03 August 2008 AT CAPITAL RESEARCH

AT Capital Weekly Update

Weekly News Update

Key themes in this issue are:

Bangladesh:
• Tata’s USD 3bn pullout has profound implications for Bangladesh’s economic future in
terms of underlining the need for both an effective energy policy as well as a clear
strategy for regional economic integration especially with India.
• A FDI policy based on attracting foreign companies via heavily discounted gas prices,
whether it is from India, Korea or Taiwan, is extremely short sighted.
• The number one economic policy issue facing the country today, namely a solution to
the power crisis and the necessary shift away from an addiction to subsidized gas
supplies towards the rapid development of our coal reserves, is a critical focus – now.
• Bangladesh should not pin its energy future on unrealistic expectations about future
undiscovered gas reserves
• With Underground coal mining method we could recover only 441mn MT of from our
five coal deposits while with the best combination of Underground and Opencast
Mining the amount could be 1,418mn MT.
• Amid the mutual recriminations between the US, EU, India and China on the
breakdown in the Doha round, the reality is that immediate domestic political self-
interest, especially in the case of Indian and Chinese farmers, overwhelmed any
perceived long-term benefits from reducing global trade barriers further.
• The experience of the collapsed Doha trade talks gives little comfort the world can
effectively negotiate an effective agreement on a far more complex and intractable
problem, namely climate change.
Asian Tiger Capital Partners

EDITORS
Doha talks collapse on agricultural intransigence
Ifty Islam
Managing Partner
ifty.islam@at-capital.com

Syeed Khan
Partner
syeed.khan@at-capital.com

Professor Jahangir Sultan

Senior Advisor
jahangir.sultan@at-capital.com

Asian Tiger
Capital Partners

UTC Building, Level 16

8 Panthapath, Dhaka-1215
Bangladesh
Tel: 8155144, 8110345
Fax: 9118582
www.at-capital.com
03 August 2008
Overview - Bangladesh
An important week for global trade and Bangladesh FDI
prospects with the two major news events, the collapse of
the Doha round of trade talks in Geneva and the decision by
Tata to finally withdraw its pending USD 3bn+ investment
into Bangladesh. It seems likely that the issues raised by the
Tata pullout have more profound implications for
Bangladesh’s economic future in terms of underlining the
need for both an effective energy policy as well as a clear
strategy for regional economic integration especially with
India.
A summary of the Tata “Investment Saga”
On Thursday, July 31, Tata and Sons, submitted a statement
to the Board of Investment stating that: “It is clear that the
government will not be in a position, in the foreseeable
future, to grant the projects the natural gas commitment they
would require…Consequently, there is no prospect of taking
these projects further. “
By way of background, Tata Chairman Ratan Tata’s made
the investment offer when he visited Bangladesh in 2004.
Tata signed a memorandum of understanding with
Bangladesh in 2004 on a USD2 bn investment, which later
grew to USD 3bn. Its investment proposals include a 2.4
million-tonne a year steel mill, one million tonne a year
fertiliser factory, 1,000 MW gas-fired and 500 MW coal-fired
power plants.
The government initially rejected Tata’s offer to buy gas at a
fixed rate of USD 1.10 per 1,000 cubic feet or one unit over a
20-year period. It also informed Tata that it would not give
any guarantee for gas supply for 20 years.
Tata came up with a new offer of USD 3.10 per unit of gas
price for its fertiliser plant in April 2006. The revised deal also
included a proposal to pay USD 2.60 per unit gas price for
the steel plant. However, Tata’s requirement for gas was
more than 200 million cubic feet per day which Bangladesh’s
Energy Secretary Mohammed Mohsin emphasized it was
unrealistic for the country to commit to.
An FDI Soap Story but one that raises important policy
issues
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AT CAPITAL RESEARCH
Ifty Islam, Managing Partner
ifty.islam@at-capital.com
At times the ups and downs of Tata’s proposed multi-billion
dollar investment in Bangladesh has all the makings of an
economic soap opera. The announcement on Friday that
they had finally decided to pull out saw multiple
recriminations and soul-searching from a wide range of
commentators within the country. Does it spell the death of
Bangladesh’s prospects of attracting large scale industrial
investment from its large neighbour or indeed elsewhere?
Was it a welcome escape from economic exploitation by a
oligarchic proverbial 800 lb economic gorilla next door that
would be to the long-term detriment of Bangladesh’s
economic development? Was a necessary sacrifice in terms
of gas and coal subsidized commitments to open the flood
gates of Indian FDI that could transform our economic
fortunes?
The reality is complex but among the key themes, it seems
evident that
1. Tata, India’s dominant conglomerate and one of the
most aggressive and savvy of its outward investment
champions (note its purchase of Jaguar cars and Tetley
tea among other global brands it has scooped up) saw
an opportunity to establish a major industrial presence in
a neighbouring country but predicated on it receiving
subsidized energy at extremely preferential terms.
2. But Tata is at the end of the day a profit maximizer and
even if a new deal that is not predicated on cheap
energy but still makes sense for the company on the
basis of cheap labour or access to land in economic
zones or fiscal breaks will still make sizeable
investments here.
3. Bangladesh needs to develop a more coherent and
compelling regional economic cooperation and
integration policy especially with India.
4. Bangladesh needs to move away from an FDI policy
from India, Korea, Taiwan or elsewhere than attracts
foreign investors with the carrot of cheap gas.
5. The country needs to finalize its energy policy as soon
as possible. But let’s be more specific – Bangladesh’s
future energy policy is all about a clear strategy on coal.
Regional Economic Policy should focus on a Free Trade
Area with India
With SAARC summit taking place last week in Colombo, the
focus has naturally shifted back to issues of regional
cooperation. The headline article in the August 2 Daily Star
Business section suggested a decision on a Free Trade Area
(FTA) with India, Pakistan and Sri Lanka was due
imminently, even that day. Commerce Secretary Feroz
Ahmed stated that “Bangladesh has to consider bilateral free
trade agreements with its regional trading partners as
regional agreements such as SAFTA have failed to yield
expected results. “ Given the collapse in the Doha round of
trade talks we discuss in more detail later in this section, the
need for a more pro-active bilateral trade strategy has
increased. The specific issues involved in terms of the
optimal trade policy Bangladesh should follow are complex
2
03 August 2008
and we will discuss them in the next issue of the AT Capital
Weekly. However, in the next section, we focus on probably
the number one economic policy issue facing the country
today, namely a solution to the power crisis and the
necessary shift away from an addiction to subsidized gas
supplies towards the rapid development of our coal reserves.
Let’
Let’s cut to the chase on Energy Policy – It’
It’s about
developing the coal!
As many Dhaka residents sit through their “umpteenth”
power outage in 2008, businesses decry the shortage of gas
causing production setbacks and there is much gnashing of
teeth about the cancellation of the USD 3bn Tata investment,
the confusion, misinformation and lack of clarity on our
energy policy continues to amaze both this author and many
more learned observers of Bangladesh’s power sector.
Taking my cue from Bill Clinton’s memorable slogan in his
1992 Presidential Campaign – “It’s the Economy Stupid!” – I
am tempted to start every discussion about the power crisis
in Bangladesh with a similar slogan “It’s about hurrying up
and developing our coal reserves stupid!”
Now, I would be the first to accept that this statement will
undoubtedly draw the ire of both environmentalists and those
who live in the land of wishful thinking about the
undiscovered gas reserves in the country but I think the
country is facing a sufficiently severe energy-driven
economic crisis that will only get worse to merit some straight
talking (and indeed open discussion).
Reviewing some of the past detailed discussions on
Bangladesh’s energy policy, I was struck by two different
research reports, both from 2006. The first was from the
Energy Panel of a group called “The Bangladesh
Environmental Network” or BEN. The Panel was composed
of: Dr. Ahmed Badruzzaman (Chairperson), Dr. Sarwat
Chowdhury, Dr. Selim Hannan, Mr. Golam Kabir and
Professor Mohamed Khalequzzaman and the paper was
entitled: “ Bangladesh Energy Strategy: A brief Survey with
Recommendations”. Among notable excerpts from the report
were a few observations/strategies I concur with including a
comment that:
“Natural gas is the major indigenous, modern energy source
in Bangladesh. Its resource potential is substantial but
proved reserve is still small. With rapid growth in the
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AT Capital Weekly Update
AT CAPITAL RESEARCH
economy and population, both categories of resources will be
strained, especially as demand to replace traditional fuels
with natural gas continues to grow. This has resulted in a
spirited debate on the wisdom of export of raw gas proposed
by some. The debate is fuelled by a strong disagreement on
reserves estimates and inappropriate use of various
categories of reserves and resources to bolster arguments
by the two contending camps, for and against export of gas.”
I agree that Bangladesh should not pin its energy future on
unrealistic expectations about future undiscovered reserves.
Also the debate on the scope to export gas seems additional
wishful thinking.
I also agree with the group’s observations that:
“Institutions to support energy exploration, development and
utilization in Bangladesh often function under difficult
circumstances and with very limited resources. The
associated legal, regulatory and enforcement frameworks
are weak. It is alleged that decision-making is often non-
transparent. Bangladesh has a core group of technical
experts (geologists, engineers, economists and scientists) in
the energy sector, but a much larger group is needed to
develop plans to offer independent technical judgment, to
monitor the work of foreign companies and ultimately achieve
self-reliance. Energy economists are in short supply and
until recently, current economists in Bangladesh have not
participated in the energy debate in a significant way. This
has hampered a meaningful debate based on economic
analysis coupled with technological input. In addition,
Bangladesh needs legal experts in energy and
environmental sectors.”
On coal the BEN panel comments that:
“A significant reserve of coal has been identified. However,
Bangladesh is not prepared to mitigate the adverse effects
that arise from both upstream (extraction) and downstream
(burning) activities in utilizing coal. The proposed open-pit
mining in Phulbari raises serious water and environmental
pollution concerns. It will result in loss of rich agricultural land
in an extremely densely populated country and will displace a
large number of people from their homes.”
Nothing wrong with their comment below on gas exploration
but it cannot be the mainstay of the solution to Bangladesh’s
energy crisis:
“Significantly increase exploration activities in the gas sector
to locate additional resources and add to proved reserves.
Utilize both domestic funds and investment by international
oil companies, latter via appropriate partnerships to benefit
from the state-of-the-art-technologies and resources these
companies would bring.”
Where I disagree with their recommendations is the view that
we should:
“Postpone any decision to exploit the coal reserve by open-
pit mining until the likely severe environmental, land-use and
population displacement impacts and resultant economic
issues have been clearly understood and only when realistic,
proven mitigation plans have been developed. Perform an
in-depth cost/benefit analysis of this option. Adverse impact
of open-pit mining can last for decades and often cannot be
mitigated. “
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03 August 2008
However we sit here in Dhaka two years after that report was
published with no substantive progress on our energy policy
and a dysfunctional power generation system. Yes there is
environmental costs and dislocations of exploiting coal for
100,000 people. But they can and should be fairly
compensated. But we should not overlook the daily
dislocations to the other 150mn citizens of Bangladesh.
AT CAPITAL RESEARCH
project. Along with short term compensation, the developer
could also ensure long term packages for the dislocated
population around the mining area. One suggestion at the
BEI seminar was to give some stock of the mining company,
preference in working in the mining company, encouraging
the setting up of supporting industries etc.
In conclusion, the key to Bangladesh’s energy and hence
economic future lies in coal. Rather than recriminations over
the Tata deal, both this interim government and the next
elected one should accelerate the coal development plan as
fast as possible. Potential companies that would be
interested in the development may be from India or
elsewhere but given the level of global coal prices, despite
the recent pullback, there is unlikely to be a shortage of
interested parties.

Open Pit Mining a necessary solution

There has been a lot of discussion about the merits of

underground mining versus open pit coal extraction. Perhaps
the most lucid explanation of the necessity of open pit mining
was given at a talk on July 31 at the Bangladesh Enterprise
Institute by Mr Nazrul Islam. CEO of the Infrastructure
Investment Facilitation Centre (IIFC). Among the key issues
we would note that Bangladesh has five good quality coal
reserves in the northern part of the country. Currently, only
one mine (Barapukuria) is producing coal using underground
mining method with production capacity of 1mn MT per year
where the actual production in the previous year was 0.5mn
MT.

With Underground mining method we could recover only

441mn MT of from our five coal deposits while with the best
combination of Underground and Opencast Mining the
amount could be 1,418mn MT. For the maximum amount of
coal recovery, we should focus on the best mining method
based on the mine type. If we go for an underground method
for all the mines then 1bn MT of coal will be left underground
worth USD 100bn (Considering USD 100/MT). This has been
summarized in the table below:

Coal reserves in Bangladesh

Recoverable
Recoverable by
Depth of Deposit Estimated Reserve Recoverable by Opencast Total Recoverable
Coal Deposit Underground Mining
(m) (mn MT) Mining (mn MT) Reserve (mn MT)
(mn MT)
Jamalganj 800 – 1,150 1,053 168 N/A* 168
Barapukuria 119 – 504 390 62 270 270
Khalshpir 257 – 480 685 110 480 480
Phulbari 140 – 350 426 68 360 360
Dighipara 328 – 455 200 32 140 140
These
Total challenges could be overcome if the government or
2,754 441 1,250 1,418
the mine developer develop the appropriate rehabilitation
Source: Infrastructure Investment Facilitation Centre
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AT Capital Weekly Update 4
03 August 2008
Doha Collapse a Reflection of First World, “Chindia” political
self-
self-interest
Amid the mutual recriminations between the US, EU, India
and China on the breakdown in the Doha round of trade talks
that took place in Geneva, the reality is that immediate
domestic political self-interest, especially in the case of
Indian and Chinese farmers, overwhelmed any perceived
long-term benefits from reducing global trade barriers further.
Some estimates have suggested that the direct costs of
failure – a successful Doha round might have added another
$100bn, or one tenth of one per cent, to the world economy –
looks small in the scheme of things. Many existing tariffs are
already below the maximums in the proposed agreement.
However, as Philip Stephens noted in a July 31 column in the
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Financial Times:
“The past few decades the opening of markets and growing
economic interdependence have been a force for geopolitical
stability as well as of rising economic welfare for the world’s
poorest. We learned at the beginning of the 20th century that
globalisation offers no guarantee against war. But mutual
economic dependence does provide a powerful incentive to
settle political differences. The present strains on the world
economy, notably the imbalance between supply and
demand of raw materials and a rising protectionist clamour
threatens this progress. And it threatens it at a moment of
huge geopolitical upheaval as the global order adjusts to the
emergence of China and India as great powers.”
The experience of the collapsed Doha trade talks gives little
comfort the world can effectively negotiate an effective
agreement on a far more complex and intractable problem,
namely climate change.
5
03 August 2008 AT CAPITAL RESEARCH
Stock Market Weekly
DSE performance: 52 weeks Market news

• The market continues its bearish run

• Direct listing of Titas maintains its disappointing
performance
• Banks continue earning bumper profits
• Grameenphone submits IPO prospectus to SEC
• Olympic Industries gets SEC nod to issue shares
• Steel maker BSRM submits IPO prospectus
• IDLC Securities signs panel broker deal with Trust
Bank

DSE performance: 30 days Regional stock market performance (last week)

Market summary Valuation snapshot

DSE General Sector P/E

Index performance DSE 20
Index Feb-08 Mar-08 Apr-08 May-08
Opening of this week 2,878.1 2,636.1 Banks 24.8 21.9 22.2 22.6
Closing of this week 2,761.1 2,526.2 Cement 12.8 14.7 14.7 17.6
Change within a week (%) -4.1% -4.2% Ceramic 28.1 43.2 43.7 42.7
Change within a week (Point) -117.0 -109.9 Engineering 30.2 33.7 38.9 41.4
Food & Allied 22 24.5 28.2 28.5
Fuel & Power 28.1 28.3 25.8 26.2
This Last %
Capitalization and turnover Insurance 22.1 23 28.1 32.4
Week Week Change
Investment 22.4 40.5 64.9 65.2
Number of Trading Days 5 5
IT 16.6 18.3 18.4 17.6
Market Capitalization (USD bn) 13.96 14.12 -1.2%
Jute 8.8 18.6 16.4 16
Total Turnover (USD mn) 232 242 -4.1%
Miscellaneous 20.1 22.3 23 25.9
Daily Avg. Turnover (USD mn) 46 48 -4.1%
Paper & Printing 6.9 11 9.2 9.5
Total Volume (mn) 110 109 1.0%
Pharmaceuticals 20.2 25 26.7 29.8
Daily Avg. Volume (mn) 22 22 1.0%
Service & Real Estate 8.8 10.8 20.5 19.5
Tannery 15.3 19.9 25.1 23.1
This Last
Weighted avg. P/E Ratio* Issues Textiles 11.8 14.6 14.9 14.4
Week Week
Source: Dhaka Stock Exchange
This Week 21.02 Advanced 63 94
Last Week 22.14 Declined 183 151
% Change -5.06% Unchanged 8 4
*Weighted on Market Cap. Not Traded 33 37

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AT Capital Weekly Update 6
03 August 2008
Weekly Stock Market Commentary
The market continues on a bearish streak
The DSE started the week with a modest gain of 0.24% on
Sunday, but fell for the next four days. The average daily
trading volume was similar to that in the previous week. The
benchmark DGEN index fell by 4% to 2761, its lowest level in
the last ten months.
However, one should note that part of the fall (roughly 0.7%)
can be attributed to the incorrect reflection of the Islami Bank
25% stock dividend announcement. While the index reflects
the expected fall in share price (20%), the increased number
of shares in issue are not reflected until bonus shares are
credited to beneficiary owner (BO) accounts in the coming
weeks. As such we believe the real fall is 3.3%.
Titas direct listing – running out of gas?
Titas gas continued its poor run. By close of week, Titas sold
only 3% of the total issue where its BDT 302 price stood at its
lowest point since it was first offered at BDT 750, on the 2
July. The Titas listing raises a few questions: 1) Why has
there been so little interest? 2) It is the largest issue to date -
is the market too shallow to absorb a USD 30m listing? 3)
What impact will this have on the privatization of State
Owned Enterprises (SOEs) via a direct listing?
Direct listing is the only method available to dispose of SOEs
via the public markets. While direct listing may be used to
divest non-SOE assets, it has been used infrequently, when
Square Pharma divested Square Textiles, and ACI has
recently announced it will use this method for one of its
subsidiaries. SOE’s Jamuna Oil, Meghna Oil, Desco and
Power Grid were all listed successfully via direct listing. In
the case of Meghna in 2008, shares changed hands at a
37% premium to the initial offer price within 2 days of the
issue.
The Titas offering, has not quite been the same. It seems
that timing has played a role. Titas has come to market in the
month, where market watchers are yet to conclude if we are
entering a bear market or simply experiencing a timely
correction. It seems reasonable to assume, that earlier in the
year an initial issue price of BDT 750 (25x P/E), which
nobody took up, may have found buyers given the SOE oil
companies listed at between 40-80x PE! Shares are now on
offer for BDT 302 (9.8x P/E). From what initially started as
investors tightening their purse strings, waiting for the market
to find a digestible equilibrium, has turned into a waiting
game to see how much lower the stock can fall. Another
interesting feature of the Titas listing is its size. All other SOE
issues ranged from USD 2m to USD 13m, while Titas aims to
dispose of USD 30m shares. Time will tell if the market has
the appetite for such a large issue, but clearly market depth
is a key determinant of success of any large listings in the
pipeline. The Titas listing also raises questions around the
government’s favoured direct listing method for SOEs,
especially as there are no other methods available to do this
via public markets. If one concludes that the issue size was
simply too large, this may lead to questions about the ‘10%
of share capital rule’ for large SOE’s, given that Titas is at
risk of being delisted if it fails to sell 10% its share capital. On
the other hand, if we see investors wait till the last moment
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and buy at lower prices, it is hard to see that the government
will stand by and watch a repeat of this debacle.
SOE Direct Listings
100
88.8
90
80
70
56.6
60
50
40 34.5
30
20 13.3
10 5.9 4.6 2.0 1.8
0
Power Grid (2006) DESCO (2006) Jamuna Oil (2008) Meghna Petrolium
(2008)
P/E at Issuance Issue Size(Million USD)
Banks continue to announce bumper profits
Half yearly announcements season continued last week.
Islami Bank, the largest private sector bank in the country
announced 59% growth in half year net profits (its price rose
by 3.1% on announcement). Its equity base increased by
18% year on year and it raised BDT 3bn (USD 43.5mn) tier II
capital through a bond issue. Bank Asia announced half
year earnings growth of 22.2% while its equity base
increased by 32%. Southeast Bank’s half year earnings grew
by 8.4% while its equity base increased by 21% last year.
Mercantile Bank’s half year earnings and equity base grew
by 31% and 30% respectively.
However, a note of caution on some banks with seemingly
bumper profits - banks had to increase their equity base, last
year, with retained earnings to support their asset growth. If
earnings growth is lower than the growth of the equity base,
one will see decreases in the return on equity. ICB Islamic
Bank reported half year earnings of BDT 138mn (USD 2mn).
A promising start for the bank’s new owners who inherited
significant accumulated losses and a book of poor quality
assets from the failed Oriental Bank. Banking system credit
grew by 20%, year on year, to USD 28bn as at June 30,
2008. Private commercial banks (PCBs) accounted for 93%
of total credit growth, with their credit growing by 35% last
year. With credit growth of 93%, BRAC bank was the fasted
growing bank.
Rupali Bank continues to struggle with no trades in the week.
With reported losses of more than BDT 11bn (USD 160mn)
in 2007, negative net worth of BDT 10bn (USD 145mn) and
no fresh privatization initiatives on the horizon, investors are
not showing much interest in its stock.
Mutual Funds - ‘What’s NAV got to do with it?’
nd
The shares of the 2 NRB mutual fund, the largest mutual
fund in the country to date, had its debut trading on Sunday.
It gained 90% on the first day of trading but fell by 10% in the
next four days. We will be discussing mutual funds and their
propensity to trade at significant premia to their net asset
values in an upcoming edition.
7
03 August 2008
Stock Market News
DSE indices fall for fourth day
The Daily Star, Friday, August 1, 2008
The Dhaka Stock Exchange (DSE) price indices fell on
Thursday for the fourth consecutive day. The higher fall in
DSI index was due mainly to a fall in the share prices of
United Commercial Bank shares (UCB), a Z category share
that is a part of DSI but not the DGEN. On Thursday, prices
of UCB shares came down by 50.7% at BDT 3,242.3 (USD
47.3) by close of trade. The UCB price fell sharply as the
previous day was a record date for its stock dividend. A total
of 54,275 shares of the bank worth BDT 165.3mn (USD
2.4bn) were traded. The DSE General Index declined by
40.38 points, or 1.44%, to 2,761.04 points, while the DSE All
Share Price Index fell by 57.04 points, or 2.35 %, to 2,369.03
points.
The market started with a steep fall in the price indices. The
market fell for the first one and half hours and then remained
unchanged for next half an hour. However, in the last two
hours of trading the market fell again at a steady rate. Most
of the share prices dropped yesterday. Of the total 227
issues traded on the premier bourse, 52 gained, 165 suffered
losses and 10 remained unchanged. The market turnover
also came down to BDT 2,696.1mn (USD 39.4mn). A total of
17,817,440 shares were traded on the prime bourse on
Thursday. Apart from the UCB share price slide, the insiders
said, the investors' shakiness to invest in the stock market is
another major reason behind the falling share prices.
http://www.thedailystar.net/story.php?nid=48356
48356
ICB declares dividends on 8 mutual funds, unit fund
The Daily Star, Thursday, July 31, 2008
The Investment Corporation of Bangladesh (ICB) declared
dividends on its eight mutual funds and on the unit fund for
the year 2007-08. The ICB declared a 265% dividend on the
first mutual fund and 75% for the second, 65%, 60%, 45%,
30%, 30% and 25% for the third through eighth mutual funds
and BDT 20 (USD 0.3) per unit on each unit fund for the year
ended June 30, 2008.
http://www.thedailystar.net/story.php?nid=48243
Steel maker BSRM submits IPO prospectus
The Daily Star, Thursday, July 31, 2008
BSRM Steels Ltd, the country's only manufacturer of 500
grade steel rod, has submitted a draft prospectus for IPO to
the Securities and Exchange Commission (SEC). The
company is looking to raise BDT 200mn (USD 2.9mn) to fund
further expansion of its business. If approved, BSRM will
float 2,000,000 ordinary shares of BDT 100 (USD 1.5), which
will be added to its existing paid up capital of BDT 1.3mn
(18.3mn). The authorized capital of the company is BDT 2bn
(USD 29.2mn). Sources said almost all the necessary works
have already been done and the proposal may be placed
before the upcoming commission meeting of the SEC.
http://www.thedailystar.net/story.php?nid=48246
Grameenphone submits IPO prospectus to SEC
SEC
The Daily Star, Wednesday, July 30, 2008
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Grameenphone, the country's leading mobile phone
operator, submitted a draft prospectus of the largest-ever
initial public offering (IPO) to the stock market regulator for
raising USD 150mn (around BDT 10bn) on Tuesday.
Grameenphone, which has recently been valued at USD
3.2bn, wants to offer each share at BDT 18 (USD 0.26)
including a premium of BDT 17 (USD 0.25). The raised
capital will be used for Grameenphone's network
development programme.
As of 2007, earning per share of Grameenphone was Tk
1.50. When asked, Sighed Yamin Bakht, Director (Public
Relation) of Grameenphone, said, “The draft prospectus of
Grameenphone IPO was filed with the SEC and it is a
confidential document. The version linked with the DSE
website will not be the full version. We can only file the full
version of the IPO prospectus after receiving approval from
the SEC.”
Unlike other IPOs, details of the IPO prospectus will not be
published on Dhaka Stock Exchange's (DSE). Instead, a
brief version of the prospectus will be published on the
website where details such as the paid up capital, authorised
capital, earning per share, market lot and premium may not
be available, according to sources. The sources also said
that there are some legal issues and all the information could
not be published right now, but will be published shortly.
Grameenphone also submitted the pre-IPO plan to the
Securities and Exchange Commission (SEC) for approval to
raise another $ 150 million through private placements on
Tuesday.
Arif Al Islam, Chief Financial Officer of Grameenphone,
formally submitted both the IPO and pre-IPO prospectuses to
SEC Chairman Faruq Ahmad Siddiqi. In a short press
briefing, he said that by the end of this year Grameenphone
will be the largest listed company in the country's stock
market, which will be a milestone for Bangladesh's capital
market. Citigroup Global Markets Bangladesh Limited is the
issue manager of the Grameenphone IPO. Norway's Telenor
owns a 62% stake in Grameenphone, which launched its
operations in 1997, with the remaining 38% being held by
Grameen Telecom, a concern of Grameen Group.
According to Telenor's financial report, the company's
revenue, which is around NOK 4.6bn (USD 895.1mn) was 7
% higher in 2007 compared to its revenue in 2006. Its
operating profits, however, dropped sharply by about 33 % to
NOK 1.3bn (USD 240.3mn) during the year compared to
NOK 1.8bn (USD 356.1mn) in 2006.
http://www.thedailystar.net/story.php?nid=48056
Olympic Industries gets SEC nod to issue shares
The Financial Express, Thursday, July 31, 2008
The Olympic Industries Limited has stated that the Securities
and Exchange Commission (SEC) has approved its
proposed issue of 205,472 ordinary shares of BDT 100 (USD
1.5) each amounting to BDT 205.5mn (USD 3.0mn) thereby
increasing the paid-up capital of the company from BDT
17.3mn (USD 0.25mn)to BDT 19.3mn (USD 0.28mn).
http://www.thefinancialexpress-
bd.info/search_index.php?page=detail_news&news_id=41248
41248
8
03 August 2008 AT CAPITAL RESEARCH
Turnover leaders Best performers* Worst performers*
(All fig. in mn) BDT USD
% Change % Change
Beximco Pharma 1,067 15.6 Grameen Mutual One UCBL
33.2 -48.8
UCBL 876 12.8 Wonderland Toys Fareast Islami Life
29.0 -32.0
Keya Cosmetics 789 11.5 Apex Spinning. 7th ICB M.F.
17.4 -29.5
BEXIMCO 763 11.1 Bd.Thai Aluminium Confidence Cement
17.1 -18.9
Square Pharma 653 9.5 Progressive Life Lexco
16.9 -18.5
Grameen Mutual One 593 8.7 Standard Ceramic Bionic Sea Food
14.4 -17.1
BATBC 562 8.2 Orion Infusion Islami Bank
12.1 -17.0
ACI Limited. 561 8.2 Square Textile 5th ICB M.F.
11.9 -16.4
LankaBangla Finance 548 8.0 Sonargaon Textiles Peoples Insurance
11.1 -16.3
Square Textile 537 7.8 3rd ICB M.F. ICB
11.1 -16.2

*By closing price

Market cap. by sector* Correlation with other Indices*
Banks 55.1% S&P FTSE NIKKEI KSE
Pharmaceuticals 10.9% 500 DJIA 100 SENSEX 225 100 DSE
Fuel & Power 10.4% S&P 500 1.00
Insurance 5.9% DJIA 0.94 1.00
Cement 5.6% FTSE 100 0.65 0.63 1.00
Engineering 2.7% SENSEX -0.09 -0.13 -0.07 1.00
Miscellaneous 2.7% NIKKEI 225 -0.13 -0.12 0.07 0.53 1.00
Foods 1.9% KSE 100 0.02 0.03 0.07 0.24 0.29 1.00
Textile 1.8% DSE -0.14 -0.22 -0.12 0.17 0.12 0.16 1.00
Tannery 1.5% * Based on the last 65 monthly returns
Service & Real Estate 0.9%
IT 0.4%
Ceramics 0.1%
Paper & Printing 0.07%
Jute 0.03%
Total 100%
*As of May 31, 2008

Research Team

Professor Jahangir Sultan Shahidul Islam

Senior Advisor Investment Manager
jahangir.sultan@at-capital.com shahid.islam@at-capital.com

Rashed Hasan Syed Najibullah

Research Associate Research Assistant
rashed.hasan@at-capital.com syed.najibullah@at-capital.com

_______________________________________________________________________________________
AT Capital Weekly Update 9
03 August 2008 AT CAPITAL RESEARCH
Economics

Export figures across different sectors (USD millions) Market

Market news

Jul-
Jul-Apr Jul-
Jul-Apr • Overall trade deficit rises to USD 6.4bn
Particulars Growth
2006--07
2006 2007--08
2007
Raw jute 124.84 143.36 14.83%
• Investment in saving tools declines in 2007-08
Jute goods (excl. carpets) 268.62 265.96 -0.99%
Tea 5.21 13.96 167.95%
Frozen food 416.87 449.39 7.80%
• Apparel industry faces new challenge of taka
Leather 221.79 236.75 6.75% appreciation
RMG woven 3,814.45 4,185.50 9.73%
RMG knit 3,661.00 4,392.71 19.99% • Govt signs USD 50mn credit deal with IDA
Chemical products 144.26 153.20 6.20%
Agro products 45.64 74.76 63.80% • Tata walks out on investment plan
Engineering & electronic
196.03 176.47 -9.98%
goods
Others 1,014.08 1,273.67 25.60%
Source: Export Promotion Bureau Share of total exports, Jul-
Jul-Apr 2007-
2007-08

Recent export
export trends (USD millions)

A. Annual exports 2004-05 2005-06 2006-07

8,654.52 10,526.16 12,177.86
(+13.83) (+21.63) (15.69)
B. Monthly exports Month 2007-08 2006-07
July 902.33 1,143.36
August 1,129.08 1,155.85
September 1,042.85 950.07
October 941.48 870.78
November 1,144.47 916.04
December 1,329.70 1,174.88
January 1,231.97 816.39 Source: Export Promotion Bureau
February 1,198.91 979.23
March 1,224.65 1,010.05
Import L/Cs opened across different sectors, Jul-
Jul-Apr
April 1,203.97 875.04
2007-
2007-08
May 1,269.35 1,043.95
12,638.86 10,958.62
July-
July-May
(+15.33) (+16.56)
Source: Export Promotion Bureau

Latest treasury yields

Weighted average
Auction date Tenor & security type
yield
20-Jul-08 91-day T-bill 7.78%
20-Jul-08 182-day T-bill 8.01%
20-Jul-08 364-day T-bill 8.51%
15-Jul-08 5-year T-bond 10.60%
1-Jul-08 10-year T-bond 11.72%
8-Jul-08 15-year T-bond 12.14%
22-Jul-08 20-year T-bond 13.07%
Source: Bangladesh Bank Source: Export Promotion Bureau

S Adeeb Shams
Research Associate
adeeb.shams@at-capital.com

_______________________________________________________________________________________
AT Capital Weekly Update 10
03 August 2008
Economics News
Economic News
Overall trade deficit
deficit rises to USD 6.4bn
The Financial Express, Tuesday July 29, 2008
Bangladesh's total trade deficit rose to USD 6.4bn in 2006-
07, an increase of 28% from USD 5bn in 2006-07, according
to officials in the Commerce Ministry. Provisional estimates
reveal imports worth USD 20.4bn, while exports accounted
for USD 14bn during the fiscal year. The year 2007 was
particularly bad for Bangladesh because of factors: 1) two
major floods and a devastating cyclone, and 2) global price
rises in major commodities.
The trade deficit, the highest ever, is due, in part, to a 385%
increase in rice imports to meet production shortfalls largely
due to natural calamities in the year. The Finance Ministry
and donor agencies have estimated that rice worth in excess
of USD 600mn was lost last year. Furthermore, despite a
drop in domestic consumption of petroleum last year, imports
costs were 12% higher, as a result of a significant increase in
global oil prices.
Other than rice, higher payments were made for items such
as wheat, edible oil, milk powder, fertilizers, iron and
chemicals. Central bank statistics reveal that the import of
food grains and other consumer goods rose by 143% and
45%, respectively from the previous fiscal.
http://www.thefinancialexpress-
bd.info/search_index.php?page=detail_news&news_id=41113
Investment in saving tools declines in 2007-
2007-08
The Financial Express, Wednesday July 30, 2008
Investment in saving instruments by small savers has
declined by 34% in 2007-08, according to the National
Savings Directorate (NSD). The NSD reports that it received
net investment worth BDT 25.2bn (USD 367.4mn) in 2007-
08, a decline by BDT 16.58bn (USD 242.1mn), a 34%
decline.
While investment in savings certificates, in the first half of the
fiscal year, July to Dec 08, were particularly depressed, at
BDT 7.9bn (USD 115mn), certificate sales picked up sharply
at BDT 17.3bn (USD 252.3mn) in Jan to June 08.
Internal Resources Division (IRD), Secretary Muhammad
Abdul Mazid, commented that the decline was caused by
diversion of investment into the capital markets, with 2007’s
bumper stock market year as well as general increases in
living costs which restricted many small savers’ investment
capacity. The 2006-07 imposition of a 10% tax on interest
income above BDT 150,000 (USD 2,190) also made the
capital markets a more attractive investment destination.
http://www.thefinancialexpress-
bd.info/search_index.php?page=detail_news&news_id=41171
Apparel industry faces new challenge of taka appreciation
The Financial Express, Wednesday July 30, 2008
The UNB reported that if the Bangladeshi taka continues to
strengthen against the US dollar, it poses a significant threat
to the recent rebound in RMG exports. The dollar has
already fallen by over 4% to BDT 67, compared to the BDT
_______________________________________________________________________________________
AT Capital Weekly Update
AT CAPITAL RESEARCH
70+ terms that were contracted at the end of 2006.
Furthermore, production costs have escalated by between
10-15%, owing to fuel price rises and increased input costs,
with concerns over wage inflation further eroding diminishing
margins. All this comes at a time when the price of rice has
almost doubled in the last year. The President of the
Bangladesh Knitwear Manufacturers and Exporters
Association (BKMEA) Fazlul Hoque has said that it will be
extremely difficult to maintain export growth if the dollar
slides further.
The sector suffered negative growth in the first half of 2007-
08, owing to political unrest and the anti-corruption drive, but
recovered during the second half due to improved political
stability and the taka weakening against the dollar. From
July 07 to May 08, , knitwear exports registered a 21% rise
to USD 4.9bn from the same period in the previous fiscal,
while the export of woven garments increased by 11% to
USD 4.6bn. Overall RMG exports reached USD 9.6bn an
increase of 16% year on year.
http://www.thefinancialexpress-
bd.info/search_index.php?page=detail_news&news_id=41186
Govt signs USD 50mn credit deal with IDA
bdnews24.com, Thursday July 31, 2008
The government has signed a USD 50mn credit agreement
with the International Development Association, the low-cost
lending arm of The World Bank, as a means to rehabilitate
families affected by last year's Cyclone Sidr in coastal areas
in the south west. The funds will be disbursed under the
Social Investment Program Project (SIPP) to support rural
infrastructure development and income generating activities
for the poorest. The project is expected to cover fourteen of
the worst affected upazilas and will assist almost one million
people, by helping restore assets and livelihoods.
http://www.bdnews24.com/details.php?id=58579&cid=4
Tata walks out on investment plan
bdnews24.com, Thursday July 31, 2008
Tata Group has been forced to abandon a USD 3bn
investment plan in Bangladesh after it failed to win
commitments from the government for the supply of natural
gas to the projects. A spokesperson for the Indian
conglomerate said that the Bangladesh government will not
be in a position in the foreseeable future to grant the projects
the natural gas commitment they would require.
Tata had planned to set up a steel plant with an annual
capacity of 2.4mn tonnes. It also had plans of running two
power plants – a fertiliser plant with the capacity of producing
1 mn tonnes of urea annually, as well as an opencast coal
mine.
http://www.bdnews24.com/details.php?cid=4&id=58604
11
03 August 2008
Sector News
Agriculture
Milk Vita posts record profit
Bdnews24.com, Saturday July 26, 2008
Milk Vita, branded dairy products, manufactured, by the
Bangladesh Milk Producers Co-operative Union, announced
record profits, at its AGM, of BDT 114.5mn (USD 1.7mn) in
fiscal 2007-08, a BDT110.9mn (USD 1.6mn) increase from
BDT 3.5mn (USD 0.1mn) in fiscal 2006-07.
Increased profits were driven by sales growth, with the
company paying on average, BDT 7 (USD 0.1) higher per
litre of milk than in the previous period with average
expenditure increasing by BDT 12mn (USD 0.17mn) a
month.
Milk Vita is Bangladesh's largest dairy cooperative and the
leading supplier of fresh milk and dairy products such as
butter and yogurt. Milk Vita sells milk and milk products by
collecting milk from remote places through networks
established by its primary co-operative societies.
The government has also announced it will set up a "National
Dairy Development Board or Council" to control the quality of
milk and milk products.
http://www.bdnews24.com/details.php?cid=4&id=58226
Shrimp hatcheries
hatcheries suffer BDT 100
1000mn
000mn (USD 1.5mn) loss
The Daily Star, Thursday July 31, 2008
Shrimp hatcheries have incurred about BDT 1000mn (USD
1.5mn) losses this year because of a sharp decline in the
price of fry amid poor demands from farmers. Almost all the
hatcheries have suffered losses due to falls in Bangladesh
shrimp prices in global markets, as they face stiff competition
from a species of shrimp called Vannamei cultivated in
countries such as Vietnam, Thailand and China. Farmers
have also been moving production to rice cultivation with
global rice prices increases.
Fear over the US recession has pushed shrimp prices down
in global markets with price of each pound of shrimp (16-20
grade) declining to USD 4.50-4.30 until April this year from
USD 5.80-5.30 a year ago. A fear of cancellation of
consignments by the EU also affected the price of shrimp.
http://www.thedailystar.net/story.php?nid=48219
SAARC Food Bank starts functioning soon
The Daily Star, Wednesday July 30, 2008
th
Following the first day of the 35 SAARC Standing
Committee, members announced they will make the SAARC
Food Bank operational immediately to member states
following concerns over food security. Foreign secretaries of
South Asian countries also agreed on the transfer of
technology and extending institutional support for increasing
production in agriculture sector. The SAARC Council of
Ministers comprising foreign ministers, will finalize the
Standing Committee's recommendations on these matters.
At least two agreements concerning SAARC Development
_______________________________________________________________________________________
AT Capital Weekly Update
AT CAPITAL RESEARCH
Fund (SDF) and SAARC Regional Standardization
Organization (SARSO) will be signed at the summit on
August 2-3. The headquarters of SARSO will be set up in
Dhaka.
http://www.thedailystar.net/story.php?nid=48113
Fish hatchery law on cards
The Daily Star, Monday July 28, 2008
It has been announced the ‘Hatchery Ordinance 2008’, will
be introduced in an attempt to improve standards in the fish
hatchery industry which has grown sporadically in the last
two decades, out with any regulatory framework, aside from
general trade licenses. The draft legislation makes it
mandatory for hatcheries to comply with plant standards
regulating the use of appropriate pumps, aeration, waste
disposal and storage facilities.
There are 58 shrimp hatcheries supplying about 8000mn to
1,0000mn shrimp spawn to meet the demand in shrimp
farming, largely in the country's south-western coastal belt. In
addition, about 30 fresh water shrimp and some carp
hatcheries are also meeting demand for cultured fish.
http://www.thedailystar.net/story.php?nid=47757
Aviation
Biman expecting a decline in losses
The Daily Star, Wednesday July 30, 2008
The loss incurred by Biman Bangladesh Airlines in 2007-08
is likely to be significantly lower than provisional estimates of
around BDT 5.5bn (USD 80.2mn). The airliner is anticipating
its loss will stand at BDT 800mn (USD 11.7mn), compared to
loss of BDT 2.7bn (USD 4mn) in 2006-07. Officials have
quoted an improvement in efficiency, coupled with reduced
pilferage, as key contributors towards this reduction in
losses.
The government converted Biman into a public limited
company in July 2007 and freed liabilities in excess of BDT
17bn (USD 24.8mn) from Bangladesh Petroleum Corporation
and Civil Aviation Authority. The government also cut back
on the total number of employees by 1,800, to cut costs. The
company has reduced the number of international routes by
as many as eight, amidst an acute shortage of aircraft. The
company successfully sealed a ground-breaking deal with
Boeing earlier last month, through which it will be procuring
brand new aircraft.
http://www.thedailystar.net/story.php?nid=48055
GMG may resume flights on suspended routes from next
month
The Financial Express, Sunday July 27, 2008
GMG Airlines, the country's largest private airliner, plans to
resume flights on certain international routes from next
month. The company was earlier forced to suspend flights to
12
03 August 2008 AT CAPITAL RESEARCH
Bangkok, Dubai, Kathmandu and New Delhi after a 30% and they will benefit from an extended period of two months.
increase in the price of jet fuel. The central bank will select the top three PDs giving due
http://www.thefinancialexpress-
consideration to their performance on participations in
bd.info/search_index.php?page=detail_news&news_id=40907 primary auction and secondary transactions of government-
approved securities on a quarterly basis. Under the
guidelines, each of the bank and non-bank PD will underwrite
Banking a minimum of 12% and 4% of the auction amount
respectively. Earlier, the central bank selected nine PDs -
Private banks' eight banks and a non-banking financial institution (NBFIs) to
banks' credit grows 35%
35% in one year
The Daily Star, Tuesday July 29, 2008 handle government-approved securities in the secondary
bond market. Under the guidelines, the PDs will subscribe
Private commercial banks (PCBs) witnessed 35% credit and underwrite primary issues and make secondary trading
growth between June 2007 and June 2008. However, the deals with two-way price quotations. A PD will not short-sell
23% growth in their deposit base shows a clear disparity any particular issue and will not hold a short position in
between credit and deposits. According to a Central Bank secondary dealings. The PDs will not act as inter-bank or
report this was driven by increased credit provided to retail inter-dealer brokers as specified in the guideline.
consumers. The sector’s credit reached BDT 1,908.40bn
http://www.thefinancialexpress-
(USD 27.87bn) up to 26 June 2008, a 20% increase from
bd.info/search_index.php?page=detail_news&news_id=41282
BDT 1,596.80bn (USD 23.32bn) on 28 June 2007.
BB permits 14 banks to open 100 SME centres
Top 5 PCBs in terms of credit growth in % The Financial Express, Monday July 28, 2008
Figures in June 26, June 28, Growth
USD mn 2008 2007 in % The central bank has given permission to 14 commercial
BRAC Bank 657.9 341.0 92.9% banks for opening around 100 SME service centres across
Standard Bank 319.7 194.8 64.1% the country by December 31, 2008 to improve financing for
the country's small and medium enterprises (SMEs).
Shahjalal Bank 376.5 238.0 58.2%
The banks - 13 private commercial banks (PCBs) and a
Trust Bank 329.9 212.2 55.5% foreign commercial bank (FCB) will have to collect their
UCBL 598.0 406.5 47.1% licenses by November 30, 2008 to open such centres. The
service centres will also facilitate disbursement of inward
remittances to the recipients in the country's remote areas.
Top 5 PCBs in terms
terms of absolute credit figure
Figures in June 26, June 28, Growth
USD mn 2008 2007 in % Bangladesh Bank will cancel permission, if any bank fails to
open the centres within the stipulated timeframe. Notabley,
Islami Bank 2719.9 1995.3 36.3%
on 5 May 2008, the Bangladesh Bank (BB) had asked the
Prime Bank 993.4 700.6 41.8%
banks to submit applications by June 15, 2008, seeking
Pubali Bank 771.3 697.0 10.7%
permission to set up SME service centres. The central bank
Southeast Bank 720.9 596.7 20.8% also instructed the scheduled banks to follow the guidelines
AB Bank 713.5 501.0 42.4% for establishing such centers, under which the banks will
provide services only to SME clients through the centres.
Of the total credit, PCBs accounted for BDT 1,141.8bn (USD http://www.thefinancialexpress-
16.7bn), state-owned banks accounted for BDT 481.36bn bd.info/search_index.php?page=detail_news&news_id=40978
(USD 7.03bn), foreign commercial banks accounted for BDT
148.3bn (USD 2.17bn) and specialised banks accounted for
BDT 137.0bn (USD 2bn). During the period, the overall Infrastructure & Energy
growth of the banking sector was 20%. Some commentators
believe such credit growth will exacorabate inflationary Two small rental power plants go into operation
pressures, with the IMF suggesting tighter monetary policy. The Financial Express, Sunday August 3, 2008
However earlier this month the Bangladesh Bank opted for
an expansionary policy promoting private sector led growth. Two small rental power plants (RPP) have commenced
commercial operation supplying about 90MW of electricity to
http://www.thedailystar.net/story.php?nid=47923 the national grid. These are among six private sector plants
approved by the government in early 2008 with a total
Primary dealer banks, NBFI facing liquidity shortfall generation capacity of 220 MW. Another RPP Shahajibazar
The Financial Express, Thursday July 31, 2008
50 MW power unit is expected to go into commercial
production by the third week of August 2008. Two other
Primary dealer (PD) banks and a non-banking financial
rental power projects, the Fenchuganj 50 MW unit and Bogra
institution (NBFI) are facing liquidity problems as amended
20 MW unit is expected to launch operations in a month.
guidelines have squeezed support from the central bank.
Under the amended guidelines, the PDs will be given liquidity
http://www.thefinancialexpress-
support facilities against devolved treasury bills and bonds
bd.info/search_index.php?page=detail_news&news_id=4158
for a maximum period of one month from the date of issue of
4
such securities. Additionally, three top performing PDs will be
selected on the basis of their success ratios and turnover,

_______________________________________________________________________________________
AT Capital Weekly Update 13
03 August 2008
Petrobangla to contest Chevron's case with WB's arbitration
The Independent, Friday August 1, 2008
Petrobangla has decided to contest the case filed by
Chevron with the International Centre for Settlement of
Investment Dispute (ICSID), an autonomous arbitration
institute of the World Bank, to settle a dispute over payment
of a gas-business charge. The issue of a 4% payback on
account of a wheeling charge is a long standing issue .
Chevron claimed that the 4% wheeling charge is applicable
only if it uses Petrobangla's pipeline to supply gas to other
parties, but the company has been supplying gas from three
gas fields only to Petrobangla. Chevron said the company
sought ICSID arbitration in March 2006 only after the parties
(Petrobangla and Chevron) were unable to amicably settle
this longstanding dispute. If Petrobangla is defeated, it will
have to repay about USD 40mn, the amount it has deducted
as wheeling charge since 1999.
http://www.theindependent-bd.com/archive.details.php?nd=2008-08-
01&nid=92073
Country needs USD 8bn investment in energy sector: ICC-
ICC-B
The Daily Star, Thursday July 31, 2008
According to the International Chamber of Commerce-
Bangladesh (ICC-B), the country needs investment of USD
8bn in the energy sector by 2025, if it is to become a Middle
Income Country (MIC). The chamber said the energy crisis is
the most critical issue facing the country to achieve its goal
by 2015.
Quoting energy experts, the chamber said Bangladesh is
facing three roadblocks for development: lack of a proper
strategy to cope with the increasing demand for power,
depleting natural gas reserves, and significant price rises in
petrol and food.
http://www.thedailystar.net/story.php?nid=48238
Draft renewable energy policy reviewed
The Financial Express, Friday August 1, 2008.
The power ministry, headed by power secretary Dr M Fouzul
Kabir Khan, reviewed the draft Renewable Energy Policy and
expedited its adoption to explore ways in which renewable
energy sources may be developed. Infrastructure
Development Company Ltd (IDCOL), the Local Government
Engineering Department (LGED), Grameen Shakti, the
Bangladesh Power Development Board (BPDB) and the
Rural Electrification Board (REB) provided their comments
on the draft policy during the meeting. An inter-ministerial
meeting is expected to be held soon, before placing it to the
council of advisers for final approval. The proposed
renewable energy policy is likely to help the growth and
expansion of renewable energy projects and explore
opportunities for community based renewable energy options
for different applications in off-grid areas of Bangladesh.
Renewable energy contributes around 15 MW, less than 1%
of total electricity generation. Chief Adviser Dr Fakhruddin
Ahmed this month launched a national campaign to promote
the use of renewable energy and urged all concerned for the
efficient use of energy.
_______________________________________________________________________________________
AT Capital Weekly Update
AT CAPITAL RESEARCH
http://www.thefinancialexpress-
bd.info/search_index.php?page=detail_news&news_id=4132
1
Petrol use fall by 50% following rise in prices
The independent, Thursday July 31, 2008
Following the recent 35% increase in petrol prices in July,
sales in octane and petrol have fallen sharply to 4,000 MT
and 7,000 MT respectively (from 8,000 MT and 15,000 MT in
June). Recent price increases have accelerated consumers
converting their vehicles to compressed natural gas (CNG).
According to the Bangladesh Economic Review 2008, about
113,995 motor vehicles were converted to CNG, while 165
CNG re-fuelling stations and 108 CNG conversion plants
were set up in 2007.
Following the substantial fall in consumption, the BPC have
estimated that demand for petroleum will fall by 200,000MT
in 2008. In 2007, the BPC imported about 3.7mn MT of
petroleum oil at a cost of nearly BDT 160bn (USD 2.3bn).
http://www.theindependent-bd.com/details.php?nid=91915
USD 136.07m
136.07mn plan to streamline rural power lines
The New Nation, Wednesday, July 30, 2008
Two projects to reduce system loss (from 15% to 2%) and
improvement of existing distribution lines in Rajshahi and
Khulna-Barisal, have been announced as a joint initiative by
the Rural Electrification Board (REB) and the Japan
International Bank for International Cooperation (JBIC). The
REB is hoping to start implementation of the USD 136mn
projects by December 2008.
http://nation.ittefaq.com/issues/2008/07/30/news0075.htm
68 industries in Chittagong to get gas
The independent, Tuesday, July 29, 2008
A 15-member high level gas and power committee decided
to supply gas to the 68 industrial units in Chittagong at a total
cost of BDT 35bn (USD 511.1mn) in phases during the next
6 to 9 months. According to Chittagong Chamber of
Commerce and Industry (CCCI) more than 200 industrial
units now await going into production. Of them 68 industrial
units are fully ready to start production. But due to shortages
of gas they are yet to commence operations. The total
demand for gas in Chittagong is 330 mmcft while Bakhrabad
Gas Systems Limited is only supplying 250 mmcft of gas
daily met by the production at Sangu, Bakhrabad, Feni,
Salda, and Meghna gas fields.
http://www.theindependent-bd.com/archive.details.php?nd=2008-07-
29&nid=91717
Three small power
power plants to get funds under IPFF soon
The Financial Express, Tuesday July 29, 2008
Under the Investment Promotion and Financing Facility
(IPFF) Project, the central bank is working to disburse funds
to three power projects with capacity of 44MW through two
private commercial banks and a financial institution. The
World Bank has approved the USD 50mn IPFF Project for
long-term financing of infrastructure projects under a Public-
Private Partnership (PPP) framework.
14
03 August 2008
http://www.thefinancialexpress-
bd.info/search_index.php?page=detail_news&news_id=41118
Summit Power inks deal for BDT 3.96bn
96bn (USD 57.8mn)
consortium loans
New Age, Monday July 28, 2008
Summit Power has signed an agreement with the Industrial
and Infrastructure Development Finance Company (IIDFC)
for BDT 3.96bn (USD 57.8mn) consortium loans to set up
four power plants, with total investment cost of BDT 5bn
(73mn) to generate 110MW electricity. Summit will provide
BDT 1bn (USD 14.6mn) as equity. This is the largest
consortium debt package ever.
Three plants will produce 33MW each with the other
producing 11MW. A power purchase agreement was signed
whereby the Rural Electrification Board and the Bangladesh
Power Development Board will buy the electricity produced
at the four plants – this is the first time power will be
purchased in Taka, rather than US dollars. It is anticipated
that they will start supplying the national grid by June 2009.
http://www.newagebd.com/2008/jul/28/busi.html#5
Govt mulls setting up naptha-
naptha-based power plants
The Independent, Sunday July 27, 2008
The government is planning to install some naphtha/furnace
oil based rental power plants in the Chittagong region with
public funding. Such methods have been used in the Khulna
110 and 90MW plants, and the Eastern Refinery produces
100,000 tonnes of Naptha per year.
http://www.theindependent-bd.com/archive.details.php?nd=2008-07-
27&nid=91432
Techno-
Techno-feasibility study on deep seaport resumes
The Financial Express, Monday July 28, 2008
The techno-feasibility study on the proposed deep seaport in
the Bay of Bengal resumed last month after a gap of nearly
one year.
"The country's potentials for becoming a booming business
hub will remain elusive without the establishment of a giant
seaport," commented a senior ministry official. A report
published in an Indian financial daily said Bangladesh, which
is located almost at the centre of South-East Asia, could act
as a regional business hub for transporting goods to the
north-eastern states of India and other neighboring countries,
Myanmar, southern China, and landlocked countries like
Nepal and Bhutan.
Pacific Consultant International (PCI) have recommended
suitable sites for the proposed giant port in its initial study
and will submit reports, within the next year, on the design of
the port, a project appraisal and an appropriate business
model. The provisional estimate, suggests the project should
be constructed in three phases, which will cost around BDT
420bn (USD 6bn).
http://www.thefinancialexpress-
bd.info/search_index.php?page=detail_news&news_id=41043
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AT CAPITAL RESEARCH
Ministry selects lead donor agency for Padma Bridge today
The Financial Express, Thursday July 31, 2008
The Communications Ministry is expected to award the debt
mandate to interested financiers when it convenes on 31
July, for the construction of the Padma Multipurpose Bridge.
The ADB is offering a USD 350mn package while the WB
and Japan Bank of International Cooperation (JBIC) have
each offered USD 300mn. The Islamic Development Bank
has also tendered to finance the project. The government will
bear one third of the project cost. The WB is offering cheaper
financing costs, than the ADB and it had previously financed
the Jamuna Bridge. However the ADB may have an edge, as
it was involved in the preparation of the detailed design of the
6km Padma Bridge and will provide the largest package.
The bridge to be built at the Mawa-Jinjira point of the river
Padma is expected to cost USD 1.8bn. Construction is
expected to commence in 2010. The 25-metre wide, four-
lane Padma Bridge with provision of railway tracks is
expected to take six years and forecast to boost GDP by 1.2
per cent. The bridge division will acquire around 918
hectares of land in Munshiganj, Madaripur and Shariatpur
this year for around USD 50mn. According to a survey by the
Japan International Cooperation Agency (JICA), nearly
30,000 people will lose their lands due to such land
acquisitions.
http://www.thefinancialexpress-
bd.info/search_index.php?page=detail_news&news_id=41297
Licenses of two private ICDs cancelled
The Daily Star, Tuesday July 29, 2008
Chittagong Customs Authority has temporally cancelled the
licenses of two private ICDs (inland container depots,
Chittagong Container Transportation Company Limited and
Iqbal Enterprise) for non compliance of licensing conditions.
This follows a similar action against Messer’s Seafarers
Limited. There are 13 private ICDs in the country.
http://thedailystar.net/story.php?nid=47930
CPA handles a record 1m containers last fiscal
The Financial Express, Wednesday July 30, 2008
Chittagong port set a record by handling a million containers
in 2007-08 fiscal year following a substantial rise in
international trade through containers. It handled a total of
1.027 million twenty-foot equivalent unit (TEUs) containers in
2007-08 fiscal against 913,704 TEUs in 2006-07 registering
a growth of 12.48%.
Of the total quantity handled during 2007-08, 517,510 TEUs
were import containers and 510,235 export containers. In the
previous year, it handled 458,542 TEUs and 455,162 export
containers. The port handled a total of 32.023 million cargo
including bulk items. Of them, import cargo was 25.34 million
and export was approximately 6.7 million. The growth of the
cargo handling was 5.71 per cent over the same period in
2006-07. The port handled a total of 30.2 million cargoes
including bulk cargoes in 2006-07.
There are currently 11 dedicated berths for container
carrying feeder vessels, three at the Chittagong Container
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03 August 2008
Terminal, and six at the GCBs (general cargo berths) and
two at the NCT.
http://www.thefinancialexpress-
bd.info/search_index.php?page=detail_news&news_id=41157
Insurance
Insurance industry hails new law
The Daily Star, Sunday July 27, 2008
In a move to modernize the insurance industry, the cabinet
has approved two ordinances, the Insurance Regulatory
Authority (IRA) Ordinance 2008 and the Insurance Ordinance
(IO) 2008, both of which now await the President's approval.
With the introduction of the IRA Ordinance 2008, the 70-year
old, Department of Insurance and the Insurance Act 1938 will
cease to exist. The new ordinances have been drafted in line
with the international best practices, particularly with
reference to the model of India's Insurance Regulatory and
Development Authority, officials said. The insurance sector
hopes that the new Insurance Ordinance provides a much
needed regulatory framework, appropriate for the fast
growing industry.
A newly-formed Insurance Regulatory Authority will consist
of a five-member team consisting of a chairman and four
members for a three-year term. It is expected that the body
will be headed by an official with at least the rank of
Government Secretary. The main features of the ordinances
include an increase in paid-up capital for both general and
life insurance companies. The amount of paid-up capital for a
general insurance company has been raised to BDT 400mn
(USD 5.8mn) from BDT 150mn (USD 2.2mn), and to BDT
300mn (USD 4.4mn) from BDT 75mn (USD 1.1mn) for life
insurance companies. A mandatory solvency margin for the
companies will also be introduced. The insurance
companies, particularly the general insurers, will be
encouraged to operate brokerage houses. Besides, the
insurers, both life and general, are required to follow
international accounting practices, have separate products
for Islamic insurance and conventional insurance, put a limit
on commission expenses and reduce the number of directors
in their respective boards. The new law will allow foreign
investment in general insurance companies. With the
promulgation of the ordinances, the industry will be under the
jurisdiction of the Ministry of Finance, instead of the Ministry
of Commerce, as it exists in other countries.
There are 60 insurance companies in the private sector in
Bangladesh, with 17 operating as life insurance companies
and 43 as general insurance companies. According to
industry sources, premium of both general and life insurance
companies total BDT 3,2570mn (USD 475mn) annually. The
industry has seen significant growth with about 10mn
policyholders in life insurance and at least 5mn in general
insurance.
http://www.thedailystar.net/story.php?nid=48030
Foreign investments may drive small firms out
The Daily Star, Sunday August 3, 2008
Insurance industry officials welcomed the government’s
initiative to modernize the sector through the approval of the
Insurance Regulatory Authority (IRA) Ordinance 2008 and
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AT Capital Weekly Update
AT CAPITAL RESEARCH
Insurance Ordinance (IO) 2008, but expressed concerns
regarding foreign investment in the sector and the increase in
paid-up capital as per the new ordinances.
Local insurance companies fear that the entry of foreign
investment may force weak local firms out of business.
Officials commented that local insurance companies should
be protected for a certain period of time and consolidation
may be appropriate for smaller firms. They added, foreign
investment should be permitted in a controlled manner. India
could be emulated in this regard where foreign participation
was initially limited to 24% and eventually raised to 49%.
Industry people believe that such arrangements could create
an environment for healthy competition.
http://www.thedailystar.net/story.php?nid=48670
IT
WiMAX could raise number of internet
internet users in Bangladesh
to 5m by 2012
The Financial Express, Tuesday July 29, 2008
Technology experts on Monday expressed their optimism
that the number of internet subscribers in Bangladesh will
reach up to five million by the year 2012 through the
penetration of mobile WiMAX broadband. Talking to
reporters at the first WiMAX Roadshow at a city hotel,
experts said WiMAX would minimise the digital divide
between rural and urban Bangladesh.
Chinese telecom giant Huawei Technologies organised the
roadshow as the Bangladesh Telecommunication Regulatory
& Commission (BTRC) recently introduced licensing
guidelines for Broadband Wireless Access in Bangladesh.
Representatives of the BTRC and other government
organisations, mobile companies, internet service providers,
and vendor companies were present at the roadshow.
There are currently an estimated 0.6mn fixed and over 5mn
mobile internet subscribers.
http://www.thefinancialexpress-
bd.info/search_index.php?page=detail_news&news_id=41123
Real Estate
Existing laws can protect customers' interests: REHAB
The Daily Star, Sunday August 3, 2008
The Financial Express, Sunday August 3, 2008
Realtors urged the government to reappraise the new
ordinance for the housing sector. “We feel that we do not
need any kind of ordinance as the existing laws of the land
are enough to regulate the real estate business”, said
Tanveerul Haque Probal, president of the Real Estate and
Housing Association of Bangladesh (REHAB).
On Tuesday, the government approved in principle the
ordinance titled "The Real Estate Management Ordinance
2008" which carries a provision for jail sentences or fines for
developers violating agreements with buyers. Highlighting
different loopholes of the new ordinance, Mr. Probal
mentioned that the promulgation of such ordinances will
destroy the sector which in turn will affect the national
16
03 August 2008
economy. The real estate sector is a major employer and a
major consumer of different raw materials like MS rod, steel,
electricity and gas, he pointed out. He made an assurance
that any dispute with regard to
agreements with buyers of plots and flats might be resolved
through negotiations. Realtors also warned they would stop
construction work if the government promulgated the
ordinance. "We will stop construction works of all under-
construction and new projects once the government
approves the ordinance," said Ahmed Riad Momen,
managing director of Momen Real Estate Limited who is also
a senior leader of REHAB.
Mr. Probal also mentioned that the major problem lies in the
fact that some non-member companies of REHAB do not
follow the rules of apartment sales, but ultimately REHAB
has to bear the responsibility. He added that the government
should identify such companies to take punitive measures
against them. He suggested that the government can confer
the certification power on REHAB like BGMEA, BKMEA and
BTMA to make all deals flawless for protecting customers'
rights.
http://thedailystar.net/story.php?nid=48671
http://www.thefinancialexpress-
bd.info/search_index.php?page=detail_news&news_id=41567
Developers review previous deals
The Daily Star, Friday August 1, 2008
Customers have alleged that developers are raising the
prices of apartments altering previous agreements with their
clients, despite the government's new law having provision to
bring the violators of such deals to book.
Developers claimed that an approximate 46% rise in the
prices of construction materials in the last two years have
forced them to increase flat prices to a level beyond the
amount agreed. But customers have claimed that real estate
companies are increasing the rate as high as BDT 1,500
(USD 22) per square feet.
According to sources, during the last two years, the prices of
MS rod increased by 90% and that of brick by 70%. Usually,
MS rod accounts for 30% of the total cost of an apartment.
Developers said that they are likely to rise further between
BDT 300 (USD 4.40) - BDT 500 (USD 7.30) per square feet.
SR Chowdhury, senior manager (Administration and
Recovery) of Multiplan Limited, a real estate company claims
that at the time of agreement, the rate was in the region of
BDT 1,300 (USD 19) to BDT 2,000 (USD 29.20) per square
feet, which is now in the region of BDT 3,000 (USD 43.80) –
BDT 3,500 (USD 51.10).
The customers are also disgruntled as the developers are
not only increasing the prices of apartments which are under
construction, but also of those which were constructed in
2006. M Mohsin Mia, who oversees customer services at
REHAB, admitted that some developers are taking
advantage of the situation and increasing selling prices of the
apartments that were constructed before the prices of
construction materials soared. However, he also added that
during the last two years expenditure on per square feet of
any apartment increased by BDT 600 (USD 8.75), while the
market price of per square feet of apartment has increased
by BDT 1,000 (USD 14.60).
_______________________________________________________________________________________
AT Capital Weekly Update
AT CAPITAL RESEARCH
http://www.thedailystar.net/story.php?nid=48383
Telecoms
Grameenphone submits IPO prospectus to SEC
The Daily Star, Wednesday July 30, 2008
Grameenphone, the country's largest mobile phone operator,
submitted a draft prospectus of the largest-ever initial public
offering (IPO) to the stock market regulator, the SEC, for
raising USD 150mn from the public and another USD 150mn
through private placements, mostly to international investors.
GP has recently been valued at USD 3.2bn and the company
wants to offer each share at BDT 18 (USD 0.26) including a
premium of BDT 17 (USD 0.25). As of 2007, earning per
share of GP was BDT 1.50 (USD 0.02). The money raised
from the IPO will be used for GP's network development
programme.
Citigroup Global Markets Bangladesh Limited is the issue
manager of the GP IPO. Norway's Telenor owns a 62 %
stake in GP, with the remaining 38 % being held by Grameen
Telecom, a concern of Grameen Group.
http://www.thedailystar.net/story.php?nid=48056
Telephone Shilpa Sangstha revival plan in trouble
The Daily Star, Sunday July 27, 2008
The government's plan to breathe new life into the
Telephone Shilpa Sangstha Limited (TSS) has suffered a
setback as not a single company has so far showed interest
in becoming a strategic partner of the lone state-run
telephone equipment manufacturer. The company
management said they are a bit surprised over the poor
response, both from local and foreign buyers, as many
companies initially expressed their interest after the
publication of an advertisement 'Expression of Interest' in
early May. The company is a supplier of land phone sets and
analog system equipment to the government run land phone
operator Bangladesh Telecommunications Company Limited
(BTCL).
According to TSS sources, UK based Orange Telecom, a
Russian based company and some local conglomerates
showed their interest and verbally made commitment to
submit their bids. The company is believed to have assets
worth over BDT 200mn (USD 2.92mn). The TSS Board is
looking for a partner, which, it thinks, might revive the
fortunes of the obsolete technology-based company that has
incurred an accumulated loss of BDT 350mn (USD 5.11mn)
since 1998. At present, the government holds 92 % shares in
the company, while Nokia Siemens Network owns the rest.
Before a strategic partner is found the Nokia Siemens will
handover its stake to the government.
http://www.thedailystar.net/story.php?nid=47627
Guideline for sharing telecom infrastructure prepared
The Financial Express, Sunday August 3, 2008
The Bangladesh Telecommunication Regulatory
Commission (BTRC) is preparing a guideline for the sharing
of infrastructure among private stakeholders. The BTRC has
17
03 August 2008 AT CAPITAL RESEARCH
come up with the guideline to encourage the mobile service
providers, internet service providers and other companies
operating in the communications sector to share
infrastructure in order to minimise cost and protect the
environment.

This new guideline may prove especially beneficial to mobile

service providers in Bangladesh as all six companies are
facing downward trends in their operating revenues due to
intense competition. The only profitable company operating
in the market now is Grameephone, itself under pressure due
to a 33% reduction in net profits in 2007.

http://www.thefinancialexpress-
bd.info/search_index.php?page=detail_news&news_id=41581

Tourism

Parjatan Corporation to develop country’s first-

first-ever cable car
The Daily Star, Sunday August 3, 2008

Bangladesh Parjatan Corporation (BPC) is to develop the

country's first-ever cable car by the end of the year. The
cable car will cover a distance of over a kilometer, over two
hills slopes at Mirinza in Bandarban.

According to Shafique Alam Mehdi, Chairman of BPC, the

cable car will attract both domestic as well as foreign tourists.
He also said that the cost of the project will be approximately
BDT 50mn (USD 730,000). Kazi Wahidul Alam, Tourism
analyst and Editor of travel magazine Bangladesh Monitor, is
optimistic that the new concept will enable the number of
tourists in the region to double.

http://www.thedailystar.net/story.php?nid=48668

_______________________________________________________________________________________
AT Capital Weekly Update 18
03 August 2008 AT CAPITAL RESEARCH

AT Capital Team – Dhaka

Ifty Islam Managing Partner (880-2)-8155144, ext. 132 ifty.islam@at-capital.com
Syeed Khan Partner (880-2)-8155144, ext. 132 syeed.khan@at-capital.com
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S.M. Rashedul Hasan Research Associate (880-2)-8155144, ext. 137 rashed.hasan@at-capital.com

A. M. A. Bari Nahid
Mohammad Emran Hasan
Syeda Tasnuva Akhter
Ahmad Sajid
S Adeeb Shams
Sohana Alam Seraj
Research Associate (880-2)-8155144, ext. 130 nahid.bari@at-capital.com
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Sanwar Ahmed Research Analyst (880-2)-8155144, ext. 139 sanwar.ahmed@at-capital.com
Md. Zahidur Rahman IT Analyst (880-2)-8155144, ext. 140 zahidur.rahman@at-capital.com

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AT Capital Team – North America

Zarif Munir Senior Advisor zarif.munir@at-capital.com
Professor Jahangir Sultan, Ph.D. Senior Advisor jahangir.sultan@at-capital.com
M. Nasim Ali Senior Advisor nasim.ali@at-capital.com
Iqbal Hussain Senior Advisor iqbal.hussain@doctors.org.uk

© Copyright 2008. Asian Tigers Capital Partners Limited, Level 16, UTC Tower, Panthapath, Dhaka –
1215, Dhaka, Bangladesh. All rights reserved. When quoting please cite “AT Capital Research”. The
above information does not constitute the provision of investment, legal or tax advice. Any views
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Asian Tigers Capital Partners or its affiliates. Opinions expressed may change without notice. Opinions
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_______________________________________________________________________________________
AT Capital Weekly Update 19