://e-cab.net/

90 7. http://www.brainstation-23.com
79.227 /top-e-commerce-sites-banglad
80 esh-according-alexa/
70 66.862
8. https://hifipublic.com/2015/07/
60 54.058 12/kaymu-releases-survey-report
-on-bangladeshs-e-commerce/)
50 42.282
36.534 9. Bangladesh bank website
40
10. BTRC website,
30
20 11. ICT: Information and
communication technology
10
12. Bureau of statistics website
0
Internet subscribers (in million) 13. http://nbr.gov.bd/

Sep-13 Sep-14 Sep-15 Sep-16 Sep-17 14. http://www.internetworldstats.


com/asia.htm#bd

58 OCTOBER - DECEMBER 2017 | The Bangladesh Accountant


Financial Markets of Bangladesh
Development and Challenges

M A Wahab Akanda ACA

A
bstract the role it plays in
intermediating savings of the
The financial market private and public sector to
plays an important role in productive activities including
economic development of investment. Bangladesh
Bangladesh. It transfers the financial system is dominated
fund from surplus units to by the banking sector, which
deficit units for investment. The fundamentally depends on
main purpose of the study is to short‐ and medium‐term
examine the significance of deposits for financing their
financial market in economic lending portfolios. This limits
development of Bangladesh. availability of funds that would
The study has used only be required for long‐term
secondary data. The secondary investments like infrastructure
data are collected only relevant and housing. Bangladesh has a
to study such as market capital market, with its known
The Author is a capitalization, stock turnover, difficulties, and there is no
Chartered Accountant and number of listed securities and vibrant secondary market for
an Associate Member of the companies, stock index and bonds, which limits the
Institute of Chartered Accountants GDP for measuring economic availability of resources for
of Bangladesh-ICAB development during the period infrastructure financing. This is
of 2005‐ 2015. The main reason starting with a general overview
to consider the certain period is of the current structure of the
the availability of data. The financial system in Bangladesh
study has used some statistical in terms of the 4 key
measures of means, growth markets—money market
rate, and ratio of total market comprising banks, microfinance
capital to GDP method. This institutions and nonbank
study revealed that financial financial institutions, financial
markets have made substantial market, bond market and
contribution in economic insurance market and their
development of Bangladesh. sizes, relationships between the
The study seems to carry an various markets and the
enormous academic value as associated regulatory bodies
only few studies have been assigned to govern the different
undertaken in this area. market segments.

Key‐words The recent developments in the


financial markets of Bangladesh
Bangladesh, economic have given rise to considerable
development, market divergence of views about its
capitalization, financial market, role in the economic
money market, capital market, development, more specifically
bond market, insurance market. economic growth, of the
country. Some policy makers
have termed the market as
Introduction “wicked” and gambling casino.
On the other hand officials of
The financial sector is a vital
the exchanges have been trying
part of an economy because of

OCTOBER - DECEMBER 2017 | The Bangladesh Accountant 59


ARTICLE

Financial Markets of Bangladesh


Development and Challenges

hard to project the markets as a potentially major


Size of Different Segments of the Financial System as
contributor to investment and hence to growth.
Share of Total Assets of the Formal Financial Sector
and as Percentage of GDP, June 2013
Financial market is considered to be a barometer
of the Economy. The economic development of a Percentage Share in Size as
country depends largely on the effective Total Assets of the Percentage of
performance of financial market. The financial Formal Financial Market GDP
market augment the process of economic Banking Sector 63 60
development though a number of ways: a) Financial market 20 19
bringing together holders of surplus funds and
users of such funds; b) offering a broad spectrum Bond Market 16 15
for investment and financing choices to both Insurance Market* 3 3
investors and issuers, c) drawing more institutions *The figures for the Insurance Market are based on the data of year 2010 from
into investment, and e) reducing the dependence Masuduzzaman, M., Rahman, M.H. and Ahammed, S. (2013). Integration of
of industrial enterprises on non‐security market Financial Market and its implication of Financial market Development in
Bangladesh: An evaluation.
for capital.
Source: Bangladesh Bank, DSE and BBS

The semi‐formal financial sector includes


those institutions which are regulated
Bangladesh financial system is otherwise but do not fall under the
dominated by the banking sector, jurisdiction of Central Bank, Insurance
Authority, Securities and Exchange
which fundamentally depends Commission or any other enacted
on short‐ and medium‐term deposits financial regulator. This sector is mainly
for financing their lending portfolios. represented by Specialized Financial
Institutions like House Building Finance
This limits availability of funds that Corporation (HBFC), Palli Karma Sahayak
would be required for long‐term Foundation (PKSF), Samabay
(Cooperative) Bank, Grameen Bank, and
investments like infrastructure financial activities/programs (lending and
and housing. deposit taking)
Non‐Governmental
of various
Microcredit
Organizations. The informal financial
sector includes private intermediaries
which are completely unregulated and
Structure of the Financial Market of sometimes engaged in financial
Bangladesh transactions not legally permitted. The
formal financial market in Bangladesh
The financial system of Bangladesh is comprised comprises mainly of money market,
of three broad fragmented sectors: Formal financial market, bond market, insurance
Sector, Semi‐Formal Sector and the Informal market, foreign exchange market and
Sector. The categorization is based on the extent micro‐financial market. The discussions
of regulation in the sectors. The current size of the will focus primarily on the formal sector
respective sectors measured in terms of asset of the financial market.
base of the financial sector of Bangladesh is
shown in Table

60 OCTOBER - DECEMBER 2017 | The Bangladesh Accountant


ARTICLE

Money Market

The major participants involved


in the money market are
scheduled banks, development
financial institutions (DFI),
non‐bank financial institutions
(NBFI) and Microfinance
Institutions (MFI). Banks play a
dominant role in the financial
market of Bangladesh. At
present there are 56 scheduled
banks operating in Bangladesh
of which 6 are state‐owned
commercial banks (SCBs), 2 are
government‐owned specialized
banks (SOCBs), 9 are foreign
commercial banks (FCBs) and
39 are domestic private
commercial banks (PCBs)
including 31 conventional The three main factors that its share of total deposit has
private commercial banks and 8 contributed to the improvement expanded from 43% to 69%
Islamic banks. in the coverage of the banking over the same period.
sector of Bangladesh are
As the views towards greater competition for market Challenges and Concerns
denationalization and private share, better regulations and Relating to the Banking Sector
sector participation in the improved supervision. The
banking system changed, the opening up of the banking Although the banking sector
initial phase of banking reform sector to private enterprises has had its share of success,
(1980‐1990) focused on the was perhaps the most there are a number of serious
promotion of private ownership determining factor. As a result concerns that remain and are
of commercial banks and of this competition the share of likely to intensifying if remained
denationalization of some private banks in total assets has unattended.
nationalized commercial banks grown from 42% in 2001 to 72%
(NCBs). in June 2012; commensurately, First, there are sharp differences

Assets of the Banking Sector as on June 2013

Non-Interest Operating Cost as a


Type of Banks Total Assets
Operating Cost % of Total Assets
State-owned Commercial Banks 1,421.36 201,315.32 0.706
Specialized Development Banks 829.59 42,401.66 1.957
Private Commercial Banks 5,046.95 462,820.63 1.090
Foreign Banks 525.04 46,112.57 1.139
Total 7,822.94 752,650.18 1.039
Source: Bangladesh Bank

OCTOBER - DECEMBER 2017 | The Bangladesh Accountant 61


Financial Markets of Bangladesh
Development and Challenges

in the performance of banks, measures are often constrained. Exchanges, Stock Dealer/Sock
especially between private and Owing to lack of autonomy, Brokers, Merchant Bankers and
public banks. For example, the Bangladesh Bank often cannot Portfolio Managers, Asset
NPL of private banks in June withstand political pressure. Management Companies, Credit
2014 was 5.7%, but it was 23% Rating Companies,
for public commercial banks Fifth, there is widespread Trustees/Custodians and the
and 33% for public specialized allegation from the business Investment Corporation of
development banks. community that bank interest Bangladesh (ICB). The primary
rates and charges in Bangladesh segment of capital market is
Second, the definition of NPLs are too high. These high interest operated through private and
used in Bangladesh was not in rates have adversely impacted public offering of equity and
line with the international investment and domestic bond instruments. The
norms. The standard economic activity. secondary segment of capital
international definition for NPLs market is institutionalized by
was scheduled for adoption Finally, corrective monetary two stock exchanges‐‐Dhaka
from July 2012. This move has, policy actions over the past 15 Stock Exchange and
as expected, contributed to the months or so have tended to Chittagong Stock Exchange.
deterioration of the NPL ratios offset some of these adverse The instruments in these
beginning 2013. effects, particularly in the areas exchanges are equity securities
of inflation and exchange (shares), debentures, corporate
Third, there are important issues market stability. bonds and treasury bonds. The
relating to the corporate capital market in Bangladesh is
governance of banks. Due to Capital Market regulated by the Securities
political connections and Exchange Commission (SEC) of
influences some private banks In last two decades, capital Bangladesh. Below table shows
are able to bypass standards market witnessed a number of some selected indicators of
relating to fit and proper criteria institutional and regulatory capital market developments
for bank board and advancements which have referring to three choice of
management. resulted diversified capital years, year 2007, 2010 and 2014.
market intermediaries. At It can be observed that market
Fourth, the capacity and present, capital market capitalization and the DSE
flexibility of Bangladesh Bank to institutions and intermediaries General Price index increased
supervise the banking industry are of following types: Stock dramatically in the peak year.
and implement prudential

Indicators of Capital Market Developments (DSE)

FY 2007 (Pre- FY 2010 (Peak of FY 2014* (as of


bubble year) the bubble) June 2014)
Number of listed securities 281.00 279.00 315.00
Issued equity and debt (billion Tk) 83.70 213.10 482.70
Market capitalization (billion Tk) 412.20 2,277.00 2,386.80
Turnover (billion Tk) 164.70 2,714.30 1,125.40
General Price Index 2,149.30 6,153.70 n/a
DSE Broad Index n/a n/a 4,480.00
DSE -30 Index n/a n/a 1,644.80
Source: Bangladesh Bank

62 OCTOBER - DECEMBER 2017 | The Bangladesh Accountant


ARTICLE

This development also


negatively impacted on
investments in other segments
of the financial market i.e.
money market and investment
in NSD saving instruments by
diverting funds from those
markets. During the periods of
boom in the financial market,
the rates of interest on bank
deposits and NSD saving
instruments were fixed at levels
below market expectations,
which played an important role
in diverting investment funds to
the financial market.

Historical Background of the


Capital Market
measures by its regulator BSEC - Limited financial stability
Although Bangladesh capital
and opportunity of gaining oversight and policy
market came into existence in
more returns from holding coordination between SEC,
early 1950, for the next 40 years
stocks. Both market Bangladesh Bank and the
it failed to generate much
capitalization of all shares listed Ministry of Finance
activity. All key market
in DSE and its share in total
indicators like the number of
assets of the financial sector - Weak regulation, governance
companies traded in the capital
increased remarkably. In 2003, and operation of stock
market, market turnover and
financial market capitalization exchanges
market capitalization in
accounted for only 4% of the
relations to GDP remained very
total assets of the financial - Small institutional investor
low relative to its regional
system, which increased sharply and mutual fund industry:
comparators. Market
to 24.7% by 2011 despite a major underdeveloped insurance
regulations and its governing
downward market correction in industry serving only 1%‐2% of
structure were not up‐to‐date
2011. Market Capitalization as a population; nascent mutual
and the regulatory environment
percentage of GDP experienced fund segment of the financial
was very weak. This weak
the biggest jump from 16% in sector
governance and institutional
2009 to 33% in 2010. It however
structure contributed to the
declined sharply after 2010. - Limited supply of bonds and
formation of first speculative
equities
bubble and subsequent burst in
There is a general degree of
1996.
convergence among the The Key Recommendations
practitioners and market were:
Developments in the Financial
Markets analysts about the key
problems facing the capital - Demutualization of stock
The capital market flourished markets, which are: exchanges (already
noticeably due to stronger completed during 2016/2017)
economic fundamentals of the - Limited SEC capability in
listed companies, various areas of regulation, - Enhanced coordination
surveillance, and enforcement between regulators to

OCTOBER - DECEMBER 2017 | The Bangladesh Accountant 63


Financial Markets of Bangladesh
Development and Challenges

enhance financial stability markets with international funds by issuing bonds, they are
best practices. less dependent on banks and
- Enhancing institutional less exposed to vulnerabilities of
investor demand and Due to the slowing down of the banking system.
promote the mutual fund business activity and loss in Corporations suffer greatly
industry Enhancing supply revenues, it is recommended when there is liquidity crisis in
and demand of equities and that The Stock Exchanges the banks and bond is their
bonds explore new channels of primary source of funds.
revenue generation as
A review of reform measures suggested by the World Government Bonds
recommended after the Federation of Exchanges.
financial market debacle The bond market in Bangladesh
indicates that most of the key Bond Market is dominated by the fixed
measures have been income government debt
implemented except for one In a well‐diversified financial instruments, namely the
although almost 4 years have system bond market has a very National Saving Certificate.
passed since the bubble busted important role to play. Bond These bonds are not tradable in
in late 2010. In particular, financing allows diversification the secondary market. The
despite delays experienced in of credit and investment risks interest rates on this saving
submitting the draft and thus reduces certificate are generally higher
Demutualization Act to macroeconomic vulnerability to than that of other bonds in the
parliament and the Banking shocks and systemic risk market. The national savings
Control Act (BCA), both acts through. The government bond scheme is aimed at mobilizing
have been approved by market forms the backbone of a the savings of small investors
Parliament and the modern securities market in and pensioners at attractive
demutualization of Dhaka and both developed and developing interest rates. Under the
Chittagong stock exchanges countries. The availability of National Savings Directorate,
have been completed. long‐term funds for specific formed under Public Debt Act,
uses such as for infrastructure 1943, national savings
Recommendations for development and long‐ term certificates are sold through
Governance and Operations of industrial financing is facilitated 9,000 post office branches and
Primary and Secondary by the debt market. 3,300 commercial bank
Markets and Self‐ branches functioning as
The bond market links the commission agents. Bangladesh
Regulatory Organizations issuers having long‐term Bank collects the sales
financing needs with investors proceeds and reimburses the
- Protection of the investors willing to place funds in seller at the time of encashment
should be the top priority of long‐term interest bearing (redemption). Government uses
accounting firms, merchant securities. When firms can raise 3 to 5 years term savings
banks and stock exchanges. certificates (Sanchaypotro) for
the purpose of domestic
- The industry needs to define borrowing from the public.
the role of SROs in oversight
and adopt international best Corporate Bond
commercial practices.
The corporate bond market in
- The SEC needs to officially Bangladesh remains at a
recognize many of the SRO’s nascent stage, with a shallow
and begin the process of debenture market. In 1987–2005
integrating Bangladesh’s

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only 17 debentures were issued issued in early 1990s defaulted reduces funding costs for
through public offerings. The on the interest payments. investors and for the financial
eight debentures still intermediaries by addressing
outstanding in 2014 had an issue Inefficiencies in the taxation the problem of asset‐liability
value of only $2 million. The system (transaction taxes and mismatches.
corporate bond market faces high rates) have reduced the
important constraints—but also attractiveness of financial Secondary market trading
a potential for growth in bank markets and encouraged tax should be encouraged by
and infrastructure bonds that evasion. The high transaction making trading of government
could spark its development. costs of bond issuance are bonds by primary dealers easier
There are only 3 corporate impediments. and allowing all government
bonds currently operating in the bonds to be accepted as
country ‐‐ IBBL Mudaraba It happens quite often that a collateral by Bangladesh bank.
Perpetual Bond, ACI Zero number of banks form
Coupon Bond and BRAC Bank syndicates for financing large Development of organized
subordinated Bond. projects of companies. futures market will help
Syndicated loans are cheap as promote market liquidity and
Constraints on the well as flexible and tailor‐made, efficient pricing in the
Development of the Bond which makes bonds less secondary market.
Market attractive to the corporate
issuers. Facilitating private issuance of
The bond market of Bangladesh corporate bonds through the
is very underdeveloped. A Finally, the Investment formation of a private
number of factors including Corporation of Bangladesh placement and clarification of
supply side constraints such as (ICB), which enjoys a good regulations of corporate bonds.
a lack of benchmark bonds, reputation in the market, could
inadequate regulatory system, play an important catalytic role Creating market awareness of
market distortions due to through underwriting the corporate bonds.
national savings scheme, and a developmental costs of
lack of interest from private quasi‐public market Insurance Market
companies in bond markets infrastructure.
because of high costs, default of The insurance law has gone
debentures in the past, and the Recommendations for through several amendments
general preference of investor Government and Corporate since 1984. The Insurance Act
in the equities rather than in Bonds 2010 has been enacted by
bonds are responsible for the updating the provisions in the
slow growth of the bond market The deepening of the Insurance Act, 1938. The
in Bangladesh. government bond market Insurance Development and
through creation of large Regulatory Authority Act 2010
Even if there is a full‐fledged benchmark issues, re‐openings has also been framed with a
legal/regulatory framework, and other techniques. The Debt view to synchronizing functions
there is need for a change in Management Office should be of the existing Insurance
some existing laws and strengthened so that the Department in the spirit of the
measures in the form of tighter Ministry of Finance (MOF) can newly‐enacted Insurance Act,
regulation, boosting the issue bonds at market rates. 2010 to maintain proper control
authority’s political and supervision of the sector
independence and access to Asset backed securitization of and protect the interests of
resources. Some of the debt provides a potentially policy holders and beneficiaries.
corporate debentures (bonds) important source of fund and Bangladesh remains behind its

OCTOBER - DECEMBER 2017 | The Bangladesh Accountant 65


Financial Markets of Bangladesh
Development and Challenges

The Insurance Development &


Regulatory Authority (IDRA) of
Bangladesh recognizes a total
of 77 insurance companies as
authorized to operate in
Bangladesh, of which 30
provide life insurance and 45
are in the general insurance
field. Among the life insurance
companies, except the
state‐owned Jiban Bima
Corporation (JBC) and a
foreign‐owned American Life
Insurance Company (ALICO),
the rest are domestic private
entities.

Recommendations

As part of reforms for the


Insurance Market, Asian
neighbors, both in terms of (IDRA) has been established for Development Bank (ADB) has
premium income and the insurance sector. The recommended that the
penetration. Only 1.5 percent of insurance companies including government implements a white
the population has life insurance the state‐owned enterprises paper to strengthen the
coverage in Bangladesh, as need to be regulated under insurance sector by:
compared to 4.5 per cent in comprehensive laws and
Pakistan and 7.5 per cent in guidelines and need to be (i) Agreeing to a timetable for
India (as of 2010). supervised by a strong recapitalizing all the
regulatory authority. insurance companies in
The Insurance Development accordance with Insurance
and Regulatory Authority Act 2010;

Performance Indicators of the Insurance Market


2005 2010 2013
Number of Insurance Companies 62 62 66
Number of Insurance Policy Holders 3,246,108 6,703,073 17,098,364
Life insurance policies 3,015,861 6,279,031 16,038,269
Non-life insurance policies 230,247 424,042 1,060,095
Number of Insurance Policies 7,689,907 15,114,084 17,968,616
Life insurance policies 6,978,299 13,863,772 16,498,603
Non-life insurance policies 711,608 1,250,312 1,470,013
Insurance corporations 38,012 109,109 182,973
Life insurance tech. reserves 32,641 100,985 172,050
Non-life insurance tech. reserves 5,371 8,124 10,923
Source: Financial Access Survey, IMF

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(ii) Adopting investment Since 2007 share market was World’s Bank Investor
regulations as required by upward and sometimes the Protection Ranking for
Section 41 of the Insurance same was downward which Bangladesh 19th, Pakistan 25th,
Act 2010; indicate the fluctuating trend India 38th & Sri Lanka 70th.
and this trend is not considered
(iii) Initiating implementation of to be congenial for the Bangladesh was considered as
this white paper; and economy of Bangladesh. Again, one of the Goldman Sachs Next
for the last couple of months 11 countries for a high potential
(iv) Implementation of the the indices of share market of becoming the world’s largest
following regulations: (a) broke all the prior records in economies in the 21st century
management of IDRA Fund terms of both the increasing along with the BRICs (Brazil,
and (b) CEO appointment. and decreasing trends, while Russia, India and China).
these are not the sound signals
Impact of Capital Market of contributions what the Easy access to ownership of
on the Overall Economy analysts consider. Infrastructure Development
companies, high net worth
The internal force like capital Why Should the private banks and companies
market which can make the Foreigners Invest in through Capital Market.
economy healthy is weak in the Bangladesh Capital
perspective of this country so Requirements for NRBs &
Market?
far. Thus, Bangladesh is being Foreign Investors to
deprived of getting some extra 100% repatriation of capital, Invest in Bangladesh
benefits from this market due to dividend and investment profits.
the lack of sound position in A Foreign Currency (FC)
comparison with other Reinvestment of repatriable Account is needed for inward
neighboring, regional and some dividend treated as new and outward remittance.
other countries. investment. No tax on capital
gains A Non‐resident Investor’s Taka
In support of this statement a Account (NITA) is required for
recent comparative study 10% of all IPOs are reserved for converting foreign currency
regarding some aspects of this NRBs. into Taka.
market can be shown below:

Country’s Terminologies
Stock Indices Market Turnover % of GDP
Exchange Capitalization (US $)
(Millions US $)
Dhaka Stock Exchange (SE) 2,384.18 7,915.00 623 11.67
Colombo SE 2,442.11 7,042.00 579 26.28
Karachi SE 13,630.50 65,820.00 67 51.02
Mumbai SE 15,551.00 1,111,791.00 1,55,651 126.05
Philippines SE 3,501.20 93,951.00 17,305 80.35
Singapore SE 3,547.10 512,895.00 212,568 388.10
Hong Kong SE 23,184.90 2,229,101.00 921,992 1,176.00
London SE 6,360.10 3,945,829.00 6,532,036 166.02

OCTOBER - DECEMBER 2017 | The Bangladesh Accountant 67


Financial Markets of Bangladesh
Development and Challenges

indicates weak governance


structure, narrow institutional
investor base, half‐ or
uneducated large small investor
base, weak capacity of SEC to
monitor market developments
at the micro level and act timely
and decisively, lack of
coordination among important
regulators (including with
Bangladesh Bank and Ministry
of Finance), and lack of capacity
on the part of the regulator to
withstand political pressures.
Given the range of issues
confronting each important
segment of the financial sector,
separate sets of
recommendations have been
made for all financial sector
All Capital Market investors are sector development (e.g., components. The government
required to conduct trading insurance sector), reduced in collaboration with the
through a Stock Broking confidence of market relevant regulatory agencies
Account maintained with any participants in the manner (such as Bangladesh Bank,
Stock Broker/Member of the certain markets function (e.g., BSEC, IDRA, BIDA, etc.) should
respective Stock Exchange. financial market), and be able to implement most of
contributed to increased cost of these recommendations during
In order to trade dematerialized financial intermediation or the Seventh Plan period in
shares listed with the Stock mobilizing funds (e.g., banking consultation with private sector
Exchanges, investors must have system) for private sector stakeholders.
a Beneficiary Owners (BO) investment. Fraudulent
Account with CDBL. activities and market On the economic side,
manipulations, when remain facilitating private sector
NRB & Foreign Investors may unpunished due to political and investment and promoting
choose to appoint a Custodian other reasons provide wrong domestic/national savings to
to ensure trade execution and signals to market participants finance the investment
safe custody of shares. and encourage culture of requirements, while ensuring
default and manipulations continued financial stability, will
Conclusion increasing financing cost for all be the major challenge. Since
and limiting access to financing the higher growth target
Certainly Bangladesh financial for the genuine SME borrowers. envisaged under the Plan would
system, despite significant require a commensurate
progress on many fronts, is Bangladesh capital market has increase in the investment/GDP
quite underdeveloped and gone through two major round ratio, mobilization of foreign
suffers from serious institutional of boom and burst in the last financing will also be very
and regulatory weaknesses. two decades. The most recent important in filling the domestic
These institutional weaknesses one was during 2009‐11. This investment‐savings gap.
have undermined financial type of market instability

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Corporate Social and Environmental Reporting (CSER)


The Development of Theoretical Framework

Mohammad Omar Faruq1 | Dr. Md. Ali Noor2

A
bstract business and economic
decisions. It is the process of
The Authors are:
As the social and presenting financial data about
environmental disclosure a company’s financial health,
systems have been developed operating performance, and
over decades, the ethos of flow of fund. Financial reporting
corporate social and disseminates relevant
environmental responsibility information to investors,
came to the fore globally. What creditors and other users in
and how environment-sensitive making investment, credit and
companies (i.e. companies that other economic decisions
are more likely to do respectively. International
environmental damages) Accounting Standard Board
disclose such information (IASB) has issued IASs and
voluntarily affects the public, IFRSs in order to harmonize
especially in Bangladesh, where financial information of the
strong debatable issues companies and to ensure
1
Assistant Professor constantly raise as a result of relevant, reliable, consistent and
Department of Accounting & the rapid economic growth. comparable information for the
Information Systems, Corporate social and users.
Jagannath University environmental responsibility is
no longer an international Corporate social and
obligation but a domestic environmental reporting is
demand for Bangladesh (Ali et concerned with the disclosure
al., 2010). This study will of an entity’s social and
enhance our understanding of environmental related
arguably a very important issue information such as community
in the country’s economy. It will activities, environmental
try to expand the scope of impacts, employee welfares,
research on corporate social products and safety information
and environmental reporting to and consumer interests –
the context of a developing information that is of interest to
country like Bangladesh. wider stakeholders or
community groups in addition
Key Words to shareholders. Stakeholders
need to make decisions by
Corporate Social Responsibility drawing on social and
Professor
2
environmental reporting from
Department of Accounting & (CSR), Corporate Social and
Environmental Reporting various sources to improve their
Information Systems, decision making capacity. Here
Jagannath University (CSER), Corporate
Sustainability, Financial it is recognized that social and
Reporting, Global Reporting environmental reporting stems
Initiative (GRI). from many sources and that
different sources of social and
environmental reporting
Introduction contribute to stakeholder’s
decision making. Information
Financial reporting provides
contributes towards decision
information which is used by the
making through its display of
potential users in making

OCTOBER - DECEMBER 2017 | The Bangladesh Accountant 69


Corporate Social and Environmental Reporting (CSER)
The Development of Theoretical Framework

various qualitative characteristics of information. terminologies, making it perplexing to


Corporate reporting in the form of the annual agree upon a commonly defined term
report and accounts is often considered to be the because of the breadth and vagueness of
primary source of communication between a its scope. Matten and Moon (2008)
company and its stakeholders and the most identified these difficulties with three
in-depth studies on CSER examine information reasons:
originating from corporate reporting.
i) Valuation of intrinsic values that
Objectives of the Study made it difficult to set specific rules,

The broader objective of the study is to develop a ii) Characteristics in common with other
theoretical framework of corporate social and business and society concepts such
environmental reporting (CSER). The specific as business ethics, and
objectives are as follows:
iii) Dynamic phenomenon.
i. To give a thorough idea about corporate
social responsibility (CSR), dimensions of It should be noted that various definitions
CSR, and theories behind CSR practices. defined by scholars may be caused by
different perceptions and interpretations
of CSR identified with American and
European traditions. In other words, in
CSR is the commitment of business further explaining these differences,
Matten and Moon (2008) argued that
to contribute to sustainable such differences in definitions can be
economic development, working attributed to political systems, financial
with employees, their families, the systems, education and labour systems
as well as cultural ethos.. It is, however,
local community and society at large important to note that such differences
to improve their quality of life make it difficult to conduct cross-country
studies on CSR theory and practice in
(The World Business Council for understanding its implications and
Sustainable Development, 2008). outcomes (McWilliams, et al., 2006).

CSR is also known as corporate


responsibility, corporate citizenship,
responsible business, corporate social
ii. To explore the concept of corporate social
opportunity, corporate philanthropy,
and environmental reporting (CSER), and
corporate sustainability, business and
Global Reporting Initiative (GRI).
society. In aiming to demonstrate the
development of the concepts, Carroll
iii. To expand the scope of research on
(1991) organized the literature
corporate social and environmental reporting
chronologically by identifying the
(CSER) to the context of a developing
evolution of CSR definition. The initial
country like Bangladesh.
definition of CSR can be traced back to
Bowen’s seminal book, Social
Corporate Social Responsibility (CSR) Responsibilities of Businessman, in the
1950s, due to which Carroll (1999)
Throughout the years, literature on CSR across acknowledged him as the “Father of
the globe has defined it using many different Corporate Social Responsibility”. The

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ARTICLE

beginning of the modern period Figure - 1: Carroll's CSR Pyramid


of literature on CSR, however,
was marked when Bowen (1953)
defined CSR as “referring to the
obligations of businessmen to
pursue those policies, to make
those decisions, or to follow
those lines of actions which are
desirable in terms of the
objectives and values of our
society”.

CSR is the commitment of


business to contribute to
sustainable economic
development, working with
employees, their families, the
local community and society at
large to improve their quality of
life (The World Business Council
for Sustainable Development, Source: Carroll (1991)
2008). CSR is a concept
whereby companies integrate compliancy and disclosure has built upwards by the legal,
social and environmental become an essential part of ethical and philanthropic
concerns in their business measuring “ethicality” and the responsibilities.
operations and in their “social” nature of corporations
interaction with their in this new era marked with The four types of
stakeholders on a voluntary post-financial crisis realities. responsibilities are explored
basis. Being socially responsible below:
means not only fulfilling legal Dimensions of CSR
expectations, but also going (i) Business requires
beyond compliance and In exploring the conceptual economic responsibility
investing more into human nature of CSR, Carroll’s (1979)
capital, the environment and the widely known model articulates The main purpose of business is
relations with stakeholders.(The that CSR comprises of four to create wealth. As a
Commission of European domains: economic, legal, foundation in the pyramid of
Communities, 2001) ethical and discretionary social responsibility introduced
(philanthropic) with particular by Carroll (1991), economic
In sum, CSR has now become a emphasis on philanthropic or responsibility results in
core area and therefore a voluntary activities as part of producing goods and/or
reasonable number of defining pro-activity in CSR. services to society, fulfilling
corporations in the These domains, as stated by their needs and wants. This
industrialized democracies have Carroll (1991), are then idealized indicates the view of
come to an understanding that into a pyramid to identify maximizing shareholders’ value.
they need to contribute to the progression of objective However, any social
development of social and function of a corporation with responsibility considered within
biological environment in which economic responsibilities as the this first level of responsibility
they are operating if not to the foundational base, and then should benefit both business
global humanity. Therefore, CSR

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Corporate Social and Environmental Reporting (CSER)
The Development of Theoretical Framework

and society, hence CSR, (iii) Society expects ethical and firms should refrain from
consequently, is classified as a responsibility any wrong doing that could
means to an end of profit harm and go against society’s
yielding. Ethical responsibility is expectations beyond the legal
introduced since the legal requirements. Consequently,
(ii) Business needs legal responsibility does not cover firms are expected to contribute
responsibility every aspect of moral behaviour to social justice and transparent
(Masaka, 2008). In other words, accountability in their activities.
Legal responsibility requires “legal” solutions may not
firms to obey the standard rules necessary be “ethical” at the (iv) Society desires voluntary/
and regulations made by a same time. Thus, ethical philanthropic responsibility
higher authority in order to responsibility as part of
perform business activities as pro-activity in social Voluntary or philanthropic
demanded by the society, which responsibility implies how responsibility refers to social
implies that businesses are ethical values are perceived as a activities which are beyond the
expected to play by the rules of duty or task which is obligatory legal requirement and
the game. This is considered for the organisation in relation performed on a completely
another aspect of CSR in to the society (Garriga and voluntary basis to improve the
locating the business within its Melé, 2004). As aspirational quality of life and the welfare of
larger framework.. expectations, it concerns what the society (Kitson and
is right in the eyes of society Campbell, 1996). In other words,

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“giving back to society”, which


is a familiar slogan in firms that
encourages CSR. It does not
necessarily have to be in line
with rational expectations of
profit maximization. However, it
is suggested that investing in
philanthropic activities creates
competitive advantage to the
firms at the same time
increasing its social values. Such
philanthropic activities includes
charitable functions, supporting
the community, etc.

In overall, these responsibilities


are essential to ensure the
success of manifesting the
socioeconomic objectives of the
corporation. In addition, the
ethical dimension or goal other than profit strategic benefits for the
responsibility in CSR is further maximization (Herremans et al., organisation (Burke and
articulated in order to nurture 1993). Logsdon, 1996). According to
ethics and morality. this theory, CSR is linked with
According to the classical view profit maximization of
Theories behind CSR Practices theory, there is a negative businesses and this benefits
relationship between social their stakeholders. Therefore,
Classical View Theory performance and financial CSR policy should put thrust on
performance, since, by the economic benefits to the
Friedman (1962; 1970) is the implementing CSR, firms will business. CSR is strategic when
most prominent defender of this incur a competitive it yields substantial
theory. According to Friedman, disadvantage, as they will have business-related benefits to the
the most important additional costs that might firm, such as by supporting core
responsibility of business is to otherwise be borne by other business activities and thereby
increase shareholders’ wealth. parties such as the government contributing to the firm’s
For this reason, managers’ and (Aupperle et al., 1985). Adopting effectiveness in accomplishing
executives’ main aim is to make an environment-friendly its mission.
as much profit as possible while production process may
conforming to the basic rules of increase the cost of production, According to Garriga and Mele
society. Firms are commonly which in turn, will reduce (2004), a positive relationship
assumed to incur significant competitive advantage. between CSR and economic
private cost by pursuing social achievement can be achieved
welfare objectives beyond The Instrumental / Strategic through: (1) maximizing
profit maximization within the Theory shareholder value; (2)
law. This creates a major conflict benefitting from competitive
between profit maximization The instrumental or strategic advantage; and (3) marketing
and CSR. Accordingly, classical theory looks at CSR from a the advantages of CSR activities
view theory asserts that different perspective. It focuses based on systematically
management, as agents of the on the ways in which CSR targeting areas for superior
shareholders, should pursue no programmes can create performances (Johnson, 2003).

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Corporate Social and Environmental Reporting (CSER)
The Development of Theoretical Framework

assumptions regarding
congruence between their
values and organizational values
(Mobus, 2005).

Stakeholder Theory

Stakeholder theory focuses on


the relationship between
groups and individuals who can
affect or be affected by the
achievement of the
organization’s objectives
(Freeman, 1984). A stakeholder
is a person or group that has, or
claim, ownership rights or
Motivation for CSR they will behave fairly and show interest in a corporation and its
implementation is strategically accountability for their actions activities, past, present or
instrumental since each activity beyond legal requirements. The future. Such claimed rights or
is targeted to enhance financial social contract states society’s interests are the results of
performance. For example, expectations of businesses as actions taken by the
working with the community well as businesses’ expectations corporation and may be legal or
not only shows that the of society (Kakabadse et al., moral, individual or collective
company is a good citizen; it 2005). This research therefore (Clarkson, 1985). Starik (1995)
also provides a means to attract endeavored to explore the expanded the definition of
and to retain good customers. influence of a multi-cultural stakeholder to include both
society and its expectations on human and non-human entities.
Social Contract Theory natural environmental He argued that the non-human
management. natural environment can be
Based on Sacconi (1999), social integrated into the stakeholder
contract theory views the firm The Legitimacy Theory management concept, since the
as an institution endowed with a natural environment is one of
formal constitution. The social Legitimacy is a generalized the important components of
contract establishes the perception or assumption that the business environment.
‘constitution’ of the firm and the actions of an entity are
provides a hypothetical model desirable, proper, or From a stakeholder perspective,
of ideal agreement that appropriate within some corporate social performance
constitutes the criterion for socially constructed system of (CSP) is assessed in terms of a
assessing the actual economic norms, values, beliefs, and company meeting the demands
institution. That is to say, the definitions (Suchman, 1995). of multiple stakeholders (Ruf et
social contract is the According to legitimacy theory, al. 2001). Waddock and Graves
constitution of the firm and the in order to survive, companies (1997) found a positive
code of ethics or ‘constitutional have to perform well and meet relationship between
chart’ makes the implicit social the expectations of the various stakeholder and corporate
contract explicit (Chua and parties from whom they derive social performance practice due
Rahman, 2011). power. Observer groups to the relationship between a
(audiences or relevant sections firm’s explicit costs, such as
The social contract implies that of the public) evaluate the payments to bondholders and
society allows businesses to organizations based on their its implicit costs to other
operate on the assumption that perceptions and/or

74 OCTOBER - DECEMBER 2017 | The Bangladesh Accountant


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using accounting systems to


provide insight in environmental
impacts and associated financial
effects. (Steele and Powell,
2002)

Development of Corporate
Social and Environmental
Reporting

One of the ideas emerging from


the social activism of the 1960’s
and 1970’s was the concept of
the corporate social audit. If
companies were to be held
responsible for their societal
and environmental impact, then
a social audit, similar to the
stakeholders, such as product that it is suitable for the living
annual financial audit, was seen
quality costs and environmental beings, whereas pollutions
to be an ideal mechanism to
costs. A firm that lowers its vitiate the environment.
assess corporate responsibility
implicit costs by socially Environmental studies are now
in this area (Johnson, 2001).
responsible actions will produce considered a separate discipline
higher explicit costs, resulting in for studying and analyzing the
The phrase ‘social audit’ was
competitive disadvantage. issues related to the ecology.
first coined in the 1950’s. Much
early work took the form of
Environmental Environmental accounting is the
external investigations to assess
Accounting (EA) process of communicating the
the impact of large corporations
social and environmental effects
on their workforce, consumers
The term environment refers to of organizations’ economic
and the community. This
all living and non living things actions to particular interest
investigative strand of social
occurring and forming the groups within society and to
auditing has continued
totality of surrounding society at large. As such it
examining the impact of plant
conditions. It includes the air, involves extending the
closures and of investment or
water, plants, animals and many accountability of organizations
relocation decisions and,
numerous things that are a part (particularly companies),
increasingly, uncovering the
of our surroundings. The beyond the traditional role of
ethical behaviour and
environment affects the providing a financial account to
environmental impact of
individual and thus the nature of the owners of capital, in
business corporations.
the survival of an individual is particular, shareholders. Such
Increasing numbers of
determined by the environment. an extension is predicated upon
corporations now accept the
In simple words, if we say that the assumption that firms do
notion of ‘corporate
we have less water pollution have wider responsibilities than
responsibility’ and have
then it means that it is safer for simply to make money for their
developed substantial
mankind to sustain in such an shareholders. Gray et al. (1987)
community support programs.
environment. Environment More recently companies have
plays a pivotal role in Environmental accounting is the
been required to report on their
developing lives of people. A identification, allocation and
environmental impact and few
good environment indicates analysis of material streams and
developments can now proceed
their related money flow by

OCTOBER - DECEMBER 2017 | The Bangladesh Accountant 75


Corporate Social and Environmental Reporting (CSER)
The Development of Theoretical Framework

without an environmental However this standard, as far as Jones Sustainability Index


impact audit. New standards for environmental impact is (DJSI), Kinder, the Lydenberg
environmental reporting have concerned, only addresses the and Domini Indexes (KLD), the
been introduced, for example need for the accounting and ICC Business Charter for
BS7750 and ISO 14001. disclosure of restoration costs. Sustainable Development by
However, AASB1022 is but one Paris-based International
According to Deegan (2001) the standard issued by the Chamber of Commerce (ICC),
practice of social reporting was accounting profession and even the ISO 14000 Series and the
widely promoted in the 1970’s this standard is predominantly Global Reporting Initiative
but lost prominence in the concerned with financial Sustainability Reporting
1980’s. The collapse of the social disclosures. Disappointingly, the Guidelines (GRI). Many
audit was probably triggered by broader notion of social researchers combine several
several factors. A major factor reporting has not been adopted guidelines to examine the level
was a lack of enthusiasm for by the accounting standard of CSED in China; for instance,
voluntary auditing by the setters, although there are Chu (2007) combined the DJSI,
business community itself. Much several examples of such KLD and GRI, including 5
of the drive for the audits was reporting. sub-categories, such as
coming from social activists, responsibility to the nation,
academics, and others, with the Further evidence of the responsibility to shareholders,
business community being development of social reporting responsibility to employees,
dragged reluctantly into the practice is provided by responsibility to the
discussion (Johnson, 2001): developments in the notion of environment and other
“The idea was new and quite Triple Bottom Line reporting. responsibility. The GRI was used
radical. Viable models and Triple Bottom line reporting has by Niu (2009) and Peng (2009),
measurements were lacking. been defined by Elkington in combinations with other
And managers feared that (1997) as reporting which guidelines.
exposing their firms to a social provides information about the
audit could open the doors to economic, environmental, and The GRI is appropriate for this
public criticism and possible social performance of an entity. study because of a number of
government interaction”. It represents a departure from reasons. Firstly, the most
previous ‘bottom line’ common guidelines across the
In the early 1990s attention was perspectives which have world were based on the GRI.
devoted to environmental traditionally focused solely on They retain high standards for
reporting from an an entity’s financial or economic environmental and social
eco-efficiency perspective. performance. regulations. Moreover, the GRI
Social reporting did not appear Sustainability Reporting
to re-emerge until the mid to Global Reporting Initiative Guidelines are the most
late 1990s. There is little doubt commonly used framework
that environmental reporting The review of the relevant internationally. The KPMG
has become more widespread regulations and guidelines Survey into Corporate Social
although the accounting suggests that corporate social Responsibility (KPMG, 2008)
profession has not been in the and environmental reporting examined 250 top companies
forefront of developments. The still remain voluntary, and there listed on the Global Fortune 500
accounting profession has are no fixed or consistent and the 100 largest firms by
issued an accounting standard standards for companies to revenue in 22 countries. The
relating in a minor way to follow in order to prepare their results showed that there were
environmental matters, this disclosures. Various popular more than 75% of companies
being AASB1022 Accounting for frameworks have been adopted from the Global Fortune 500
the Extractive Industries. by researchers, such as the Dow and 70% of the 100 largest

76 OCTOBER - DECEMBER 2017 | The Bangladesh Accountant


ARTICLE

revenue firms that applied the information such that the the relation between taking society
GRI respectively. In addition, the advocates of CSER responsibility and market
GRI is highly praised in all over recommended that it be made performance of listed company –
take the Shanghai industrial
the world because of its compulsory (Moravcikova, k. et
enterprise as the example” (Master’s
comprehensiveness. Hopkins al, 2015 and Noronha et al., dissertation), Xinjiang University of
(2003) contends that the GRI 2012). So, corporate social and Finance, China.
includes some aspects of the environmental Reporting
popular social and (CSER) should ideally discharge Chua, F. and Rahman, A. (2011).
environmental guidelines, such the accountability of an “Institutional pressures and ethical
reckoning by business
as the ISO 14000 and the Global organization’s stakeholders. corporations”, Journal of Business
Sullivan Principles. Chu (2007) After all, legally specified Ethics, 98: 307-329.
claims that the creation of GRI disclosure requirements and
guidelines provides companies enforcement mechanisms will Clarkson, M. B. E. (1985). “A
with prestigious standards in enhance the quality of such stakeholder framework for
analyzing and evaluating corporate
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78 OCTOBER - DECEMBER 2017 | The Bangladesh Accountant


ARTICLE

Literacy Rate and Primary Education


A Study on 64 Districts of Bangladesh

Sujan Chandra Paul ACA1 | Dr. Anup Kumar Saha2

A
bstract NGO schools and Ebtedayee
The Authors are: madrasah are 37941, 23007,
This study investigates 2613, 16580, 29342, 7206
the relationship between respectively. Among the 116,689
number of primary and primary and equivalent
equivalent educational institutions, Barisal Division has
institutions and literacy rates. It 8,346 institutions in its 6
also investigates the districts, Chittagong division
relationship between students has 22,768 institutions in its 11
per teacher of primary and districts, Dhaka division has
equivalent institutions and 31,809 institutions in its 17
Literacy rate in Bangladesh. districts, Khulna division has
Furthermore it aims to 12,146 institutions in its 10
determine which primary districts, Rajshahi division has
institutions have a significant 14,927 institutions in its 8
influence on increasing literacy districts, Rangpur divison has
1
Chartered Accountant and 17,184 institution in its 8 districts
rate. District wise literacy rate,
an Associate Member of the and Sylhet division has 9,509
number of primary and
Institute of Chartered Accountants
equivalent educational institutions in its 4 districts.
of Bangladesh-ICAB
institutions and students per
teacher of primary and Literacy as the ability to
equivalent educational understand and use those
institutions’ data were collected written language forms required
from the Bangladesh Bureau of by society and/or valued by the
Statistics. This research found individual. Young readers can
that number of government construct meaning from a
primary school, number of variety of texts. They read to
kindergarten school, have a learn, to participate in
positive relationship with the communities of readers in
literacy rate and students per school and in everyday life, and
teacher of registered primary for enjoyment.( Mullis, Martin,
school and Ebtedayee Kennedy & Foy, 2007).
madrasah have negative Organisation for Economic
relationship with literacy rate. Co-Operation and Development
2
Assistant Professor (OECD) define literacy as
Department of Accounting Key Words understanding, using, and
and Information Systems reflecting on written texts, in
University of Dhaka order to achieve one’s goals, to
Literacy rate, primary schools,
students per teacher, develop one’s knowledge and
Bangladesh. potential, and to participate in
society.
Introduction A key recommendation of the
National Education Policy 2010
As per ‘District Statistics 2011’ of
is providing pre-primary
Bangladesh Bureau of Statistics,
education (PPE) for all children
the total number of government
and extending compulsory
primary schools, registered
education to grade 8 within the
primary schools, private primary
next decade. It also foresees
schools, Kindergarten schools,

OCTOBER - DECEMBER 2017 | The Bangladesh Accountant 79


Literacy Rate and Primary Education
A Study on 64 Districts of Bangladesh

common core curricula and minimum standards teacher of primary and equivalent
of provision for different types of primary and educational institutions and Literacy rate
secondary level institutions. It proposes that in Bangladesh considering previous
teachers’ recruitment, training, professional research in this area. This research had
development and remuneration should be key the objectives to:
elements of the strategy to improve quality of
education. A consolidated education law is 1. Examine the relationship between
proposed as the legal framework for education number of primary and equivalent
management in line with purposes of the policy educational institutions and Literacy
(GOB 2010). rate in Bangladesh.

Major source of literacy statistics at the national 2. Examine the relationship between
level is the decennial censuses conducted by the students per teacher of primary and
Bangladesh Bureau of Statistics. The definition of equivalent educational institutions
literacy has changed during last sixty years; and Literacy rate in Bangladesh
however, the mode of collecting information
remained the same. An individual able to read and Literature Review
write a simple letter in any language has been
Aistear (NCCA, 2009. p. 56) defines
literacy as being more than having the
A key recommendation of the ability to read and write. It is about
National Education Policy 2010 is helping children to communicate with

providing pre-primary education others and to make sense of the world. It


includes oral and written language and
(PPE) for all children and extending other sign systems such as mathematics,
compulsory education to grade art, sound, pictures, Braille, sign language
and music. Literacy also acknowledges
8 within the next decade. It also the nature of information communication
foresees common core curricula and technology, and many other forms of
representation relevant to children
minimum standards of provision for including screen based (electronic
different types of primary and games,
television).
computers, the internet,

secondary level institutions.


Essien (2005) stated that literacy is
concerned with the ability to read and
considered as literate since 1981. Reported literacy
write in a language. Asiedu and Oyedeji,
is recorded through population censuses by
(1985) stated that functional literacy is an
asking an adult member of a household to report
intellectual equipment for an individual to
about the literacy skills of all members of his/her
enable him or her not only literate, but
household. The Education Watch 2001 also
also perform other tasks that are of
generated literacy statistics at the national level
benefit to him/or her and to the society in
through sample survey using same definition and
which he or she lives.
technique (Chowdhury etal 2002).
Street (1995) argues that the socio
Research Objectives economic level of a family has more to do
with a child’s literacy level and that
The study focused on an examination of the literacy levels have to do with income.
relationship between number and students per The higher the family income the more

80 OCTOBER - DECEMBER 2017 | The Bangladesh Accountant


ARTICLE

likely it is that the children skills. Young people from poor grains (ultra poor) and
would have a high literacy level, households are at a greater “sometimes in deficit” during
in other words, though illiteracy disadvantage in acquiring the year (poor). Fifty five
does not cause poverty, poverty foundation skills. Performance percent of children who drop
does cause illiteracy. in certain regions of the country, out come from “food deficit”
ecologically disadvantaged and households despite the fact that
According to the United geographically remote, lags only 45 percent of the
Nations Development behind the national average population fall in this category.
Programme UNDP (1999), a (Ahmed et.al. 2013). Lack of food security, a proxy
minimum of 4 to 6 years of for general poverty, clearly
education is required for Asadullah and Chaudhury affected enrolment and
increasing agricultural (2012) have suggested that continuation in school adversely
productivity. According to after completing primary (Hossain and Zeitlyn 2011).
UNESCO (2005), illiteracy is education a significant
most prevalent in developing proportion of students do not Research Methodology
countries.EFA Global achieve basic literacy and
Monitoring Report 2012 numeracy competencies. Data Collection
recognized the importance of According to Education Watch
foundation skills to enable Report 2008, students who Secondary data are utilized in
youth to prepare for the world completed primary education this study. Data were both
of work, develop their work cycle (grade five) achieved only quantitative and qualitative.
skills, and earn a decent living” 18.7 of the competencies out of This study gathers quantitative
Both primary and secondary 27 tested (Nath & Chowdhury, data in form of literacy rate,
schooling is the vehicle for 2009). number and students per
acquiring foundation skills. teacher of government primary
Deficiencies in the quality of Nearly two-thirds of children schools, registered primary
primary education, discussed never enrolled in primary school schools, private
earlier, are barriers to the come from households “always (non-registered) primary
development of the foundation in deficit” in respect of staple schools, kindergarten schools,
NGO schools, Ebtedayee
madrasah. On the other hand,
the qualitative data consists of
journal, and working paper.

Quantitative data were


collected from Bangladesh
Bureau of Statistics. The
quantitative data, primarily
were used to develop a
regression model and to
support the sequence analysis.
The qualitative data, such as
journal and working paper were
utilized to generate literature
review, model construction and
to enhance analysis.

OCTOBER - DECEMBER 2017 | The Bangladesh Accountant 81


Literacy Rate and Primary Education
A Study on 64 Districts of Bangladesh

Data Processing

After collecting the secondary


data, the subsequent step is
determining and defining
variables. To estimate
regression analysis, there are
two major variables utilized in
constructing the model, (1)
literacy rate and (2) number of
institution and students per
teachers of such institutions.
The literacy rate variable
constitutes to district wise
literacy rate of Bangladesh
during 2011. Number of
institution and students per
teachers of such institutions
also stated district wise during
the year 2011.

This paper carried out


regression analysis by utilizing
ordinary least square method in
order to see the relationship a. Number of primary and Ha: there is a positive
between number and students equivalent institutions has a relationship between
per teacher of primary and positive relationship with number of primary and
equivalent educational literacy rate. equivalent institutions and
institutions and Literacy rate in literacy rate.
Bangladesh. Mason (1996) b. Students per teacher of
stated that regression analysis is primary and equivalent (Ha:βn< 0)
a technique in developing linear institutions has a negative
equation to make a prediction. relationship with literacy b. Ho: there is no negative
The data were processed with rate. relationship between
Microsoft Excel. A descriptive students per teacher of
study has also been performed In regard with estimated primary and equivalent
by applying different descriptive regression analysis, we can institutions and literacy rate.
statistical tools i.e., mean, define the hypothesis as the
median, standard deviation, following: (Ho: βn ≥ 0)
maximum, minimum etc.
a. Ho: there is no positive H a: there is a negative
Hypothesis relationship between relationship between
number of primary and students per teacher of
Based on the analytical equivalent institutions and primary and equivalent
framework and previous literacy rate. institutions and literacy rate.
studies, this study defines the
hypothesis as the following: (Ho: βn ≥ 0) (Ha:βn< 0)

82 OCTOBER - DECEMBER 2017 | The Bangladesh Accountant


ARTICLE

(sptKGS), students per teacher


of NGO school (sptNGOS),
students per teacher of
Ebtedayee madrasah (sptEM).

After constructing the model,


the next step is defining the
equation. Since it is assumed
that increased number of
primary and related schools is
helpful for increasing literacy
rate, a positive sign is used for
the coefficients of number of
schools and more students per
teacher is not helpful for
increasing literacy rate, a
negative sign is used for these
coefficients.

The complete equation model


for regression analysis can be
Model Construction formula to expose a relationship
drawn as the following:
between one or some known
This research simplifies the variables and one or some
L = α +β1nGPS + β2nRPS + β
model by directly relating unknown variables. This
3nPPS + β4nKGS + β5nNGOS +
literacy rate and number and research develops the equation
β6nEM - β7sptGPS -β8sptRPS -β
students per teacher of primary as the following:
9sptPPS -β10sptKGS -β
and equivalent institutions
11sptNGOS -β12sptEM + μ
without considering the number L = f(nGPS, nRPS, nPPS, nKGS,
…………………………….……. (2)
and student per teacher of nNGOS, nEM, sptGPS, sptRPS,
other educational institutions, sptPPS, sptKGS, sptNGOS,
Hypothesis Testing and
such as high schools, colleges, sptEM) ………………………… (1)
Interpretation
madrasahs, universities etc.
Regardless of other related Where, number of government
After model verification, the last
variables and its indirect primary school (nGPS), number
steps are to test the hypothesis
relationship, it is believed that it of registered primary school
and to interpret the result of
is considerable to define literacy (nRPS), number of private
regression model. Gujarati
rate as a function of primary primary school (nPPS), number
(2004) stated that there are
education. of kindergarten school (nKGS),
two common hypothesis tests:
number of NGO school
To estimate the relationship (nNGOS), number of Ebtedayee
(1) t test is used to test the
between number and students madrasah (nEM), students per
significance of regression
per teacher of primary and teacher of government primary
coefficient. The test aims to
equivalent institution and school (sptGPS), students per
understand the effect of each
literacy rate, it is necessary to teacher of registered primary
independent variable to
put those variables into a model school (sptRPS), students per
dependent variable.
(regression equation). Algifari teacher of private primary
(2000) stated that a regression school (sptPPS), students per
This test can be written in the
equation is a mathematics teacher of kindergarten school
following equation:

OCTOBER - DECEMBER 2017 | The Bangladesh Accountant 83


Literacy Rate and Primary Education
A Study on 64 Districts of Bangladesh

H0: β1 = β2,3,n = 0

Ha: β1 ≠0; β2,3,n are constant.

However since this study


employed one-sided tail
hypothesis, especially negative
direct hypothesis, the
construction of hypothesis test
can be defined as the following:

Ho: β1 ≥0

Ha: β1< 0, β2,3,n are constant.

(2) F test is used to test the


significance of methodology.
The goal of the test is to
understand the influence of all
independent variables to the
dependent variable.

Ho: β1 = β2,3,n = 0
Findings and Results students per teacher of
Ebtedayee madrasah are 44.74,
Descriptive Analysis 592.83, 359.48, 40.83, 259.06,
Ha: β1 ≠β2,3,n≠0
458.47, 112.59, 54.81, 53.91,
Table 1 shows a summary of 43.59, 22.25, 30.16, 33.54
The similar formula with t test is
literacy rate, no. of primary and respectively.
used to define hypothesis in
equivalent educational
term of negative one-sided tail
institutions and student per The standard deviation of
hypothesis. The construction of
teacher of those institutions of literacy rate, no. of govt.
hypothesis test can be defined
64 Districts in Bangladesh. The primary school, no. of registered
as the following:
average of literacy rate, no. of primary school, no. of private
govt. primary school, no. of (non-registered) primary
Ho: β1,2,n ≥0
registered primary school, no. of school, no. of kindergarten
private (non-registered) school (pre schooling), no. of
Ha: β1,2,n< 0
primary school, no. of NGO school, no. of Ebtedayee
kindergarten school (pre madrasah, students per teacher
Before interpreting the
schooling), no. of NGO school, of govt. primary school,
regression analysis, we should
no. of Ebtedayee madrasah, students per teacher of
consider the level of
students per teacher of govt. registered primary school,
significance in interpreting the
primary school, students per students per teacher of private
developed hypothesis. This
teacher of registered primary (non-registered) primary
paper utilizes significant level
school, students per teacher of school, students per teacher of
5%. If the p value of variables
private (non-registered) kindergarten school (pre
indicates less than 0.05, it
primary school, students per schooling), students per teacher
means we reject Ho and accept
teacher of kindergarten school of NGO school, students per
Ha.
(pre schooling), students per teacher of Ebtedayee madrasah
teacher of NGO school, are 8.16, 265.65, 185.51, 34.48,
372.58, 376.78, 90.14, 14.99,

84 OCTOBER - DECEMBER 2017 | The Bangladesh Accountant


ARTICLE

14.42, 14.19, 6.07, 11.24, District (12). The minimum District, registered primary
11.71respectively. students per teacher of govt. school is 866 in Dinajpur
primary school, registered District, private
The minimum of literacy rate are primary school, private (non-registered) primary school
in Cox’s Bazar district of (non-registered) primary is 208 in Chittagong District,
Bangladesh which is 30.2%. The school, kindergarten school (pre kindergarten school (pre
minimum no. of govt. primary schooling), NGO school, schooling) is 2684 in Dhaka
school among 64 districts in Ebtedayee madrasah are 33 District, NGO school is 1864 in
Bangladesh is 162 (Meherpur (Rangamati District),23 Mymensingh District,
District). In Munshiganj District, (Rangamati District), 20 Ebtedayee madrasah is 43 in
there are lower no. of registered (Rangamati District), 15 (In 6
Comilla District. The maximum
primary schools and the no. is Districts named Barguna
students per teacher of govt.
69. The minimum no. of private District, Jhalokati District,
primary school is 122 (Sylhet
(non-registered) primary Chandpur District, Lakshmipur
schools are in Feni District (4), District), registered primary
District, Rangamati District,
In Bandarban District, there are Sherpur District) 10 (Bandarban school is 102 (Cox’s Bazar
only 9 kindergarten schools (pre District), 13 (Barguna District) District), private
schooling) which is the lowest respectively. (non-registered) primary
among 64 districts in schoolis 86 (Noakhali District),
Bangladesh. In Jhalokati District, The maximum of literacy rate kindergarten school (pre
there are only 12 NGO schools are in Jhalokati District of schooling) is 45 (Bogra District),
which is the minimum. The Bangladesh which is 65.3%. The NGO school is 79 (Jhalakathi
minimum no. of Ebtedayee maximum no. of govt. primary District), Ebtedayee madrasah
madrasahs are in Bandarban school is 1665 in Chittagong is 84 (Narsingdi District).

Table 1: Summary of literacy rate, no. of primary and equivalent educational institutions and
student per teacher of those institutions (64 Districts of Bangladesh)
Observation

Maximum
Deviation

Minimum
Standard
Variable
Name

Mean

Literacy rate 64 44.74 8.16 30.2 65.3


Government primary school No. of Institutions 64 592.83 281.65 162 1665
Registered primary school No. of Institutions 64 359.48 185.51 69 866
Private (non -registered) primary school No. of Institutions 64 40.83 34.48 4 208
Kindergarten school (pre schooling) No. of Institutions 64 259.06 372.58 9 2684
NGO school No. of Institutions 64 458.47 376.78 12 1864
Ebtedayee madrasah No. of Institut ions 64 112.59 90.14 12 431
Government primary school Student per Teacher 64 54.81 14.99 33 121
Registered primary school Student per Teacher 64 53.91 14.42 23 102
Private (non -registered) primary school Student per Teacher 64 43.59 14.19 20 86
Kinderg arten school (pre schooling) Student per Teacher 64 22.25 6.07 15 45
NGO school Student per Teacher 64 30.16 11.24 10 79
Ebtedayee madrasah Student per Teacher 64 33.54 11.71 13 84

OCTOBER - DECEMBER 2017 | The Bangladesh Accountant 85


Literacy Rate and Primary Education
A Study on 64 Districts of Bangladesh

Relationship between number square are 0.618506982 and Table: 2.1 - Regression Statistics
of primary and equivalent 0.528743919 respectively. After
educational institutions and the ensuring free of multicolinearity Regression Statistics
students per teacher of those problem, the high value of R Multiple R 0.786452149
institutions with Literacy rate: square indicates that 62% the R Square 0.618506982
variance of estimator (number
Adjusted R Square 0.528743919
Table 2.1 exposes the regression and students per teacher of
estimation of literacy rate and Standard Error 5.604968853
government primary school,
the dependent variables Observations 64
registered primary school,
(number of primary and private primary school,
equivalent educational kindergarten school, NGO As the p value of F (Table: 2.2) is
institutions and the students per school and ebtedayee significant (0.0000), we can
teacher of those institutions). madrasah) succeeds to explain write down the regression
The model is moderate because the variance of literacy rate. estimation in the following way,
the R square and adjusted R using the coefficient in
Table-2.3:

Table: 2.2 - ANOVA

ANOVA
Df SS MS F Significance F
Regression 12 2597.61388 216.4678 6.89044 0.000000338
Residual 51 1602.19947 31.41568
Total 63 4199.813

Table: 2.3 - Coefficients

Coefficients Standard Error t Stat P-value


Intercept 62.18759 4.664966 13.33077 0.00000
nGPS 0.013655 0.005071 2.692798 0.009563
nRPS -0.01023 0.006332 -1.61598 0.112269
nPPS -0.05357 0.026842 -1.99573 0.051317
nKGS 0.008359 0.002874 2.908557 0.005366
nNGOS -0.00685 0.002434 -2.81366 0.00694
nEM 0.000116 0.01269 0.00912 0.992759
sptGPS -0.10716 0.080899 -1.32464 0.191197
sptRPS -0.20187 0.085983 -2.34785 0.022799
sptPPS 0.043556 0.066857 0.651474 0.517665
sptKGS -0.05548 0.13296 -0.41729 0.678217
sptNGOS 0.14534 0.0781 1.86095 0.06852
sptEM -0.20898 0.068769 -3.0389 0.00374

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Table 3: One-sided (left side) tail Hypothesis Test of Number of there is no positive relationship
Primary and Equivalent Institutions and Student per teacher of between number of these
such Institutions institutions with literacy rate.
Variables Sign of regression P-value Description
coefficient This table also shows only the
students per teacher of
nGPS Positive 0.009563 Ho rejected
registered primary schools and
nRPS Negative 0.112269 Ho failed to be rejected students per teacher of
nPPS Negative 0.051317 Ho failed to be rejected Ebtedayee madrasah have
nKGS Positive 0.005366 Ho rejected significant p values to reject Ho.
It means that the students per
nNGOS Negative 0.00694 Ho rejected teacher of registered primary
nEM Positive 0.992759 Ho failed to be rejected schools and students per
sptGPS Negative 0.191197 Ho failed to be rejected teacher of Ebtedayee madrasah
have negative relationship with
sptRPS Negative 0.022799 Ho rejected
literacy rate. On the other hand,
sptPPS Positive 0.517665 Ho failed to be rejected the p value of other variables
sptKGS Negative 0.678217 Ho failed to be rejected (number of government
sptNGOS Positive 0.06852 Ho failed to be rejected primary schools, private primary
schools, kindergarten schools
sptEM Negative 0.00374 Ho rejected
and students per teacher of
NGO schools) failed to reject
Literacy rate = 62.187589 + kindergarten schools have Ho. Thus, it means that there is
0.013655 nGPS – 0.01023 nRPS positive relationship with no negative relationship
– 0.05357 nPPS + 0.008359 literacy rate. On the other hand, between numbers of these
nKGS – 0.00685 nNGOS + the p value of other variables institutions with literacy rate.
0.000116 nEM – 0.10716 sptGPS (number of registered primary
– 0.20187 sptRPS + 0.043556 schools, number of private Interpretation
sptPPS – 0.05548 sptKGS + primary schools, number of
0.14534 sptNGOS – 0.20898 NGO schools and number of Since the p value of F test was
sptEM…………………………………….(3) Ebtedayee madrasah) failed to significant (0.0000) we recall
reject Ho. Thus, it means that the equation 3 in Findings and
Hypothesis testing:

Recalling the hypothesis, this


study formulizes the hypothesis Literacy rate = 62.187589 + 0.013655 nGPS – 0.01023 nRPS
as the following: (0.0) (0.009) (0.112)

Ho: β1,2,3,n≥0 – 0.05357 nPPS + 0.008359 nKGS – 0.00685 nNGOS


(0.051) (.005) (.006)
Ha: β1,2,3,n< 0
+ 0.000116 nEM – 0.10716 sptGPS – 0.20187 sptRPS
(0.992) (0.191) (.022)
Table 3 shows only the number
of government primary schools
+ 0.043556 sptPPS – 0.05548 sptKGS + 0.14534 sptNGOS
and number of kindergarten
(0.517) (0.678) (0.068)
schools have significant p
values to reject Ho. It means
– 0.20898 sptEM
that the number of government
(0.003)
primary schools and number of

OCTOBER - DECEMBER 2017 | The Bangladesh Accountant 87


Literacy Rate and Primary Education
A Study on 64 Districts of Bangladesh

lower literacy rate of 0.0535%.

However this study showed that


the p value was not significant.

The coefficient of number of


private (non-registered)
primary school was – 0.05357. It
means that if number of private
(non-registered) primary school
changes 1%, literacy rate
changes by – 0.0535% and in
this case study showed that the
p value was 5.13% which was not
significant.

The coefficient of number of


kindergarten school was +
0.008359. It means that every
1% additional number of
kindergarten school be in line
with literacy rate by 0.00835%
and this study showed that the
p value was less than 5% which
was significant.

The coefficient of number of


NGO school was – 0.00685. It
means that every 1% additional
number of NGO school be
accompanied by a lower
literacy rate by 0.0068%. This
study showed that the p value
was less than 5% which was
Results Section and combine government primary school was significant.
with the p value of each variable + 0.013655. It means that every
to obtain the equation as the 1% increase in number of The coefficient of number of
following: government primary school be Ebtedayee madrasah was +
accompanied by a higher 0.000116. It means that every 1%
The interpretations of the literacy rate of 0.01365%. This increase in number of
equation (assuming other study showed that the p value Ebtedayee madrasah be in line
variables constant) are: was less than 5% which was with a higher literacy rate of
significant. 0.0001%. But this study showed
The intercept was 62.187589. It that the p value was highly
means if other variables have The coefficient of number of insignificant.
zero value, the literacy rate is registered primary school was –
-62.18%. 0.05357. It means that every 1% The coefficient of student per
increase in number of registered teacher of government primary
The coefficient of number of primary school be in line with a school was – 0.10716. It means

88 OCTOBER - DECEMBER 2017 | The Bangladesh Accountant


ARTICLE

teacher of Ebtedayee madrasah


be in line with a lower literacy
rate of 0.2089% and this study
showed that the p value was
less than 5% which was
significant.

Conclusion

Finally it can be stated that the


number of government primary
school and the number of
kindergarten schools have
positive relationship with the
literacy rate. However, by this
study the number of
government primary schools
and the number of kindergarten
schools was statistically
significant. In case of number of
Ebtedayee madrasah, there is
that every 1% increase in p value was more than 5% which positive coefficient, but this is
student per teacher of was not significant. not statistically significant. On
government primary school be the other hand, number of
accompanied by a lower The coefficient of student per registered primary school,
literacy rate of 0.1071%. This teacher of kindergarten school number of private
study showed that the p value was ¬- 0.05548. It means that (non-registered) primary
was more than 5% which was every 1% additional student per school, number of NGO schools
not significant. teacher of kindergarten school had negative relationship with
be in line with literacy rate by the literacy rate where NGO
The coefficient of student per -0.0554% and this study schools data were statistically
teacher of registered primary showed that the p value was significant and others two were
school was – 0.20187. It means more than 5% which was not not statistically significant.
that every 1% increase in significant.
student per teacher of Students per teacher of
registered primary school be in The coefficient of student per government primary school,
line with a lower literacy rate of teacher of NGO school was + registered primary school,
0.2018%. and this study showed 0.14534. It means that every 1% kindergarten school, Ebtedayee
that the p value was significant. additional student per teacher madrasah had negative
of NGO school be accompanied relationship with the literacy
The coefficient of student per by a higher literacy rate by rate. However, by this study
teacher of private 0.1453%. This study showed that students per teacher of
(non-registered) primary school the p value was more than 5% registered primary schools and
was + 0.043556. It means that if which was not significant. Ebtedayee madrasah were
student per teacher of private statistically significant and the
(non-registered) primary school The coefficient of student per others two were not significant.
changes 1%, literacy rate teacher of Ebtedayee madrasah On the other hand, student per
changes by 0.04355% and in was -0.20898. It means that teacher of private
this case study showed that the every 1% increase in student per (non-registered) primary school

OCTOBER - DECEMBER 2017 | The Bangladesh Accountant 89


Literacy Rate and Primary Education
A Study on 64 Districts of Bangladesh

and NGO school had positive Policy 2010. Dhaka. Ministry of 17. United Nations Development
relationship with the literacy Education. Programme UNDP (1999).
rate whereas data of these two Pacific human development
9. Gujarati, Damodar N. (2004). report: Creating opportunities.
schools were not statistically Basic Econometrics, Fourth
significant. Edition. The McGraw-Hill 18. United Nations Educational,
Companios. Scientific and Culture
References Organization (2005). Indicators
10. Hossain, A. and Zeitlyn, B. on illiteracy. Retrieved May
1. Algifari (2000). AnalisisRegresi. (2011). “Poverty and Equity: 2006 from
Teori, Kasus, dan Solusi. BPFE Access to Education in http://www.uis.unesco.org.
Yogyakarta.Second Edition.p. 2. Bangladesh,” in Ahmed. M.
(ed.). Education in Bangladesh:
2. Ahmed, M., Hossain, A., Kalam Overcoming Hurdles to Equity
A., & Ahmed. S. (2013). with Quality. Dhaka: BRAC
Education Watch 2011-12: Skills University Press and University
Development in Bangladesh: Press Limited. Ch.2.
Enhancing the Youth Skills
Profile. CAMPE: Dhaka. 11. Mason, Robert D. and Douglas
A. Lind.Quoted by
3. Asiedu K, Oyedeji L (1985). An Algifari.(1996). Study Guide for
adult literacy manual. Ibadan: Use with Statistical Techniques
University Press Limited, pp. in Business and Economics.
5-17.
12. Mullis, I. V. S., Martin, M. O.,
Bangladesh
4. Asadullah, M.N., and Kennedy, A. M., & Foy, P. Petroleum
Chaudhury, N. (2012). (2007). IEA’s progress in Exploration and
international reading literacy
"Subjective
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Bangladesh," Journal of countries. Chestnut Hill, MA: Company Limited
Economic Psychology, Elsevier, TIMSS & PIRLS International
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the drilling of new
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gas well in Bhola
Choudhury RK and Ahmed M
(2002). Renewed Hope (2009). Aistear: the Early on 9th Dec 2017.
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(2009).Education Watch 2008:
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University Press Limited. State of Primary Education in Shahbazpur in
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6. Essien O (2005). Literacy in the
mother tongue: A case study of
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90 OCTOBER - DECEMBER 2017 | The Bangladesh Accountant


ARTICLE

Economic Trends and Prospects


in Developing Bangladesh

Arif Hossain ACA

B
angladesh has made higher private investment and
remarkable progress over exports. The current account
recent years. With limited surplus expanded, and inflation
resources it has reduced its slowed.
poverty to half and grown its
economy by about six percent Continued high growth will
each year. This country is now require a rebound in
accredited as one of the 11 remittances and higher exports.
emerging economies. Productive jobs need to be
Bangladesh has made created in manufacturing and
substantial progress to become modern services for the large
middle income country by 2021, number of new entrants to the
although it has limitations and labour force and surplus farm
challenges. This country is in labor and to boost female
one of the poorest and the most workforce participation in
densely settled nations on earth. diverse sectors.
The Author is a It is subject to frequent natural
Chartered Accountant and disasters, floods and cyclones Economic Performance
an Associate Member of the which destroy productive
Institute of Chartered Accountants capacity and slow down Higher private investment,
of Bangladesh-ICAB growth. There is both exports, and wages
large-scale underemployment underpinned GDP growth
and low labour productivity. In acceleration to 7.1% in FY2016
the last few years the (ended 30 June 2016) from
government has been trying to 6.6% in the previous year
promote economic growth (Figure 3.15.1).
through the denationalization of
public enterprises and an easing Political calm, improved power
of controls. Over a longer supply, and higher growth in
period, the government has credit to the private sector were
initiated a number of the other major contributors to
anti-poverty programmes to growth. On the supply side,
reduce the unemployment growth was driven by
problem. This Briefing Paper expansion in industry at 11.1%, up
provides a background to these from 9.7% in FY2015, that mainly
policies and reviews the reflected a pickup in medium
Economic performance, and large-scale manufacturing
Economic prospects of aided by steady expansion in
Bangladesh since electricity generation, mining
independence. It also assesses and quarrying, and
the prospects for the economy construction. Supported by
and considers some policy industry expansion, services
changes currently advocated growth accelerated to 6.2%
for a more effective realization from 5.8% in FY2015. Growth in
of the economic potential of the agriculture slowed further,
country. Despite global however, to 2.8% from 3.3% as
headwinds that crimped input costs rose but farm prices
remittances, GDP recorded remained depressed. On the
robust growth in FY2016 on demand side, private

OCTOBER - DECEMBER 2017 | The Bangladesh Accountant 91


Economic Trends and Prospects
in Developing Bangladesh

investment was the main source of growth as 5.9% in FY2016 from 6.4% in the previous
public investment was constrained by low year, largely in response to lower global
implementation capacity in line agencies. Total commodity prices, steady domestic
investment equaled 29.7% of GDP, up from 28.9%. supply, and a stable exchange rate
At $2.0 billion, foreign direct investment was still between the Bangladesh taka and the US
less than 1% of GDP. A decline in remittance dollar that translated into taka
inflows curtailed consumer spending but was appreciation against the currencies of
partly offset by higher wages in both the public most of Bangladesh’s trade partners.
and the private sector. Net exports contributed to Year-on-year inflation declined to 5.5% in
growth with higher volumes of exports and lower June 2016 from 6.3% a year earlier
imports, mainly reduced quantities of food grain (Figure 3.15.2).
and fertilizer. Average annual inflation eased to
Food inflation slowed sharply to 4.2%
from 6.3%, and nonfood inflation rose to
7.5% from 6.2%, stoked by increased
Private investment and consumer prices for natural gas and electricity and
higher wages. Driven by accelerating
lending pushed up private credit growth in private credit, expansion in the
growth to 16.8%, exceeding the 14.8% money supply rose to 16.3% in FY2016,

target as political stability prevailed. exceeding the target of 15.0% (Figure


3.15.3).
While foreign financing of the fiscal
deficit was lower than budgeted, Private investment and consumer lending
pushed up private credit growth to 16.8%,
growth in net bank credit to the exceeding the 14.8% target as political
government increased by only 3.6% stability prevailed. While foreign
financing of the fiscal deficit was lower
in FY2016 and subsequently abated than budgeted, growth in net bank credit
in the first months of FY2017. to the government increased by only
3.6% in FY2016 and subsequently abated
in the first months of FY2017. This trend
mirrors the increased mobilization of
3.15.1 Supply-side contributions to growth nonbank financing in the past 2 years.
Agriculture Expansion in net foreign assets has
Industry stayed strong, accelerating to 23.2% in
Services FY2016 from 18.2% a year earlier, mainly
Gross domestic product reflecting the larger surplus in the current
account. As inflation slowed, Bangladesh
Percentage points
Bank, the central bank, lowered its repo
8 7.1 and reverse repo rates by 50 basis points
6.5 6.1 6.6
6.0
6 in January 2016 (Figure 3.15.4).
4
Ample liquidity in the banking system,
2 especially as central bank foreign
exchange purchases were not fully
0
2012 2013 2014 2015 2016
sterilized, caused further interest rate
declines. The weighted average yield on
Note: Years are fiscal years ending on 30 June of that year. 91-day Treasury bills fell to 4.0% in June
Sources: Bangladesh Bureau of Statistics. http://www.bbs.gov.bd;
2016 from 5.4% a year earlier. Banks’
ADB estimates.

92 OCTOBER - DECEMBER 2017 | The Bangladesh Accountant


ARTICLE

3.15.2 Monthly inflation 3.15.3 Growth of monetary indications


Food Broad money
Nonfood Net credit to the government
Overall Credit to the private sector

% change, year on year %


10 _ _ 20 _ _
8_ _
6_ _ 10 _ _

4_ _
0_ _
2_ _
0_ _ - 10 _ _
Jul Jan Jul Jan Jul Jan Jan Jul Jan Jul Dec
2014 2015 2016 2017 2015 2016

Sources: Bangladesh Bank 2017. Monthly Economic Trends. Sources: Bangladesh Bank 2017. Monthly Economic Indicators:
February. http://www.bbs.gov.bd Monthly Update. February. http://www.bbs.gov.bd

weighted average lending rate Spending was lower than up from 4.1% in FY2015. Import
slipped to 10.3% from 11.7% in budgeted as the payments rose by 5.5% in
the same period. The deposit implementation of the annual FY2016, nearly double the 3.0%
rate also declined, to 5.4% from development program growth in FY2015, on higher
6.7%, narrowing banks’ interest continued to underperform and imports of petroleum products,
rate spread marginally by 0.1 because current spending on yarn and other intermediate
percentage points to 4.9. The subsidies was lower than goods for the garment industry,
ratio of nonperforming loans anticipated, as were interest capital machinery, and edible
(NPLs) to all bank loans rose to payments. As a share of GDP, oil. Even with growth in
10.1% at the end of June 2016 revenue rose to 9.9% from 9.6% overseas employment booming
from 9.7% a year earlier. High a year earlier, while spending at 48.2%, remittances from
NPLs remain a concern, declined to 13.0% from 13.5%, workers abroad fell by 2.5% to
especially with those at curtailing the budget deficit to $14.9 billion in FY2016. Lower
state-owned banks standing at 3.1% of GDP (Figure 3.15.5). global oil prices have forced
25.7%. Tax collection by the budget consolidation in the Gulf
National Board of Revenue Domestic financing, mostly economies that host most
grew by 14.6% in FY2016 but fell from nonbank sources, met 90% Bangladeshi migrant workers,
short of the ambitious budget of the deficit. Exports grew by undermining wages and job
target. Nontax revenues also 8.9% in FY2016, up from 3.1% a security. Weaker currencies,
missed the target, mainly year earlier, spurred by a shift to higher living costs, and new
because of lower contributions garments with higher value taxes further squeeze the
from Bangladesh added, and enabled by political earnings left for remittance. The
Telecommunication Regulatory stability. Garment exports, current account surplus
Commission profits and the accounting for over 80% of nonetheless rose to $3.7 billion
Bangladesh Bank dividend. exports, grew briskly at 10.2%, in FY2016, equal to 1.7% of GDP,

OCTOBER - DECEMBER 2017 | The Bangladesh Accountant 93


Economic Trends and Prospects
in Developing Bangladesh

from $2.9 billion in FY2015, has, combined with the higher Economic Prospects
aided by lower deficits in the domestic inflation, brought
trade, services, and primary trend appreciation in real Forecasts for FY2017 and
income accounts (Figure 3.15.6). effective exchange rate, up by FY2018 rest on several
5.8% in FY2016 (Figure 3.15.8). assumptions: Political calm will
The higher current account continue and thus support
surplus in FY2016 helped keep The Dhaka Stock Exchange consumer and investor
the taka broadly stable against broad price index stood at confidence. The central bank
the US dollar in nominal terms, 4,507.6 in June 2016, registering will be generally mindful about
depreciating by only 0.8% from a marginal decline of 1.6% from a keeping inflation in check while
a year earlier. Central bank year earlier (Figure 3.15.9). allowing ample private credit
exchange rate policy aims to growth to support economic
build reserves and avoid The market price–earnings ratio activity. Tax authorities will
excessive volatility in the declined to 14.6 from 15.9 in the focus attention on
nominal market rate, which same period, while market administrative reform to boost
protects garment firms whose capitalization fell by 1.9%, with collections and expand the tax
contract pricing is denominated only four new companies listed base, and foreign financing will
in foreign currencies. in FY2016. Prices then moved be available as expected for
Bangladesh has nevertheless higher in the first half of FY2017 planned public investment. The
suffered some loss in export and appear to be broadly in line government will further raise
competitiveness, especially for with the upward trends in other electricity and natural gas prices
minor exports, as US dollar markets, both emerging and to cut subsidies and keep
strength against the currencies industrial. current spending in check.
of Bangladesh’s trade partners Finally, the weather will be

3.15.4 Interest rates 3.15.5 Fiscal indicators


Repo Nontax revenue
Reverse repo Tax revenue
Call money Development spending
Deposit Capital Spending and net lending
Lending Current spending
Domestic fiancing
% Foreign financing

15 _ _ % of GDP
20 _ _
10 _ _
10 _ _
5_ _
0_ _
0_ _
Q1 Q3 Q1 Q3 -10 _ _
2015 2016 2012 2013 2014 2015 2016

Source: Bangladesh Bank. 2017. Major Economic Indicators: Note: Years are fiscal years ending on 30 June of that year.
Monthly Update. February. http://www.bb.org.bd Source: Asian Development Outlook database.

94 OCTOBER - DECEMBER 2017 | The Bangladesh Accountant


ARTICLE

normal. GDP growth is speed up their implementation remittances, industry growth


expected to moderate to 6.9% of infrastructure projects. will edge back up to 10.7% in
in FY2017 as domestic demand Bangladesh’s aspiration to FY2018. Services growth is
rises more slowly and the slide become middle income country expected to slow to 6.0% in
in workers’ remittances deepens will depend mostly on private FY2017, reflecting slower
(Figure 3.15.10). investment. A robust private growth in agriculture and
sector is the key to attracting industry, and remain unchanged
Slower export growth caused investment. Growth in FY2018 is in FY2018. Inflation is projected
by weaker consumer demand in expected to remain unchanged to pick up in FY2017 to average
the euro area and the United at 6.9% as the broad 6.1% (Figure 3.15.11).
Kingdom is expected in part momentum in the previous year
because the currencies of these continues. Agriculture is It moderated from October to
destination markets have expected to slow further to December 2016 as the arrival of
depreciated against the dollar. 2.4% growth in FY2017 and 2.3% winter vegetables and the aman
Increases in wages and in FY2018, mainly because of rice crop lowered food prices.
continued access to credit will limits on area expansion and Nonfood inflation also slowed in
help to sustain private productivity improvement. this period, reflecting favorable
consumption. Private Industry growth is expected to international prices. Inflation is
investment will rise only slightly decelerate to 10.6% in FY2017 in expected to rebound in the
as investors turn cautious ahead tandem with domestic demand. second half of FY2017, however,
of national elections in 2018. With reinvigorated domestic with likely higher global prices
Public investment is expected demand resulting from higher for oil and other commodities,
to strengthen through fiscal export income and a more upward adjustments to natural
expansion as the authorities moderate decline in gas and electricity prices as the

OCTOBER - DECEMBER 2017 | The Bangladesh Accountant 95


Economic Trends and Prospects
in Developing Bangladesh

government continues to align in stock exchange prices, it global trade flows and that the
prices with production costs, tightened monitoring to ensure garment industry continues to
and the further implementation that banks abided by statutory improve worker safety and
of salary hikes introduced in limits on market exposure to welfare. Import payments rose
FY2016 for government staff’ avoid a repetition of the 2010 by 8.2% in July–December 2016
and private educational market run-up and collapse. with higher imports of wheat,
institutions to adjust for inflation Exports grew by 4.4% in the petroleum products, capital
and improve living standards. first 7 months of FY2017, down goods, and iron, steel, and other
Inflation is expected to edge up from 8.3% in the year-earlier base metals, though imports of
further to 6.3% in FY2018 as period. Growth in readymade crude oil, fertilizer, and raw
global fuel prices continue to garment exports was 4.1%, cotton declined. Imports are
rise and a new value-added tax down from 9.1%. Export growth expected to grow by 9.0% in
comes into effect at the start of is expected to strengthen in the FY2017 and 10.0% in FY2018 on
the year. The monetary policy second half of FY2017 on higher broadly stable domestic
statement for the second half of projected growth in the demand and some pickup in
FY2017 (January–June 2017) global prices for commodities,
industrial economies, but
supports growth while especially oil. Remittance
exports for the full year are
mitigating inflation risks. The inflows dipped by 17.6% to $6.2
expected to slow to 6.0% from
central bank kept policy rates billion in the first half of FY2017
8.9% in FY2016 (Figure 3.15.12).
unchanged at 6.75% for the as economic tightening
repo rate and 4.75% for reverse continued in Gulf economies
Export growth in FY2018 is
repo because inflation and newly constrained inflows
expectations remain elevated, projected to edge up to 7.0% on
steady external demand and from the US and the United
including for global commodity Kingdom appeared to reflect
prices. It kept the July 2016 improvement in the Bangladesh
political uncertainties there
monetary policy statement market share. Export forecasts
(Figure 3.15.13).
growth targets to June 2017 at assume that policy uncertainty
15.5% for broad money and in the US, United Kingdom, and Despite the 23.5% rise in jobs
16.5% for private credit. euro area is resolved in ways abroad for Bangladeshi workers
Considering current buoyancy not inimical to expansion in in the first 6 months of FY2017,

96 OCTOBER - DECEMBER 2017 | The Bangladesh Accountant


ARTICLE

remittances are expected to several items. The collection of The authorities are expected to
sink further by 7.0% in FY2017 direct taxes could also fall short cut retail fuel prices in FY2017
and 4.0% in FY2018. Falling of its target in light of sluggish but leave enough cushions for
remittances and a larger trade trends in income tax receipts the Bangladesh Petroleum
deficit are expected to push the from commercial banks. Public Corporation to earn an
FY2017 current account into a spending was slated to grow by operating profit and recoup
deficit equal to 1.0% of GDP 28.7% to equal 17.4% of GDP in past losses. Since the beginning
(Figure 3.15.14). FY2017, up from 13.0% the year of low global oil prices in 2014,
before. Current spending is the government has cut prices
The deficit is projected to shrink expected to rise to 9.6% of GDP only once, in FY2016, as policy
to 0.7% in FY2018. Capital and from 7.8% in FY2016, and the focused on eliminating large
financial inflows will likely be annual development program subsidies. Debt indicators are
sufficient to preclude any loss of to 5.6% from 3.9% in FY2016. generally favorable. Public debt
exchange reserves. The taka will Achieving the planned large declined to the equivalent of
likely depreciate marginally in increases will demand 27.2% of GDP in FY2016 from
nominal terms in FY2017 on the concerted efforts. The fiscal 27.4% in FY2015 (Figure 3.15.15).
larger trade deficit and the deficit is expected to be
continued decline in contained within 5.0% of GDP as External debt declined to 11.7%
remittances. The FY2017 planned, three-fifths of it of GDP from 12.2%, with a debt
budget assumes 36.8% growth financed by domestic sources, service ratio of only 2.0% thanks
in revenue, attained by raising mostly nonbanks. Implementing to the government’s preference
the ratio of revenue to GDP to the new value-added tax in for concessional external
12.4% from 9.9% in the previous FY2018 will be crucial to borrowing. Domestic debt rose
year. Achieving this high target advancing tax reform and to 15.5% of GDP in FY2016 from
will be a challenge, considering financing higher infrastructure 15.2% in FY2015 as the
that collection in the first 4 spending to foster growth. As a government met shortfalls in
months grew by only 17.1%. net oil importer, Bangladesh revenue collection largely by
Revenue from customs duties continues to enjoy windfall selling national savings
will be lower with rate cuts on gains from low global oil prices. certificates to the public.

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Economic Trends and Prospects
in Developing Bangladesh

Interest payments were 13.8% of to be created for the 1.4 million measures to diversify the
budget expenditure. These workers who join the workforce manufacturing base and
projections depend on the each year. Female workforce identify new sources of growth
following: Revenues need to rise participation is still low despite and jobs. In addition to
quickly if the government’s sizeable employment in the readymade garments, which
sizeable infrastructure garment industry, minimizing supply 40% of manufacturing
development program is to be women’s contribution to value added and 60% of
implemented. The exchange economic development. manufacturing jobs, the
rate should be managed flexibly Barriers should be removed government is focusing its
too set lower remittance inflows from female participation in efforts on products with high
and encourage exports. organised economic activities in labor intensity and export
Institutional and regulatory diverse sectors. The focus potential such as footwear and
reform needs to be accelerated, should be on increasing returns leather products, jute and other
and infrastructure deficits on education by enhancing the agro-processed goods,
amended, to improve the quality and relevance of electrical and electronic goods,
investment climate. Political education. light engineering, information
stability must be maintained technology services,
and security strengthened to The government seeks to tackle medium-sized shipbuilding,
boost investor confidence. the employment challenge by ceramics, and pharmaceuticals.
promoting high growth led by It is extending the duty-free
Policy Challenge and manufacturing and by import facility for raw materials
Promoting Productive accelerating regional and intermediate inputs used in
development and the rural agro-processing and
jobs transformation. Under the shipbuilding, as well as
Seventh Five-Year Plan, revamping the duty-drawback
Bangladesh faces an FY2016–FY2020, the system to guarantee to
employment challenge. government is implementing exporting firms world prices for
Productive, well-paid jobs need

98 OCTOBER - DECEMBER 2017 | The Bangladesh Accountant


ARTICLE

imported inputs. The central investment, integrating into in agriculture, fisheries, and
bank is expanding its global value chains, and livestock. It emphasizes on the
refinancing window to support diversifying exports to create development of agriculture
labor-intensive small and jobs. To attract private capital, value chains through private
medium-sized enterprises. The these zones will provide investment by encouraging the
government is reviewing import one-stop services to set up commercialization of
tariffs to mitigate any bias factories to produce garments agriculture, promoting a shift to
against exports, aiming to and other goods and to simplify high-value crops, and
weaken effective protection for compliance with regulatory streamlining market access. The
domestic manufacturers and requirements, and they will be government is developing rural
thereby encourage them to able to source raw materials areas by upgrading rural roads
enhance their productivity and readily from domestic supply to reduce user costs, facilitating
competiveness. It has stepped chains. Several of these zones connectivity with railways and
up efforts to gain greater access are attracting domestic and
to untraditional export markets foreign investment interest and waterways to promote
such as the People’s Republic of are expected to become multimodal transport systems
China, India, Japan, the Republic operational in the next couple of and improve logistics, and
of Korea, and Turkey. A years. Under the Seventh developing growth centers. It is
government program of Five-Year Plan, the government allocating more resources to
investment in skills for set a high priority on job transport infrastructure and
employment aims to make the creation in rural areas through power supply improvement in
skills development system more skills training and strengthening the country’s lagging regions in
market oriented and so improve producer and marketer the northwest and south, with a
employability and productivity. cooperatives. The government view to promoting
The government has decided to is strengthening information manufacturing and small and
allow public and private entities and communication technology medium-sized enterprises
alike to set up special economic infrastructure in rural areas to through tax incentives,
zones toward catalyzing private disseminate modern techniques low-interest loans, and special

OCTOBER - DECEMBER 2017 | The Bangladesh Accountant 99


Economic Trends and Prospects
in Developing Bangladesh

and expand private sector


driven development effort.
Bangladesh should also focus
on service sector through
information and communication
technology. Experts expressed
that it will be crucial for
economic growth in
Bangladesh. As there are
resource constraints we should
proceed with proper planning
and efficient utilization of our
limited resources. Now we can
say that with some key
challenges Bangladeshi
economy is maintaining
macroeconomic stability and
moving forward. If we look at six
on going mega projects we can
proudly say that Bangladesh is
experiencing economic boom.

Reference
1. https://www.adb.org/
countries/bangladesh/
economic zones. A government property, getting credit, and economy
priority is to complete the paying taxes—rank Bangladesh
2. https://www.adb.org/
Dhaka–Chittagong Expressway, in the bottom 10% of the publications/asian-developmen
which will substantially shorten countries covered (Figure t-outlook-2017-update
travel time between the capital 3.15.16).
3. http://www.assignmentpoint.com/
and the main port city. The
business/economics/economy-
government merged the Board Conclusion development-in-bangladesh.ht
of Investment and the ml
Privatization Commission into As a priority initiative, the
Bangladesh Investment 4. http://www.worldbank.org/en/
the new Bangladesh Investment
Development Authority is news/feature/2016/04/30/ban
Development Authority. In gladesh-development-update-b
addition to encouraging coordinating agencies’ efforts angladesh-economy-requires-fo
domestic and foreign private to reduce the costs of doing cus-on-sustainable-and-inclusiv
investment, it assists in setting business in Bangladesh. To e-growth-moving-forward
up industries and provides other improve access to electricity,
5. https://en.wikipedia.org/wiki/
services to investors. To attract the government is investing
Economy_of_Bangladesh
investment, foster rapid heavily in power generation. It is
manufacturing-led growth, and obvious that without private 6. https://www.odi.org/sites/
sector investment jobs and odi.org.uk/files/odi-assets/publi
create jobs, Bangladesh needs
cations-opinion-files/6760.pdf
to reduce the cost of doing economic opportunities for
business. Most cost indicators thousands of people is not 7. http://www.un.org/en/
surveyed by the World possible. Government should development/desa/policy/wes
create favourable environment p/wesp_current/2016wesp_ch1
Bank—for enforcing contracts,
and remove obstacles to ensure _en.pdf
getting electricity, registering

100 OCTOBER - DECEMBER 2017 | The Bangladesh Accountant


ARTICLE

Journey Towards 2050


Prospect of Bangladesh Economy

H M Ashraf-uz-Zaman FCA

I
ntroduction Some interesting findings
include- total world economy is
Economy of a country expected to be more than
includes each individual and double in size by 2050, China
every organizational entity. will continue its leadership, India
Hence, a slight positive or and USA who are currently in
negative change in overall second and third position are
economy can compel each and projected to exchange their
everyone face its position and three fastest
consequences. Though the growing economy will be India,
change is not always of same Vietnam and Bangladesh.
direction for all the parties that
comprises the economy. So, Though mere projection of
maintaining balance and future cannot guarantee
development of such complexly anything but still systematic
inter related system is beyond projection is must to prepare a
The Author is a challenging. In Bangladesh, roadmap. And as there is
Chartered Accountant and where the macroeconomic something positive about our
a Fellow Member of the factors are extremely vulnerable country, it is always justified to
Institute of Chartered Accountants the situation is even more have hope that will give us
of Bangladesh-ICAB impulsive. courage to face the uncertain
future. The focus of this
But if we can go through the write-up will be the journey of
near past of our economy, the our economy since liberation
journey will surely persuade for and challenges or opportunities
a brighter and better future. that our economy currently has
Despite of apt infrastructure, on the basis of PWC’s report.
proper planning and sufficient
investment, achieved success in Major Findings of PWC
poverty reduction and Report
sustained economic growth is
extremely creditable. An Major findings of the research
outcome of this consistence are as follows-
performance is that the world is
also viewing our economy as an  The world economy is
inspiring one for other projected to be more than
developing economy. double in size by 2050,
assuming broadly growth
“The World in 2050?”- was the friendly policies and no
title of research report of PwC major global
(Price water house Coopers), a civilization-threatening
renowned research catastrophes.
organization based on UK. This
 Emerging markets could
report published in February,
grow around twice as fast
2017 and attained a lot of hype
as advanced economies on
around the world. The prime
average
reason of attention towards this
is its expected change in  China is expected to be the
dimension of world economy. largest economy in the

OCTOBER - DECEMBER 2017 | The Bangladesh Accountant 101


Journey Towards 2050
Prospect of Bangladesh Economy

world, accounting for around 20% of world  Vietnam, India and Bangladesh going
GDP in 2050, with India in second place and to be three of the world’s fastest
USA in third place (based on GDP at PPPs). growing economies over this period.
The fastest growing large EU
Projected changes of three leading economy economy will be Poland. Breakdown
of components of average real GDP
Year: 2016 Year: 2050 growth (2016-2050) of three fastest
% of World % of World growing economy
Country
Position Economy Position Economy
Share Share  Advanced economies will continue to
China 1 18 1 20 have higher average incomes, but
USA 2 16 3 12 emerging economies are also
expected to make good progress
India 3 7 2 15
towards closing this gap by 2050.
Sources: IMF for 2016 estimate, PwC projections This emerging economies are thus
for 2050 considered to have long-term
economic potential based on their
analysis.
“The World in 2050?”- was the  To realize this growth prospective,
title of research report of PwC emerging economies have to ensure
(Price water house Coopers), stability of macroeconomic factors,

a renowned research organization economic diversification and growth


friendly legislation.
based on UK. This report published
in February, 2017 and attained a lot Findings for Bangladesh
Economy
of hype around the world. The prime
reason of attention towards this is Bangladesh is assumed to have the
its expected change in dimension prospective to be one of the fastest
growing economies over the period to
of world economy. 2050, averaging growth of around 5% a
year. Viewed as a strong emerging
market performers Bangladesh is
 Growth of faster expanding economy can call projected to move from 31st to 23rd
a rearrange in order resulting UK to be sent to position.
10th position, France out of top 10 and Italy
out of top 20. These positions will take by According to the data, it can be seen that
faster growing economies like – Mexico, GDP per capita growth is the prime force
Turkey and Vietnam. in growth rather than population growth.
So, the economic growth will be an
Average Average Real Average output of excellence in productivity.
Country Population Growth per GDP
Growth p.a. Capita p.a. Growth p.a.
Background of our Economy
Vietnam 0.5 4.5 5
India 0.7 4.1 4.9 The nation all together had to work hard
to prove labeling like “Bottomless
Bangladesh 0.6 4.1 4.8
Basket” or “Development Guinea pig”
Sources: PwC analysis

102 OCTOBER - DECEMBER 2017 | The Bangladesh Accountant


ARTICLE

Challenges

 The first and foremost


challenge for us to be one of
the fastest growing
economies is to convert our
population into our power.
These urges for a concrete
and responsive
development of the overall
system to ensure rapidly
growing population can
contribute productively to
economic growth.

Job creation is identified as


the country’s top
development priority by
The World Bank. It is very
Analysis statistics related to Bangladesh Economy much crucial to create more
GDP PPP Ranking In 2016-31 productive employment
In 2050 - 23 solution for 2.1 million
GDP at PPP In 2016- 628 youths entering the job
In 2050 - 3064 market every year.
Average Population Growth p.a. 0.6%
 If Bangladesh is to compete
Average Real Growth per Capita p.a. 4.1% with its regional and global
Average GDP Growth p.a. 4.8%overing competitors, including
emerging economies such
as Thailand, Vietnam and
wrong after independence. The economic catastrophe after Cambodia then export and
After liberation the GDP growth 90s couldn’t shake the investment diversification is
was depressing the rate was 2-3 economy of this country to core incredibly important.
percent then. But the situation as this economy is not wholly
started to change positively integrated with the world There is a clear imbalance in
during 1980s, when the economy. Though the two main our sectors of export and
economy grew around 3.5 sectors- export and remittance import. We usually import
percent. Since then we didn’t were severely affected by the high-end technology while
have to look back and at the global economic downturn, 80% of our export earnings
end of 1990s the average overall national economy come from ready-made
growth rate became 5%. These passed the resilience test. The garments. This is clearly
evolutionary changes occurred World Bank recognized this unsustainable in the
when the nation had to deal stability and elevated position long-term. Because making
with not only socio-economic of the country from low income the growth of higher-value
challenges but also with natural to a lower middle income manufacturing and service
calamities like flood and country in July, 2015. sector a real priority will
drought. The run was definitely only help to achieve its goal
not an easy one for a newly in a global economy at
born country. 2050.

OCTOBER - DECEMBER 2017 | The Bangladesh Accountant 103


Journey Towards 2050
Prospect of Bangladesh Economy

 Infrastructure and and limit of exemption was Opportunities we have


Technological development increased, they considered
is must in the swiftly shifting that it can help to boost  As the former giants of
world to make positive government’s revenue while economic world are in the
progression steady. If we try keeping people of lower verse of decline, it can act
to make our population income safe. But under like an opportunity for
productive we have to continuous domestic emerging ones. For
ensure excess of reliable pressure the government example- Though China is
and affordable power, took a back and postponed the current economic
transportation and this proposal for at least leader; its population
education facility. two years. growth is projected to be
negative between 2015 and
But the rising price of basic Government also has to 2050. This will increase cost
necessities are creating work hard on easing of the business currently
barrier to the growth of business constraints for operating in China as the
social indexes which in turn both local and foreign labor cost is going to rise.
affect the overall economic ventures. Among 27 So, this business will in
growth. Infrastructure countries having population search of some other
development is vital in this in excess of 50 million, cheaper options like
case so that it can support Bangladesh ranked second Vietnam or Bangladesh.
the overall growth of the last according to Doing Some of the global
country and technology is Business Index. This index is multinational will prefer to
important to make the truly alarming if we are shift their off shoring jobs
growth sustainable. talking about economic from china to other
growth. relatively low cost
 Development friendly economy.
legislation and firm
monetary policy is needed
to support sustainable
isgrowth. Reorganization is
required to support capital
market development and
improved investment
competence. The IMF has
warned that if the authority
fails to arrange necessary
reformation, the current
growth rate of 7% can fall
off to as low as 5%.

Launch of Value Added Tax


(VAT) was proposed in July,
2017 which created a lot of
controversy around the
country. On the contrary,
the World Bank and the IMF
greeted it positively. Since
essentials goods were kept
out of VAT considerations

104 OCTOBER - DECEMBER 2017 | The Bangladesh Accountant


ARTICLE

Moreover, Home country cannot be judged only by its schools in the last ten years.
bias is projected as a threat GDP growth. In that According to the World
these days. Investors consideration Bangladesh is Economic Forum’s Global
around the world are definitely trying hard to Gender Gap Report 2016,
planning to invest more to improve its social Bangladesh has improved
emerging markets to avoid development indicators. All its overall ranking in Global
such risks. Hence, we have inclusive planning of the Gender Gap Index from 91 in
to recognize these aspects Government seemed to be 2006 to 72 in 2016. These
and develop in a way to successful in case of improvements are
realize these opportunities. education and health highlighted more because
sector. Bangladesh has succeeded
 Bangladesh, Egypt, India, to achieve these by using
Pakistan, Philippines, The immunization rate leaser portion of its GDP in
Nigeria, and South Africa increased from 1% in the comparison to other
are projected by the UN to early 1980s to over 70% countries with similar
see a small rise in the share within 10 years. This prevailing conditions.
of those aged 15-64 of the development described by
total population, by an the United Nations  The nation appears to be
average of 3% points. This Children’s Fund (UNICEF) successful in gaining
can obviously seemed as an as a near miracle. confidence and optimism of
opportunity if our economy Bangladesh Bureau of rest of the world. According
can utilize them wisely and Educational Information to International Monetary
effectively. and Statistics (BANBEIS) Fund (IMF) the real GDP
showed a 10% increase in growth in 2016 was 7.1
 A country’s overall the net enrollment rate for percent. Though World
economic development secondary and primary Bank is expecting the GDP

OCTOBER - DECEMBER 2017 | The Bangladesh Accountant 105


Journey Towards 2050
Prospect of Bangladesh Economy

to slow down in near future https://www.pwc.com/gx/


a further rise is also en/world-2050/assets/pwc
projected that will lead the -world-in-2050-summary-r
GDP to 7% in 2020. Reliance eportfeb- 2017.pdf
of such esteemed
international organization 2. IMF (2017), Bangladesh:
acts as a boost for the 2017 Article IV
investment sector. Consultation—Press
Release; Staff Report, IMF
Conclusion Country Report No. 17/147,
Bangladesh has
June 2017.
Positive aspiration of the
jumped 25 notches
esteemed world organization 3. World Bank (2008), to 47th place in the
Poverty Assessment for
for future, the commendable
Bangladesh: Creating
Global Gender Gap
background and the present
consistent effort to thrive Opportunities and ranking, according
altogether indicate that our Bridging the East-West to the World
economy is in right track. But Divide, Bangladesh
Development Series Paper Economic Forum.
the struggle to keep up the
pace of gradual growth with No. 26, Dhaka: World Bank, Bangladesh scored
proper infrastructure, p 0.719 (with
technological and legislative
support is quiet demanding. 4. Ibrahim Hossain Ovi, “WB: complete parity at
Implementation of new VAT 1) on the gender
law crucial to achieving
While we consider future parity index and
projections, we have to keep in revenue target,” Dhaka
mind that a number of political Tribune, June 21, 2017, was ranked the
instability, economic downturn available at highest among the
http://www.dhakatribune.c
and natural calamity can occur
om/business/economy/201
South Asian
within this time period. Hence,
this situation can be both 7/06/21/wb-implementatio nations.
challenging and encouraging n-new-vatlaw-crucial-achie
for the policymaker at a time. ving-revenue-target/

SOURCE
Reference 5. “World Bank for VAT law The Asian Age
implementation,” Dhaka 3rd November 2017

1. PwC (2017), “The Long Tribune, June 20, 2017,


View: How will the global available at
economic order change by http://www.dhakatribune.c
2050?,” Pricewaterhouse om/business/economy/201
Coopers report, February 7/06/20/wb-vat-law-excise
2017, available at -duty/

106 OCTOBER - DECEMBER 2017 | The Bangladesh Accountant


ARTICLE

Myanmar Pushouts
Fiasco in Bangladesh

Aleya Ferdous

I
ntroduction asylum-seekers. Globally in
2017, over 40.3 million people
“No one leaves home were internally displaced as a
unless home is the mouth of a result of conflict. A 22.5 million
shark.” were refugees and 2.8 million
are asylum-seekers. The global
Every year millions of people refugee population contains 51%
across the globe are forced to population who are children
leave their homes and seek under 18. This is quite alarming
refuge mostly to the for us, as a huge quantum of
neighboring countries from future population gets
conflicts, violence, human rights demotivated at the start of life.
violations, maltreatment and
natural disasters interalia. The The humanitarian crisis caused
number of forcibly displaced by increasing violence in
persons has since been Myanmar’s Rakhine State is
The Author is a continuing to rise. The causing endless sufferings on a
Deputy Secretary of the consequences have warranted catastrophic scale. Over
Institute of Chartered Accountants for increased humanitarian 621,000 Rohingya ethnicity
of Bangladesh-ICAB assistance worldwide. Up to children, women and men have
84% of the forcibly displaced been forced to flee to
persons find refuge among Bangladesh to escape violence
people who already struggle in Myanmar since 25th August
with poverty in low- and 2017. Thousands more
middle-income countries. They reportedly remain stranded and
are sheltered amidst those who in peril in Myanmar without the
already lead a life full of misery means to cross the border into
and sufferings. Their survival Bangladesh. Refugees
depends on lives’ amenities and traumatized in Myanmar are
financial assistance. The arriving in Bangladesh. That are
availability of assistance mainly comprising of women
provided by communities and children. Many of them have
wherein they are sheltered . The arrived with injuries caused by
Number of people who fled to gunshots, fire and landmines.
another country in phobia and Rohingya Refugee crisis has
fear of persecution on specific become a burning issue in the
or apprehensive ground, and present world perspective.
who lacks protection from their
country is a talked about & Background
persistent global concern.
The Rohingyas has been facing
Over 65.6 million people identity crisis for long. The
worldwide are in need of Bengali-speaking Muslims and
protection and assistance as a Buddhists in Rakhine state have
consequence of forced existed for decades. But the
displacement. Forcibly most significant inflection point
displaced populations include came in 1982 when Burma’s
refugees, internally displaced junta passed a law that
persons (IDPs) and identified eight ethnicities

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Myanmar Pushouts
Fiasco in Bangladesh

entitled to citizenship. The Rohingya were not citizenship if they registered themselves
kept among them, not withstanding that they had as Bengali not Rohingya. Although many
enjoyed equal rights like other Burmese since Muslims in Rakhine state were previously
Burma became independent from British rule in indifferent about how they were labeled,
1948. Almost overnight, they were stripped of the years of oppression, combined with
their citizenship. The Rohingya people who are the tyranny they got submerged in ,
also historically termed as Arakanese Indians are a made the offer inedible. The Rohingyas
stateless Indo-Aryan people from Myanmar’, are facing many restrictions like no travel
Rakhine State,. There has been an estimated 1 without authorization, not marrying
million Rohingya living in Myanmar before the without permission.etc. They were more
2016–17 crisis. On 22 Oct 2017, the UN reported over prohibited from working outside
that an estimated 603,000 refugees from their village; due to movement restriction
inflicted on them sufficient access to
livelihood opportunities, medical care
and education. Refugees arriving in
Bangladesh report about appalling
The humanitarian crisis caused by violations of human rights and other
increasing violence in Myanmar’s abuses in Myanmar. According to these
harrowing accounts, villages have been
Rakhine State is causing endless burnt down, parents or relatives killed in
front of traumatized children, and women
sufferings on a catastrophic scale. and girls raped or brutalized. UNHCR is
Over 621,000 Rohingya ethnicity already working to register new arrivals
and provide comprehensive protection
children, women and men have services.
been forced to flee to Bangladesh Refugee Influx in Bangladesh
to escape violence in Myanmar
since 25th August 2017. The influx of Rohingya refugees from
northern parts of Myanmar’s Rakhine
State into Bangladesh restarted following
attacks at Myanmar Border Guard Police
posts on 25 August 2017. As of 30
Rakhine, had crossed the border into Bangladesh
November 2017, the Inter-Sector
since August 25, 2017. This figure increased to
Coordination Group (ISCG) reported that
624,000, and over 625,000 respectably by
646,0001 Rohingya refugees have
November 2, 2017 and by December 6, 2017. This
already entered into Bangladesh since
refugees are a mix of majority Muslims and a
the attacks. According to ISCG’s rapid
minority is Hindu.
needs assessment, 58 per cent of new
arrivals are children and including a high
In the years since then, the Rohingya were
number of pregnant women (3 per cent).
persecuted, steadily lost their rights, and were the
With the new influx, the current total
victims of violence. The worst of this violence
Rohingya people fled from Myanmar into
erupted in 2012 following the rape of a Buddhist
Bangladesh, coupled with the affected
woman allegedly by Muslim man. That prompted
population in the communities, has
massive religious violence against the Rohingya,
reached a staggering number of 1.2
forcing 140,000 of them into Camps for Internally
million. The Rohingya population in Cox's
Displaced People. International pressure emerged
Bazar is highly vulnerable, having fled
and sustained on the military government finally
away from conflict and inhuman and
agreeing to grant the Rohingya a reduced form of

108 OCTOBER - DECEMBER 2017 | The Bangladesh Accountant


ARTICLE

settlements and host


communities.

2. The Rohingya population in


the camps is likely to
increase in the coming days
which will put further
pressure on food,
employment, health and
other basic needs.

3. The Rohingya population in


the camps is likely to
increase in the coming days
which will put further
pressure on food,
employment, health and
other basic needs.

4. The law and order situation


heinous act causing them into Many Bangladeshis, the great will deteriorate
severe trauma. They are now majority of whom are also
living in extremely impoverished Muslims, support the decision to 5. the local tone is much
conditions. Population temporarily shelter the similar to the Rohingya
movements within Cox's Bazar refugees, despite the People that may enable
remain highly fluid, with socio-economic costs and the them to take any chance to
increasing concentration in risks. commit misdeeds in the
Ukhia, where the government of camouflage of the local
Bangladesh has allocated 2,000 Bangladesh will face several people
acres for a new camp. This is challenges due to the emergent
one of the world’s worst refugee Rohingya crisis from 3 main Health Hazard
crises in recent decades, and so aspects –economic, social and
far Bangladesh, has been forced environmental. The extent of 1. Scarcity of pure drinking
to bear much of the burden. the impact of such challenges water: Regarding health
will depend on the length of concern the scarcity
The sudden influx of so many stay of the Rohingyas. prevails of pure drinking
refugees has created a major water, and therefore the
humanitarian emergency and Social Impact diseases carried through
raised security concerns. water may spread out;
There’s also a Social Security Crisis
less-well-understood effect: The 2. Medical facility: Medical
Rohingya refugee crisis is 1. The inter-agency treatment facility is not
shaking Bangladesh’s body Humanitarian Response enough for too many
politic to the core, and in ways Plan (HRP) for 2017-18 refugees so the diseases
that may hasten the country’s identified the areas of may spread through them
ongoing socio-economic WASH, health, nutrition and in the absence of preventive
problems. food security and shelter to deficiency;
save lives in both
3. Life threatening diseases:

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Myanmar Pushouts
Fiasco in Bangladesh

Many Rohingyas are throughout the country and number is unabatedly


carrying contagious may be involved in crime increasing and localities are
diseases like AIDS. If not and act of criminology; deprived of many facilities
taken care of in right time from various agencies but
and properly it may shape 4. Human trafficking: yet their new concern is
into a dreadful and fatal Rohingyas are used in now the Rohingyas;
Epidemic; immoral activities like
smuggling, especially 2. The price of the daily
4. Family planning: Rohingyas women are used to carry commodities have risen;
lack awareness regarding smuggling goods and they
family planning. are also used in unethical 3. The local people used the
acts, like force or area where in the camps are
Law and Order intentional prostitution; now established;

1. SIM card: the Rohingyas are 5. Criminal activities: The local 4. Earlier the local people got
taking SIM cards illegally people may use them or medical facility and the
whereas the force them to do crime on children got stipends which
Telecommunication their behalf; have been now stopped
department has strictly due to investing on the
mentioned that Rohingya 6. Immoral activities: Long refugees;
will not get any SIM card; term refugee crisis will
socialize and increase the 5. The movement of the local
2. Drug: For their lively hood immoral activities like theft, people has been restricted
even for minimum fraudulence, and smuggling. and they have to carry the
exchange of goods they ID card;
may deal with drugs; Depression in the Local People
6. Theft, fraudulence will
3. Spreading throughout the 1. The local people initially increase;
country: They may spread welcomed the refugees but
gradually they find the 7. The Local people are afraid
that the refugee crisis may
prolong and their sufferings
will continue as they have to
share the resource with
them;

8. Many schools of the local


children are used for the
military barracks and many
students do not go to
school to work in the
camps.

Economic Impact

Bangladesh’s economy will face


a havoc of adverse impacts of
refugee from Myanmar’s
Rakhine State if they are not

110 OCTOBER - DECEMBER 2017 | The Bangladesh Accountant


ARTICLE

repatriated soon. The budget long run when the international Environmental Impact
allocation of FY2017-18 may aid will be lessen the pressure Environmental impact will also
even fall short as it was finalised will be on us and cost of living occur as a consequences of
without considering the latest will increase. Most importantly huge waste, soil erosion,
Rohingya influx, and the tourism expenditures in Cox’s deforestation, biodiversity,
government will continue to Bazaar will be greatly reduced ecosystem, use of
spend a lot of money to feed over the next 12 months non-disposable materials and
and shelter the refugees. If the certainly damaging the hotel natural calamity.
crisis is not addressed quickly. and restaurant business.
In long term its affect will be Especially Saint Martin will Humanitarian Support to
huge as the aid of the affect badly on this issue. The the Rohingyas
international bodies will be local businessmen and hotel
lessen as time passes. And the owners are very much Bangladesh initially welcomed
burden will be on us. The frustrated and they are worried the refugees warmly and people
detrimental effects are that if the refugee crisis stays from all corner of Bangladesh
expected to include local food long then there will be a long echoed their voice with the
and transport price hikes, food term impact on our tourism government to support the
grain shortages, and reduced sector. As the Rohingyas work helpless refugees.
tourism, along with increased at a very low rate of daily wages
pressure on natural resources it will affect the local people’s The Ministry of Disaster
and various social issues. In the employment opportunity. Management and Relief of the

OCTOBER - DECEMBER 2017 | The Bangladesh Accountant 111


Myanmar Pushouts
Fiasco in Bangladesh

Government of Bangladesh and displacement is not a temporary thousand for the next few years.
several national and issue. Sometimes it lasts long
international organisations have which will be a crisis for the local Diplomatic Challenges
been providing humanitarian government. Keeping the law and Initiatives to
support to the refugees. and order system in order is also Overcome the
According to UN website another big challenge. Finding Challenges
(UNOCHA) total incoming fund durable solutions for the
that came to support the forcibly displaced is a challenge. The Rohingya refugee crisis has
Rohingyas was equivalent to Voluntary repatriation to their exposed Bangladesh's
USD 143.19 million of 10 home countries is the preferred diplomatic weaknesses. No
November 2017 which is 33% of long-term outcome for permanent member of the
that fund appealed for refugees; but the lack of United Nations Security Council
Challenges We will face various political solutions to conflicts has strongly backed Dhaka to
challenges to address the prevents many from doing so. resolve the refugee problem.
Rohingya issues. Getting the China renders its support on
international aid in long term is a How to manage the long term Myanmar, India being our
big challenge. As a result the problem is unclear. Over time neighboring friend keeps aside
burden will be on the many will find their way to other Myanmar. Japan, another
government of Bangladesh. locations in Bangladesh. important Asian power, also
Getting loan from international However, one must assume that supported Myanmar. Both
agencies is yet another in the Cox’s Bazaar area there Beijing and New Delhi are
challenge. This type of forced will be several hundred developing ports, including a

112 OCTOBER - DECEMBER 2017 | The Bangladesh Accountant


ARTICLE

deep-sea port, and Special  Un security Council calls on 3. Take immediate steps to
Economic Zones (SEZ) in Myanmar to end excessive stop this brutal violence and
Rakhine. Bangladesh, on the military force and inter stem out flow of refugees;
other hand, has not utilised its communal violence in
geography strategically. In Rakhine state; 4. Pursue Strong diplomatic
recent years, not only Myanmar, movement for the returning
even the small island-country,  Kofi Annan commission of the Rohingyas to
Sri Lanka has developed calls on Myanmar to resolve Myanmar and their rights;
sophisticated maritime Rohingya crisis in Rakhine;
infrastructures including a 5. Guarantee and uphold
deep-sea port. Our concern is  US has declared of political freedoms and the
what Dhaka is doing and how withdrawal of Military freedom of movement for
diplomatically it is convincing assistance in Rakhine; the Rohingya people;
the international communities
to overcome this challenge. In summary Bangladesh faces 6. Ensure support with the
serious challenges in managing help of International
The five point proposal by our the influx of Rohingya. With agencies to the victims;
Prime Minister Sheikh Hasina: prudent diplomatic ability we
should handle the issue. 7. protect and support
1. Myanmar must displaced people during
unconditionally stop the Options for Overcoming the their displacement and
violence and the practice of Fiasco when returning to their
ethnic cleansing in the homes;
Rakhine State immediately The Rohingya crisis has given
and forever; rise to multi-dimensional 8. Ensure the security
problem for Bangladesh. Given measures in the camp areas;
2. Secretary General of the the present budgetary
9. Security measures in the
United Nation as should framework for FY 2017-18, there
Rohingya camps and
immediately send a fact is not much room for additional
adjacent areas, particularly
finding mission to Myanmar; public spending. The extent of
in the Southern of the
government expenditure for the
country have to best
3. All civilians irrespective of Rohingy as will depend on the
lengthened. The law
religion and ethnicity must length of stay of the Rohingyas.
enforcing agencies have to
be protected in Myanmar. In addition to timely measures
be vigilant to stop illegal
For that safe zones could be taken already by govt. and
activities, drug trade,
created inside Myanmar international bodies there can
human trafficking and
under UN supervision; be more means to be
terrorism;
addressed. These may include
4. Ensure sustainable return of but not limited to the following:
10. Use the active people in
all forcibly displaced
constructive way so that
Rohingya in Bangladesh to 1. Invite International
they become less
their homes in Myanmar; observers to visit at a
dependent on aid;
regular basis;
5. The recommendations of 11. The Government will best
Kofi Annan Commission 2. Build camps within deal with this by allowing
Report must be Myanmar for the returning the Rohingya to go to
immediately implanted of refugees to facilitate their school and to work. This will
unconditionally and in its rehabilitation with UN ease our problem and add
entirety. financing and supervision; some value at least;

OCTOBER - DECEMBER 2017 | The Bangladesh Accountant 113


Myanmar Pushouts
Fiasco in Bangladesh

12. Take short, medium and by international and regional 6. Implications of the Rohingya
long term study and plan to countries and communities. In Crisis for Bangladesh: Centre
overcome the situation; our drive into MIC mode of for Policy Dialogue, 11
development this problem is a November 2017
13. If the crisis is not resolved huge burden on Bangladesh.
soon then a huge amount of We find the govt. has reached 7. https://www.un.org/press/
money, food and natural MoU to end the fiasco. Let en/2017/sc13055.doc.htm
resources will need to be pressure on Military Jaunta
spent to support the needs to be intensified along 8. http://www.bscn.nl/
Rohingya. Facing a mass with efforts and action to sanctions-consulting/sanctions
influx of Rohingyas from earliest resolution of this crisis. -list-countries
Myanmar, Bangladesh Diplomatic pursuits have no
should call on the better alternatives. And
international community to Bangladesh should move ahead
intervene and put pressure taking and sitting together to
on Myanmar to address the end the heinous act of Myanmar
exodus; military Jaunta. But above
everything we aspoire to
14. Bangladesh should survive this challenge with
continue to pursue the honour and dignity. For the sake
diplomacy very prudently. of mankind and humanity we
Especially with the regional should all come forward, raise
partners like BIMSTEC, our voice against all kinds of Government
BCIM who can put pressure transgression and uphold the
on Myanmar; slogan:
estimates the
number of
15. To address the issue extra “With courage let us all combine expatriate
regional platforms like for a mission.”
ASIAN can play a role.
workers will
References cross 1 million
Conclusion including 1,
1. IDMC 2016 Global Overview
There are many other Report 13,009 women
challenges the international during this year.
community is facing today 2. UNHCR 2016 Global Trends
emanating from the refugee Report
influx. We talk of regional
conflicts, economic and social 3. UNHCR Web Site
SOURCE
crises, political instability, The Asian Age
abuses of human rights, racism, 4. Bangladesh: Humanitarian 13 December 2017
th

religious intolerance, Situation report


inequalities between rich and
poor, hunger, over-population, 5. https://www.unocha.org/
under-development. The legacy/about-us/publications/
problem has been well attended humanitarian-reports

114 OCTOBER - DECEMBER 2017 | The Bangladesh Accountant


ARTICLE

Productivity in RMG
Continuous Improvement is Key to Achieve
USD 50 Billion Landmark
Mohammad Zahid Hossain FCA

I
mprove constantly and of workers increased by 219%
“ forever the system of during last 5 years, cost of gas
production and service, and electricity also increased in
to improve quality and many folds and other costs also
productivity, and thus increased in line with yearly
constantly decrease costs”. inflation rate. RMG sector is now
compelled to comply with the
William Edwards Deming requirement of Accord and
(October 14, 1900 – December Alliance, the two western
20, 1993) was an American buyers' platforms working to
statistician, and consultant, improve workplace safety. Such
known for his work in the field compliance requirement is also
of Quality management triggering additional costs for
this industry. Considering the
Today’s largest foreign currency strong footprint of Bangladesh
The Author is a generating industry of in global RMG industry,
Chartered Accountant and Bangladesh started its journey Government is also planning to
Fellow Member of the in 1978 by exporting 10,000 reduce cash incentive for RMG
Institute of Chartered Accountants shirts. Only 9 export-oriented export. This industry is currently
of Bangladesh-ICAB
garment manufacturing units under massive pressure to
were operating in Bangladesh at produce quality product at
that time. Jute was the main minimum cost. Despite
export product for then continuous plea of the
Bangladesh’s small economy. exporters to revisit the price of
With the soft start of few the products, buyers are
visionary entrepreneurs’, today suggesting exporters to
RMG proved itself as the most improve the productivity. So, it’s
critical lifeline for the economy inevitable for RMG
of Bangladesh. producers/exporters to ensure
efficiency at every step in
Bangladesh is the second production to remain
largest RMG exporting country competitive in world apparel
in the world. In the financial year market.
2016-2017, the RMG industry
exported goods worth USD Potential Areas to
28.14 billion which was 81% of Improve Productivity
the country’s total export
earnings. Considering the
• Trained workforce: During
growth potentials, Bangladesh
the growth stage of RMG
set a target of USD 50 Billion on
industry in Bangladesh,
account of RMG export by 2021.
average productivity was
25-30%. Most of the
Though this industry registered workers were unskilled or
tremendous growth during last semi-skilled. They had to
several decades, its recent take on-the-job training and
export trend is flagging the learning curve was too long.
need to rethink about this The rate of wastage in raw
industry. Cutting & making material was as high as 20%
charge of RMG buyers dropped and output-per minute was
by 50% while minimum wages much below than then

OCTOBER - DECEMBER 2017 | The Bangladesh Accountant 115


Productivity in RMG
Continuous Improvement is Key to Achieve USD 50 Billion Landmark

industry standard. With the passage of time, introduced robots in textile sector. It
workers became well-trained by the trainers is not very far for Bangladesh to
of home and abroad. As a result, they are now introduce robots in RMG sector with
operating at a wastage rate of as low as 3-4%. an objective to compete with global
Some factories are continuously monitoring players in terms of quality and price.
its performance, comparing it with the
industry leaders and effective measures are • Robust IT platform: It is extremely
taken to remove the gap. They are important for RMG factories to
implementing well-tested performance remove flaws from business
improvement techniques including Kaizen, processes. Such glitches always open
Lean Six Sigma etc. and significant the windows of wastage, fraud and
improvement in production process is pilferages. Working in ERP
experienced. environment is the most effective
solution to combat these
• Advanced technology: Machineries with inefficiencies. Manual production
advanced technology is to be introduced to planning gives rise to unnecessary
reduce maintenance cost and increase overtime of workers, air shipment
output. Turkey, China, and Vietnam already due to delay, production of defective
goods etc. Few RMG factories
successfully implemented integrated
Bangladesh is the second largest robust ERP like SAP, Oracle. They
implemented system driven
RMG exporting country in the world. operation in demand forecasting,
In the financial year 2016-2017, the production planning, supply chain
management, costing, accounting
RMG industry exported goods worth etc. The savings of these factories are
USD 28.14 billion which was 81% of so significant that it can comfortably
justify sizeable expenditure in ERP
the country’s total export earnings. implementation.
Considering the growth potentials,
Bangladesh set a target of • Savings in power and energy: Short
supply of electricity and gas is
USD 50 Billion on account of RMG seriously hindering the progress of
export by 2021. RMG sector of the country.
Disruption in the supply of power and
energy is unreasonably increasing the
cost of product. Most of the RMG
RMG Industry: Lifeline to Bangladesh Economy factories are resorting diesel
generator for backup power. This is

81%
Of GDP of the most expensive option for RMG
16%
Bangladesh is
makers to generate emergency
contributed
of the country’s
by the RMG power. Solar based power, modern
total export machineries with low power
earnings come
consumption, installation of energy
from RMG
efficient lighting etc. can save energy
4.4
BANGLADESH is The industry indirectly

2nd
supports livelihood of by 70-80%. It will have direct impact

largest apparel exporting


Million workers earn
their livelihood from 40 on the product cost. A Green RMG
factory can operate 55,000 square
country in the world the industry Million people of the foot area at 350 kilowatt per hour
country
electricity consumption whereas it

116 OCTOBER - DECEMBER 2017 | The Bangladesh Accountant


ARTICLE

would require 550 kilowatt dealing with foreign of woven and knitwear worth
per hour would be currency e.g. negotiation of US$ 28.09 billion. During
consumed in case of conversion rate with bank mid eighties’, the value
conventional garment to settle import LC and in addition was much lower
factory. Since 2011, a total encashment of export compared to today because
of 67 Bangladeshi RMG proceed, application of revenue was only from CM
factories have received various hedging techniques (cutting and making).
Leadership in Energy and to reduce FOREX risk. Today, many local factories
Environmental Design Company’s shares can be are operating to produce
(LEED) certification from floated to raise non-interest yarn, fabrics, denim fabric,
the US Green Building bearing funds. Green RMG packing materials, trims etc.
Council (USGBC), one of the factories can be established and there are many dyeing
top green building rating to enjoy reduced tax rates. factories to dye yarn and
systems in the world. fabric. The existing rate of
• Local value addition: A value addition can be
• Smart financial strategies: review of the Bangladesh increased further by
Within the legal framework Bank on RMG showed that strengthening backward
of the central bank, local value addition to the linkages. This initiative is
cheapest funds can be industry was 75.35 per cent extremely important for the
sourced to meet the need of in FY16. Import price of raw sustainability of RMG
working capital and in materials and accessories industry. Due to the supply
acquiring capital stood at US$6.92 billion constraint of land, power
machineries. Earning can be through back-to-back L/C. and energy, many
possible from non The value was 24.7 per cent interested entrepreneurs
conventional sources in of the total export earnings

OCTOBER - DECEMBER 2017 | The Bangladesh Accountant 117


Productivity in RMG
Continuous Improvement is Key to Achieve USD 50 Billion Landmark

are not establishing makers do not arrange the cost leadership in global RMG
factories belong to these production facilities in line industry. Government should
backward linkage industries. with the demand. As a work to improve infrastructures
result, idle capacity cost especially Chittagong Sea port
• Outsourcing of non-core wipes out the profitability of condition and eliminate
functions: RMG factories the entity. If the internal bureaucracy. Entrepreneurs are
can outsource non-core demand is not sufficient to required to apply effective
activities to concentrate utilize the full facilities of the techniques to remove
into its core activities. factory, RMG factory can inefficiency from all areas of
Security services, work as contract production processes. The
housekeeping, fleet manufacturer for others. economic growth of the country
management, canteen Thus the product floors can largely depends on RMG
operation etc. does not continuously remain industry. So, stakeholders
match with the core operational and thus cost cannot show any slackness in
competencies of RMG per unit can be kept at the dealing with this
factories. Outsourcing of minimum level. economy-saving industry.
such functions may trigger
extra expenses while this Production cost of apparels is Reference
will eventually improve the significantly rising in exporting
productivity of the industry. countries of the world. By http://www.bgmea.com.bd/
improving the productivity and
• Maximum capacity reducing production cost
utilization: Many garment thereby, Bangladesh can take

118 OCTOBER - DECEMBER 2017 | The Bangladesh Accountant


ARTICLE

PPP’s Role on Country’s Development

M. Idris Ali FCA

P
ublic-Private Partnership upcoming PPP projects and to
or PPP is a joint venture manage any contingent liability
between the government exposure that the government
and the private sector at home may deem appropriate, in order
or abroad and/or between the to support PPP project
government and the financing. Furthermore, the PPP
government of another country Unit provides critical support in
(G2G). In August 2010, the overall financial management
Government of Bangladesh by providing inputs to all
issued the Policy and related national medium-term and
Strategies for Public Private long-term budgetary
Partnership (PPP), in order to
allocations.
facilitate the development of
core sector public infrastructure
Financing PPP Projects
and services that are essential
for the country’s overall
In order to finance these
The Author is a development. The objective of
infrastructural projects, initially,
Chartered Accountant and the PPP program in Bangladesh
a Fellow Member of the is to facilitate the government's the GOB allocates modest
Institute of Chartered Accountants Vision 2021 goal by ensuring a amount of funds in the national
of Bangladesh-ICAB more rapid and inclusive growth budget. These funds are placed
trajectory, and by effectively into three baskets to meet the
fulfilling the need for enhanced expense requirements and then
and high quality public services through relevant viability and
in a fiscally sustainable manner. feasibility studies, the projects
are brought into a
Since its inception, PPP has comprehendible and
proved to be an effective presentable shape. The MOF
method of conceiving, planning PPP Unit manages and oversees
and implementing medium to three keys catalytic Funds
large projects in Bangladesh. called PPP Technical Assistance
The Finance Division of the Fund, Viability Gap Fund and
Ministry of Finance has Bangladesh Infrastructure
established a PPP Unit, called Finance Fund. Objectives of
the MOF PPP Unit, which has these funds are briefly
been vested with responsibility mentioned bellow:
of overseeing the financial
viability of PPP projects and
VGF
sanctioning support funding for
their development and
The Viability Gap Fund, or VGF
financing. The Prime Minister’s
provides supplementary
office itself governs the PPP
government financing to
authority for identification,
approval and monitoring projects that the PPP Unit
ongoing progress of the deems economically vital to the
projects currently under PPP. public interest but that may not
The MOF PPP Unit works on be fully financially viable on a
behalf of the government to commercial basis. VGF monies
monitor budget implications of can be used to share the

OCTOBER - DECEMBER 2017 | The Bangladesh Accountant 119


PPP’s Role on Country’s Development

up-front cost of a project or provided on an development projects with emphasis on


annual basis to effectively subsidize PPP project renewable energy, energy efficiency and
costs. eco-friendly projects. BIFFL is working
relentlessly to supplement government’s
PPPTAF vision of achieving middle-income status
of the country by 2021.
The PPP Technical Assistance Fund provides
early stage project development funding support G2G Projects
to sanctioned PPP projects. The PPPTAF helps
defray the cost of professional consultants and The GoB is looking forward to build
advisors needed to assure the government strong bi-lateral relationships with other
achieves appropriate risk allocation in PPP governments to develop and upgrade
projects and pre-develops projects to a standard large public infrastructure assets in
that attracts maximum interest of the investors partnership with other countries, in order
and lenders at home and abroad. to support the growing economy in a
sustainable manner and to deliver
essential public services. The Policy
provides the framework for engagement
The GoB is looking forward to build and models for effectual delivery of PPP
strong bi-lateral relationships with Projects that are to be undertaken
through a G2G Partnership, whereby the
other governments to develop and implementation will be carried out with
upgrade large public infrastructure the support of the other partner
government and will be executed
assets in partnership with other through their state owned or private
countries, in order to support the sector entities. Public Private Partnership
(PPP) Authority has signed a
growing economy in a sustainable Memorandum of Cooperation (MoC) with
manner and to deliver essential the Ministry of Land, Infrastructure,
Transport and Tourism (MLIT), Japan
public services. through a grand ceremony held in the
Embassy of Bangladesh, Tokyo on 15th
June, 2017. It is expected that the signing
of the MoC for the G2G arrangement for
BIFFL
PPP projects with the Japanese
government will be a significant
Bangladesh Infrastructure Finance Fund Limited
milestone for implementing PPP Projects
(BIFFL) is a Government-owned Non-Banking
under this framework. Additionally, a G2G
Financial Institution, operating since 2011. It was
contract between Bangladesh & China
established by a resolution of the Cabinet of the
has also been signed, in order to
Government of Bangladesh and owned by the
strengthen the energy sector of
Ministry of Finance. BIFFL is the largest NBFI
Bangladesh. Power Grid
operating in the country with paid up capital base
network\r\nPGCB of Bangladesh and
of BDT 19.40 billion.
M/s. CCCE-ETERN-FEPEC Consortium of
China signed a bilateral contract on 10th
BIFFL has a strong mandate to invest in the large
of October 2016. After a successful
infrastructure projects of Bangladesh, including
completion of all these undertaken
power & energy, ports, connectivity, tourism and
infrastructural development projects,
economic zones. It also wants to ensure a greener
around 10,000 MW power transmission
Bangladesh by investing in sustainable

120 OCTOBER - DECEMBER 2017 | The Bangladesh Accountant


ARTICLE

Ltd, Green Delta Capital Ltd,


IDLC Finance LTD, IDCOL,
IIDFC, Modhumoti Bank Ltd,
Mutual Trust Bank Ltd,
Riverstone Capital Ltd, The City
Bank Ltd and Trust Bank Ltd.

A large portfolio of PPP projects


has already been established
with an estimated initial value of
US$14 billion. As of now, the
portfolio has 23 projects in
pipeline, spread across various
sectors. Contracts for 7 PPP
projects with an estimated value
of US$ 1.3 billion have already
been signed. 12 PPP projects
with an estimated value of US$ 1
billion are in the final stages of
competitive tendering.
capacity will be added with the • Power Projects Furthermore, 9 projects are
PGCB network. This is the undergoing feasibility analysis
largest ever development Haripur 360MW, and are expected to attract an
project in the history of PGCB Meghnaghat 450, MW additional US$5 billion.
and will touch around 40 power plants, RPCL 70MW)
districts of the country. The Multi PPP Program Summary
contract price is 9,072.54 crore
BDT and the development work • Port Projects (e.g. Teknaf Procurement Contract Signed
is scheduled to be completed Land Port)
by June 2021. 12 Projects Us $ 5 bn,
• Road Projects (e.g.Hanif
PPP Projects Portfolio Flyover) 11 Projects (US$1bn)
Status 8 Projects (US$1.5bn) (including
• Sectorial Projects
1 project under PSIG)
PPP projects that have already
been completed in Bangladesh • (E.g. Transport, Port, Power,
Health, Zones, Civil In principle approved: 44
are: projects US$ 44 bn
Accommodation, Housing,
• Fertiliser JV Tourism)

(E.g. KAFCO) On 3rd Nov., 2017, 14 Banking


and non-banking financial
• Health institutions signed the MOU.
They are - AB Bank Ltd, BIFFL,
BIRDEM, Heart Foundation BRAC EPL Investments Ltd, City
Bank Capital Ltd, Dhaka Bank

OCTOBER - DECEMBER 2017 | The Bangladesh Accountant 121


PPP’s Role on Country’s Development

SL Sector Project Name Status View


1. Health Hemodialysis Centre at Chittagong Medical Operational stage
College Hospital.
2. Health Hemodialysis Centre at National Institute Operational stage
of Kidney Diseases and Urology (NIKDU).
3. Zone Hi-tech Park at Kaliakoir. Construction Stage
4. Transport Dhaka-Elevated Expressway. Construction Stage
5. Zone Economic Zone 4: Mongla. Award Stage -
Contract Signed
6. Transport 2 Jetties at Mongla Port through PPP. Award Stage -
Contract Signed
7. Zone Economic Zone 2: Mirersharai. Award Stage -
Contract Signed
8. Tourism Development of Integrated Tourism & Award Stage -
Entertainment Village at Cox’s Bazar. Contract to be Signed
9. Health Oboshor: Senior Citizen Health Care and Award Stage -
Hospitality Complex at Sreemangal, Sylhet Contract to be Signed
Division.
10. Civil Construction of High-rise Residential Award Stage -
Accommodation Apartment Building for Low and Middle Contract to be Signed
Income Group of People at Jhilmil
Residential Project Dhaka.
11. Civil Construction of Satellite Township with Award Stage -
Accommodation Multi-storied Flat Building at Section 9, Contract to be Signed
Mirpur, Dhaka.
12. Social Infrastructure Development of Occupational Diseases Procurement Stage -
Hospital, Labor Welfare Center and Negotiation
Commercial Complexes at Chasara, Completed
Narayanganj, PPP Basis.
13. Social Infrastructure Development of Occupational Diseases Procurement Stage -
Hospital, Labor Welfare Center and Negotiation
Commercial Complexes at Tongi, Gazipur, Completed
PPP Basis.
14. Tourism Development of a Five Star Hotel in Procurement Stage -
Chittagong. RFP
15. Tourism Establishment of Intl. Standard Tourism Procurement Stage -
Complex at Existing Motel Upal Compound IFB
of BPC at Cox’s Bazar.
16. Transport Upgrading of Dhaka Bypass to 4 Lane Procurement Stage -
(Madanpur-Debogram-Bhulta-Joydebpur). RFP
17. Tourism Naf Tourism Park (Jaliardwip). Procurement Stage
18. Zone Hi-Tech Park in Sylhet. Procurement Stage
19. Transport Construction of Laldia Bulk Terminal. Procurement Stage -
RFQ
20. Transport Flyover from Santinagar to Mawa Road via Procurement Stage -
4th (New) Bridge over Buriganga River. RFQ

122 OCTOBER - DECEMBER 2017 | The Bangladesh Accountant


ARTICLE

SL Sector Project Name Status View


21. Tourism Establishment of 5 Star Hotel with other Procurement Stage -
Facilities at Existing Parjatan Motel Sylhet IFB
Compound of BPC Sylhet.
22. Education Medical College and Modernization of Procurement Stage -
Railway Hospital at CRB in Chittagong. IFB
23. Civil Accomodation Shopping Mall with Hotel-cum-Guest Procurement Stage -
House on the unused land in Chittagong. IFB
24. Civil Construction of multistoried Commercial Procurement Stage -
Accommodation cum Residential Apartment complex with IFB
modern amenities at Nasirabad,
Chittagong Under PPP.
25. Transport Construction of a New Inland Container Project Development
Depot (ICD) near Dhirasram Railway Stage - Detailed
Station. Feasibility Study
26. Transport Dhaka-Chittagong Access Controlled Project Development
Highway. Stage - Detailed
Feasibility Study
27. Civil Accomodation Shopping Mall with Hotel-cum-Guest Project Development
House on the unused Railway land in Stage - Detailed
Khulna. Feasibility Study
28. Transport Improvement of Hatirjheel (Rampura Project Development
Bridge)-Shekherjaiga-Amulia-Demra Road. Stage - Detailed
Feasibility Study
29. Zone Development of Economic Zone (EZ) at Project Development
Jamalpur with Private Sector participation. Stage - Detailed
Feasibility Study
30. Housing Installation of Water Supply, Sewerage, Project Development
Drainage System & Solid Waste Stage - Detailed
Management System in Purbachal New Feasibility Study
Town.
31. Tourism Establishment of Three Star Standard Project Development
Hotel and other Facilities of Existing Hotel Stage - Detailed
Pashur Compound of BPC at Mongla Feasibility Study
Bagerhat.
32. Tourism Establishment of a Five Star Standard Project Development
Hotel along with an Application Hotel and Stage - Detailed
Trainning Centre on existing land of BPC Feasibility Study
at Muzgunni, Khulna.
33. Shipping 3rd Sea Port (Payra Port Coal Terminal) Project Development
Stage - Detailed
Feasibility Study
34. Textile Development of Textile Mill at Demra, Project Development
Dhaka. Stage - Detailed
Feasibility Study
35. Textile Development of Textile Mill at Tongi, Project Development
Gazipur. Stage - Detailed
Feasibility Study

OCTOBER - DECEMBER 2017 | The Bangladesh Accountant 123


PPP’s Role on Country’s Development

SL Sector Project Name Status View


36. Education Medical College & Nursing Institute and Project Development
Modernization Railway Hospital of Stage - Advisor
Kamlapur. Appointment
37. Tourism Establishment of Sabrang Exclusive Project Development Project
Tourism Zone. Stage - Advisor
Appointment
38. Health Medical College and Modernization of Project Development
Railway Hospital at Saidpur in Nilphamary. Stage - Advisor
Appointment
39. Health Medical College and Modernization of Project Development
Railway Hospital at Paksey in Pabna. Stage - Advisor
Appointment
40. Health New Modern Medical College & Hospital of Project Development
250 beds on the unused land in Khulna. Stage - Advisor
Appointment
41. Transport Build and Construct Khulna Khan Jahan Ali Project Development
airport and Special Tourism Zone (STZ) in Stage - Advisor
Khulna under PPP Mode. Appointment
42. Research and The Innovation & Innovator Cell (IIC) Project Development
Development development under Public Private Stage
Partnership.
43. Energy Construction of LPG Import, Storage and CCEA Approved (In
Bottling Plant at Kumira or any Suitable Principle)
Place at Chittagong Including Import
Facilities of LPG, Jetty, Pipeline and
Storage Tanks under PPP.
44. Transport Construction & Operation of Inland CCEA Approved (In
Container Terminal (ICT) at Khanpur. Principle)
45. Zone IT Village at Mohakhali. CCEA Approved (In
Principle)
46. Transport Hemayetpur-Singair-Manikganj PPP Road. CCEA Approved (In
Principle)
47. Transport 2nd Padma Multipurpose Bridge at CCEA Approved (In
Paturia-Goalundo. Principle)

Conclusion employment, export and human order to effectively achieve that,


resource development. For a this government has to ensure
Development of the overall country like Bangladesh, effective and good governess,
infrastructural and service plagued with limited natural and transparency and a corruption
sectors of Bangladesh, financial resources, national free public administration. This
especially in transportation, budget and ADP funds are not will encourage more and more
power and energy, health, enough to finance such mega both local and foreign partners
accommodation, and education infrastructural projects. to invest in PPP projects.
are absolutely vital not only for Therefore, PPP is crucial,
ensuring progress and especially in developing References
expansion of the national countries like Bangladesh, for
economy, but also for accelerated development. And, I www.bangladesh.gov.bd
maintaining a sustainable firmly believe, PPP will play a
growth rate. A large, robust and significant role in aiding the www.pmo.gov.bd
compatible national process of Bangladesh
becoming a middle income www.mof.gov.bd
infrastructure will result in
incremental production, country by 2021. However, in

124 OCTOBER - DECEMBER 2017 | The Bangladesh Accountant


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he Institute of Chartered Accountants of Bangladesh (ICAB) is the
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Major Gen. Muhammad Imrul Quayes ndc, psc (retd.)


Secretary
The Institute of Chartered Accountants of Bangladesh
CA Bhaban, 100 Kazi Nazrul Islam Avenue
Kawran Bazar, Dhaka-1215, Bangladesh
Tel: 880 2 9115340, 9612612100, 9117521, 9137847 (Off.)
Fax : +880-2-9125266
E-mail: secretary@icab.org.bd
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Major Gen. Muhammad Imrul Quayes ndc, psc (retd.)


Secretary
The Institute of Chartered Accountants of Bangladesh
CA Bhaban, 100 Kazi Nazrul Islam Avenue
Kawran Bazar, Dhaka-1215, Bangladesh
Tel: 880 2 9115340, 9612612100, 9117521, 9137847 (Off.)
Fax : +880-2-9125266
E-mail: secretary@icab.org.bd
facebook.com/icabdhaka

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126 OCTOBER - DECEMBER 2017 | The Bangladesh Accountant


THE INSTITUTE - A BRIEF OUTLINE
THE INSTITUTE OF CHARTERED ACCOUNTANTS OF BANGLADESH (ICAB) IS THE
NATIONAL PROFESSIONAL ACCOUNTING BODY IN BANGLADESH, ESTABLISHED UNDER
THE BANGLADESH CHARTERED ACCOUNTANTS ORDER, 1973 (PRESIDENT'S ORDER NO.
2 OF 1973) FOR THE PURPOSE OF REGULATING THE PROFESSION OF ACCOUNTANTS
AND FOR MATTERS CONNECTED THEREWITH. THE MINISTRY OF COMMERCE,
GOVERNMENT OF THE PEOPLE’S REPUBLIC OF BANGLADESH IS THE ADMINISTRATIVE
MINISTRY OF THE INSTITUTE OF CHARTERED ACCOUNTANTS OF BANGLADESH.

VISION
ICAB members hold a widely respected professional accounting qualification which
supports enterprise, corporate governance and sustainable growth in the business
environment.
MISSION
* To promote and regulate high quality financial reporting and auditing in Bangladesh
* To develop and maintain the competence of professional accountants
* To enhance the reputation of the accounting profession in all sectors of the
economy
VALUES
* Integrity: To uphold the highest professional integrity and ethical standards
* Expertise: To conduct professional responsibilities with a high level of knowledge,
competency and skill
* Transparency: To conduct activities in a clear and transparent way
* Accountability: ICAB members to be responsible for their actions
INTERNATIONAL AFFILIATION
ICAB is an active member of the following international and regional accounting bodies:
* The International Federation of Accountants (IFAC)
* The Confederation of Asian and Pacific Accountants (CAPA)
* The South Asian Federation of Accountants (SAFA)
MoU & MRA
ICAB has Memorandum of Understanding (MoU) and the Mutual Recognition
Arrangement (MRA) with the following national & international organizations:
* MoU with the Institute of Chartered Accountants in England & Wales (ICAEW), UK
* MRA with CPA Ireland
* MoU with CIPFA, UK
* MoU with IFRS Foundation
* MoU for Local Governance Support Project in Bangladesh
* MoU with Office of the Comptroller & Auditor General of Bangladesh (OCAG)
CA Bhaban
100 Kazi Nazrul Islam Avenue, Dhaka 1215
GLOBAL
RECOGNITION
OF ICAB
Recognition of ICAB membership by ICAEW
Membership Scheme of The Institute of Chartered Accountants of England and Wales (ICAEW) allows the members of ICAB
to apply for ICAEW membership based on their experience.
Eligibility criteria of this membership scheme are a series of questions which assess ICAB Member’s experience, achievements,
skills and expertise. Each application must be supported by an eligible sponsor. Applicants need to complete an Examination
of Experience.
Details of ICAEW Membership Scheme is available at http://www.icaew.com/membership/becoming-a-member/
members-of-other-bodies/campaigns/pathways-to-membership.
It is noted that ICAB signed a Memorandum of Understanding (MoU) with the Institute of Chartered Accountants in England
and Wales (ICAEW) in 2009 and in continuation and successful implementation of the said MoU, the follow up phase of the
same MoU was signed with the ICAEW in 2014 and in London in 2017. ICAB has been working with ICAEW as the learning and
professional development partner, and also recognized as an approved tuition provider of ICAEW.
As per MoU ICAB Members can be the members of ICAEW after successful completion of 04 papers out of 15. These
members have the opportunity to apply for UK Practicing Certificate (PC) subject to meeting the standard ICAEW PC
requirement.

CPA-Ireland Membership is open to ICAB Members


ICAB has signed a Mutual Recognition Agreement (MRA) with the Institute of Certified Public Accountants in Ireland (CPA
Ireland) on December 2012.
According to the signed MRA to attain the CPA Ireland membership, ICAB members have to complete and pass only 01 paper
out of 17 papers of CPA Ireland examination.
ICAB members need to pass CPA Ireland’s only one examination from the Professional Stage 2, “Strategy and Leadership” and
an On-line “Overview of Irish Tax and law”.

Recognition of ICAB Membership by CIPFA, UK


Members of the Institute of Chartered Accountants of Bangladesh (ICAB) are eligible to apply for membership of the
Chartered Institute of Public Finance and Accountancy (CIPFA), a globally recognised membership body for the public sector.
An MoU between ICAB and CIPFA, UK was signed on 28 January 2017.Under this MoU ICAB member can be the member of
CIPFA upon fulfilling some criteria.
ICABMembers in good standing having five or more years post-qualification public sector experience are eligible for Full
Membership of CIPFA as Chartered Public Finance Accountant (CPFA) and the members having fewer than five years
post-qualification public sector experience are eligible for Affiliate member of CIPFA (CIPFA Affiliat).
ICAB members having CIPFA Affiliate membership, or having no working experience in public sector can gain CPFA status by
successfully completing exams of only two papers i.e. Public Sector Financial Reporting and Strategic Public Finance from the
CIPFA qualification.

IFRS Agreement
The Institute of Chartered Accountants of Bangladesh (ICAB) signed an agreement with the International Financial Reporting
Standards (IFRS) Foundation which empowers only ICAB in Bangladesh for development and publication of Bangladesh
Financial Reporting Standards (BFRS), Bangladesh Accounting Standards (BAS) and BFRS for SMEs.
Under this agreement, ICAB has got the copyright license to publish both in print and online electronic editions of BFRS, BAS
and BFRS for SMEs using IFRS, IAS and IFRS for SMEs as issued by the International Accounting Standards Boards (IASB) and
to distribute English language version of these standards in Bangladesh. In accordance with the terms of agreement ICAB has
entered into formal collaboration with the IFRS Foundation and committed to a convergence path towards the full adoption
of IFRS.

Other Memberships
ICAB is an active member of International Federation of Accountants (IFAC), Confederation of Asian and Pacific
Accountants(CAPA) and South Asian Federation of Accountants(SAFA). ICAB is very proactive in SAFA and CAPA. Current
SAFA President has been elected from ICAB and the Executive Secretary appointed from the same Institute. In the year 2012,
2013 and 2014 ICAB has been highly appreciated by IFAC for its continued commitment and compliance with Statement of
Membership Obligations (SMOs), which cover the requirements of quality assurance, education in line with international
education standards, auditing, financial reporting and public sector accounting standards, auditing, investigation and
disciplinary matters.

www.icab.org.bd

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