July Sep Journal 17

July - September 2017
ACCOUNTING STAGE 1
SOURCE
CYCLE DOCUMENT
STAGE 2
JOURNAL
Accounting Cycle
STAGE 3
LEDGER
STAGE 4
TRIAL
BALANCE
STAGE 5
ADJUSTMENT
July - September 2017
STAGE 6
CLOSING ACCOUNT
AND STOCK VALUATION
STAGE 7
PREPARATION OF
FINAL ACCOUNT
The Bangladesh Accountant
EDITORIAL BOARD CONTACT US

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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
JULY - SEPTEMBER 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 July - September 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 P11 Determinants of
publications, ICAB also publishes Foreign Direct Investment
books, monographs, booklets and A Paradigm of Bangladesh
Students Study Manuals regularly. P5 President’s Desk M Jalal Hussain FCA
P16 Role of Professional

Accountants for
P6 Interview
Accelerating Economic
Development and Growth
P21 The Minimum Tax

A. Wahab FCA
P28 Challenges and Opportunities

of Accountancy Profession
SAFA Perspectives
ASM Nayeem FCA
P35 Cost of Fund of

Commercial Banks
Evidence from Bangladesh
Taslima Akhter1
Md. Abu Bakkar Siddik2
Anamul Haque3
P43 Enforcement of Contract for

Doing Business and Alternative
Dispute Resolution (ADR)
S M Abu Nayem Ahmed
P47 A Comparative Study Between

USA and BANGLADESH
for more details, please visit Stock Market Crash
www.icab.org.bd Md. Toufique Hossain
2 JULY - SEPTEMBER 2017 | The Bangladesh Accountant

CQK Mustaq Ahmed, Chairman, Financial Reporting Council

Interview of
Digital Highlights
www.icab.org.bd
P59 Roles of Forensic Accountants P113 The Usefulness of Annual Report to News & Events
in Improving Corporate Evaluate the Performance of
Governance (CG) Companies: Investors Perspective Circular & Notice
Md. Kamal Hossain ACA Dr. Sumon Das1
Dr. Shilpi Das2 News Bulletin
P67 Investment Climate and
Journal
Opportunities in Bangladesh P122 Role of Blue Economy for Achieving
Arif Hussain FCA Sustainable Development Goals
in Bangladesh
P83 Thoughts for a Reformed Sara Tasneem1
Banking Sector Shanjida Chowdhury2
M Idris Ali FCA
P133 Economic Growth and Macroeconomic
P87 National Budget 2017-18
Variables the Case of Bangladesh
Time Cannot be Ours
Kumar Debasis Dutta1
Without Challenges
Mallika Saha2
P140 The Performance of Banking Industry
P91 Incongruous Amendments in
A forensic Analysis
Tax Laws Incorporated in the
Md. Shahidul Islam FCA
National Budget 2017-2018
Akhter Zamil FCA
P99 Sophistication of Pillar-2 of

Basel II Supervisory Review
Process (SRP) had it been
Considered/Addressed Properly
Before Adopting/Migrating into
the Arena of Basel III Accord?
M. Golam Kibria FCA
P107 Effect of Income Tax Provisions

on Business in Bangladesh
Muhammed Omar Faruk Ripon ACA

Editorial
“ We
particularly
welcome our I TRULY
youngsters who
are the leaders BELIEVE
of our THAT THIS ISSUE
tomorrow to
WILL BE AN
ILLUMINATING
come forward
ONE
with more ideas
and quality
articles to
make 'The
Bangladesh
Accountant' a As the July-September issue of The all actors and stakeholders -
government and all political parties,
World Class Bangladesh Accountant has no
particular theme, we have covered a business houses, financial sectors and
Journal. wide variety of contemporary topics. civil society - must seize the
We were blessed with large number opportunity to move Bangladesh
of contributions from our forward as entrepreneurs have already
contributors and esteemed readers seized the opportunity to create jobs
from various institutes and entities. and income. We look forward to
We feel extremely encouraged to see continued close relations and growing
our members from ICAB increasingly people-to-people ties as Bangladesh
contributing with zeal and takes steps to embark on a definite
enthusiasm. We very much welcome path of progress.
them in their intellectual pursuits of
the exercise of knowledge and To conclude, I truly believe that this
wisdom. We particularly welcome our issue will be an illuminating one. I
youngsters who are the leaders of personally extend my heartiest thanks
our tomorrow to come forward with and gratitude to both our contributors
more ideas and quality articles to and esteemed readers of 'The
make 'The Bangladesh Accountant' a Bangladesh Accountant' for their
World Class Journal. attachment with this publication. We
want your close cooperation to make
Bangladesh and its economy is our Journal more resourceful,
changing fast with favorable meaningful and beneficial for us All.
Dr. Jamshed Sanyiath indicators. The future appears bright
Ahmed Choudhury FCA for Bangladesh. In that journey we Kindest Personal Regards,
Chairman – Editorial Board need action and coordination among
Council Member - ICAB

President’s Desk
“ICAB
The
mouthpiece
‘The
Bangladesh
Accountant’
is such an
endeavor to
disseminate
knowledge
and
experience
among the There is no doubt, given the
challenges we face, ours is a resilient
collects, analyzes, interprets data and
provides reports to the final users and
stakeholders” economy. According to the IMF,
Bangladesh's economy is the second
helps in the economic
decision-making. In financial reporting,
fastest growing major economy of we provide thought leadership. We
2016, with a GDP growth rate of 7.1%. work together with different
This has been driven mainly by ministries, government organizations
export of readymade garments, like NBR, BSEC, Bangladesh Bank,
incoming remittances and the OCAG, etc. to develop the requisite
development of domestic agricultural capacity to support Bangladesh’s
sector. Other sectors like economic growth.
pharmaceuticals, cement, food
The ICAB mouthpiece ‘The
processing, leather and telecoms
Bangladesh Accountant’ is such an
have also done well.
endeavor to disseminate knowledge
However, we are facing multiple and experience among the
challenges like infrastructure stakeholders. Our Editorial Board and
bottlenecks, insufficient power and a team of experienced people of the
gas supplies, bureaucratic Institute are relentlessly working to
inefficiency, natural calamities and a bring out an informative journal which
lack of skilled manpower. Many of the is a value addition for our members
laudable initiatives taken by the and anybody involved in the financial
Government, have yet to show reporting and business decision
results, albeit power generation has making.
had considerable success. In the The articles published in
progress of an economy financial July-September issue of the Journal
reporting has an important role to mainly focus on various problems and
play. Chartered Accountants are prospects of our economy and the
contributing to this end through their way forward. Thank you all.
Adeeb Hossain Khan FCA technical services to businesses and
President-ICAB investors. A Chartered Accountant Best wishes

Interview
THE
CURRENT
STATE IS
BETTER
THAN MY
EXPECTATION
Mr. CQK Mustaq Ahmed, Mr. Mustaq Ahmed is an Financial Reporting Council
Chairman, Financial Reporting experienced civil servant with a (FRC) is a newly formed
Council (FRC) of the demonstrated ability in public watchdog body with
Government of Bangladesh had policy making at top levels of responsibilities to monitor the
been Senior Secretary at the government ministries and activities of auditors in order to
Ministry of Home Affairs and implementation of policies, ensure transparency and
Ministry of Agriculture. He was development projects and accountability in accounting
Secretary, Bridges Division of programs in important and auditing of public interest
Ministry of Road Transport and government organizations like organisations, which include
Bridges, and Secretary, Bangladesh Police, Border private sector companies and
Ministry of Liberation War Guards Bangladesh (BGB), various government,
Affairs. Bangladesh Coast Guards, autonomous and
Bangladesh Prisons, Fire non-government institutions.
Service and Civil Defence, The government enacted the
Narcotics and Drug Control, Financial Reporting Act 2015,
Immigration and Passports, known as the FRA 2015, on
Ansars and Village Defence, September 9, 2015 in this
etc. regard.
Mr. Mustaq Ahmed obtained In a recent interview with The

BA Honors and MA degrees in Bangladesh Accountant, the
Economics from Dept. of mouthpiece of the Institute of
Economics, Dhaka University. Chartered Accountants of
He completed two courses on Bangladesh (ICAB), FRC
leadership and governance Chairman CQK Mustaq Ahmed
from the University of discussed various aspects,
Birmingham, U.K and the challenges and future goals of
Kennedy School of the government-run watchdog.
Government of Harvard The extract of the interview is
University, USA. given below:

The Bangladesh Accountant: for which ICAB and individual

The main goal of your audit firms and professionals QUOTE OF THE ISSUE
organisation is to bring deserve credit.
transparency in financial Warren Buffett’s
reporting system. What is the The Bangladesh Accountant: company will become
current state of financial Why did the government feel it the biggest shareholder
reporting in our country? necessary to establish FRC? in Bank of America
What are your thoughts as the
Corp, after Berkshire
Mr. Mustaq Ahmed: The current founding Chairman of FRC?
state is better than my Hathaway Inc on Friday
expectation. The Institute of Mr. Mustaq Ahmed: We know invoked its right to
Chartered Accountants of that after ENRON scandal, USA acquire 700 million
Bangladesh (ICAB) has been and some other countries had shares of the
trying to improve the standard set about establishing
second-largest US bank.
of financial reporting across all independent regulatory
entities. The primary objective of agencies to operate on behalf Berkshire will take a
FRC is to ensure authenticity of of the government to restore roughly 7 percent
the financial reporting on behalf public confidence and trust in ownership stake, worth
of the government, in addition to the financial reports of the about $17 billion based
traditional self-regulatory companies. The decision by our
on Bank of America’s
arrangements by ICAB, ICMAB, government to establish FRC in
etc. Its ultimate objective is to Bangladesh was made in closing price of $24.32
play its part in collaboration with keeping with the same on Thursday. The
other regulators and institutions objectives in view. transaction will make
to bring discipline in the financial Bank of America one of
sector. As founding Chairman of FRC I Berkshire’s largest
feel that the most important
The Bangladesh Accountant: equity investments,
challenge for a regulator is to
Have you observed any earn public trust, in other joining Apple Inc,
development in financial words to earn its own Coca-Cola Co, Kraft
reporting in comparison to the credibility, which can only be Heinz Co and Wells
past? achieved through strict Fargo & Co, the nation’s
adherence to rules and
third largest bank.
Mr. Mustaq Ahmed: In the initial principles, honesty, integrity
years of this century in cases of and full transparency in its
some worst financial scandals operation. If FRC fails in this, it
like the ENRON scandal in USA will prove to be rather an
the auditing agencies were additional burden on its REUTERS
found to be complicit in them by supposed beneficiaries. It will 1ST JULY 2017
failing to identify and report fail to attain the lofty objective
manipulation of financial of earning trust of the foreign
statements. As a result, the and local investors as well as
agencies had to face other stakeholders.
punishment, even closures.
However, it is heartwarming that The Bangladesh Accountant:
such kind of manipulation and Bangladesh has been heading
willful negligence by audit firms towards a new economic
have not so far been detected in momentum with the growth of
our country in spite of some GDP and per capita income. Is
serious cases of financial this the appropriate time for
indiscretion by some banks were launching FRC? What do you
publicly reported. There appears think?
to be a marked improvement in
the audit scenario in the country

Interview
well-coordinated regulatory
network involving all the other
regulators will be necessary so
that no gap remains in a
comprehensive full-proof
financial regulatory framework
in our country.
The Bangladesh Accountant:

What is your opinion about
Chartered Accountants (CAs)?
Mr. Mustaq Ahmed: Chartered

Accountants as professionals
enjoy high esteem in the
society. It is also considered as
one of the most rewarding
professions in the world. This
prestige has entailed more
responsibility on the members
Mr. Mustaq Ahmed: Bangladesh Mr. Mustaq Ahmed: As of the profession and their
indeed is heading quite robustly short-term plan, we want to professional body ICAB to
towards attaining a middle recruit qualified personnel and preserve and uphold that
income country status by 2021 provide proper logistic support status by their professional as
marking the 50th anniversary of for them. We will look for well as social conduct.
our independence, according to Executive Directors having
the Vision 2021 declared by the appropriate qualification and
Honorable Prime Minister Sheikh experience to deliver quality
What are the main challenges
Hasina. The government has service in the FRC. We will have
for you to achieve the success?
taken various strategies, policies, stocktaking of the present
guidelines and other necessary status of the regulatory
measures under the Perspective arrangements in the short Mr. Mustaq Ahmed: The main
Plan 2010-2021 to realize that term. In the mid -term by the challenge will be to fulfill the
vision. So we are now into a race middle of the next year we objectives of FRC up to the
to reach to the goal following a envisage to complete the expectation of the
fixed timeline and a set of registration of audit firms and government, the accounting
milestones. Needless to say formulating a combined rules professionals and other
investment both foreign and for FRC. In the long term we stakeholders. The overall
local is one of the prime drivers hope for a fully functional FRC environment in which we have
of our target 10 % annual GDP by the end of next year. to work will also pose some
growth by 2021. So discipline, challenges because we alone
will have no effective control
good governance, oversight, The Bangladesh Accountant:
monitoring, etc in our financial beyond our area of authority.
Do you think the Financial
sector are of utmost importance However, we are determined to
Reporting Act 2015 is enough
for our development goals and overcome the challenges by
to bring transparency?
therefore the critical role of FRC working together with other
and other regulators in this field regulators and stakeholders.
Mr. Mustaq Ahmed: No Act
can never be overstated in the alone can be sufficient to bring
given context. The Bangladesh Accountant:
the desired transparency in the
Have you spotted any flaws in
complex multi-disciplinary
The Bangladesh Accountant: the Financial Reporting Act
financial sector. Other
What types of short-, mid- and 2015?
regulators and Acts
long-term plans have you set as corresponding to each of them
the chief of FRC? are also in action. So, a

WE KNOW THAT
AFTER ENRON
SCANDAL, USA
AND SOME OTHER
COUNTRIES HAD
SET ABOUT TO
ESTABLISHING
INDEPENDENT
REGULATORY
Mr. Mustaq Ahmed: All the well as an agreed formula to AGENCIES TO
relevant ministries, departments, determine fair fees depending
individual experts inside and on the nature and volume of OPERATE ON
outside of the government had jobs involved, the matter could
worked in unison with utmost be resolved to the satisfaction BEHALF OF THE
sincerity and hard work to of all. GOVERNMENT TO
formulate and enact the law
drawing upon examples of The Bangladesh Accountant: RESTORE PUBLIC
similar laws in other countries.
But any law is a living document,
How can ICAB help FRC
achieve its goal?
CONFIDENCE AND
that is always subject to review, TRUST IN THE
revisiting and making necessary Mr. Mustaq Ahmed: ICAB and
amendments to suit the the FRC will work as partners. FINANCIAL REPORTS
changing needs of time. In any
case, I consider FRA 2015 in its
ICAB’s role so far as a OF THE COMPANIES.
self-regulatory organization
present form is an excellent new will be valuable for FRC to build THE DECISION BY
Act encompassing all the upon that experience and
aspects needed to be covered. move further ahead with the OUR GOVERNMENT
responsibilities entrusted to it. TO ESTABLISH FRC
ICAB’s continuing internal
Do you have any plan with the regulation of the profession will IN BANGLADESH
fees for the experts? make FRC’s job so much easier.
WAS MADE IN
Mr. Mustaq Ahmed: The matter KEEPING WITH THE
of fees is very important for
quality auditing work. If we can SAME OBJECTIVES
make all the companies including Interviewed by:
the smallest ones to abide by the Mohammad Zahid Hossain FCA IN VIEW.
related laws, rules, guidelines, as Assisted by: Abu Taher

www.icab.org.bd
The Bangladesh Accountant | July-September 2017

ARTICLE
Determinants of Foreign Direct Investment

A Paradigm of Bangladesh
M Jalal Hussain FCA
P
reface It’s noticed that most of the
FDIs in Bangladesh are
The developed coalesced up with apparels and
economies or commonly known textile industries. Local
high income countries (HICs) investors also invested mainly in
have had the choate economic these two sectors of industries.
benefits from Foreign Direct Millions of skilled and unskilled
Investment (FDI) -inflow and workers have been working
out-flow. Middle income with minimal pay and
countries (MICs), on the allowances that don’t meet their
contrary, were much behind in basic needs as food, shelter and
FDI. During the last two education for their children. For
decades, the world has come high-value-added employment
across a wide-ranging inflow generation, earning more
and out-flow of FDI into MICs. foreign currency from export,
The MICs have been found diversified FDIs especially
The Author is a facing steep competition in investment in high-priced items
Chartered Accountant and attracting FDI. Bangladesh, a like electronic products-mobile
a Fellow Member of the middle-income country in South sets, air conditioners,
Institute of Chartered Accountants Asia, has made tremendous refrigerators, sport-wire, energy
of Bangladesh-ICAB progress in attracting FDI. and power sector are extremely
Bangladesh needs more FDI important for Bangladesh.
inflow to exploit its behemothic
number of man-power, to Why does Bangladesh
advance the country from the need FDI?
present status quo. FDI has a
major role to play in economic Bangladesh being a
development in terms of heavily-populated country with
transfer of technology, science, 161 million people, has no other
employment generation and druthers but to attain
creation of competitiveness sustainable economic
with the local and international development by FDI, utilizing
business entrepreneurs. and wielding the cyclopean
man-power and the country’s
Investment policy appraisals by untapped resources. FDI inflow
UNCTAD provide indicia of to Bangladesh has been
benefits of FDI in terms of traditionally lower than other
employment generation, wages, South Asian countries.
and linkages with local firms, According to Bangladesh Bank
increases in technology, statistical report on FDI, Gross
intensive exports, range of new FDI inflows during the quarter
products and services, etc. July-September 2016 reached
Overall, UNCTAD investment US$ 705.78 million, The size of
reviews suggest that FDI has a disinvestment during the same
positive impact on growth but it period recorded US$ 91.97
varies from country to country. million which was 13.01% of
By and large, FDI contributes to gross FDI inflows. Hence net FDI
growth through capital inflows in Bangladesh during
formation and technology the same quarter recorded US$
transfer. 613.81 million.

On quarterly basis, total FDI inflows (net) Bangladesh’s position in attracting FDI is
accomplished to US$ 613.99 million during not assuasive for multiple reasons. Given
July-September, 2016 which were increased by below is a chart that shows the position
US$ 159.67 million or 35.14% compared to FDI of Bangladesh in FDI inflows:
inflows (net) during April-July, 2016 (US$ 454.32
million). While during April-June, 2016 FDI inflows
Rank Country FDI in US$-31 Dec 2016
(net) were increased by US$ 43.64 million or
10.63% compared to January-March, 2016 1 European Union 5,148,000,000,000
(Figure-1).
2 USA 3,648,000,000,000
5 China 1,458,000,000,000
Investment policy appraisals by 11 Singapore 1,041,000,000,000
UNCTAD provide indicia of benefits 20 India 351,800,000,000
of FDI in terms of employment 32 South Korea 179,600,000,000
generation, wages, and linkages with 35 Malaysia 154,700,000,000
local firms, increases in technology, 65 Pakistan 33,820,000,000
intensive exports, range of new 90 Bangladesh 13,240,000,000

products and services, etc. Overall, 119 Bhutan 267,100,000
UNCTAD investment reviews suggest Source: The World Factbook
that FDI has a positive impact on
growth but it varies from country FDI is a fundamental part of an open and
effective international economic system
to country. and a major reagent to economic
development. Prescriptions to increase
the role of foreign direct investment in
promoting sustainable development
Figure 1: Quarterly net FDI Inflows from Jul-Sep’ 15 to July-Sep’ 16 generally focus on getting policies right
and recuperating the investment climate.
MICs, emerging economies and countries
700.00 598.08 613.99 in transition have gradually realized FDI
540.45 as a life-threatening antidotefor
600.00
addressing problems of economic under-
Amount (In million US$)
454.32
500.00 410.68 development, modernization, removing
income inequality and for employment
400.00
generation. Several countries at different
300.00 times have liberalized their economies in
order to attract foreign investment. In
200.00 fact, much attention has been on
100.00 stabilization policies aimed at maximizing
benefits of FDI to the domestic economy
0.00 as it relates to employment, productivity
Jul-Sep Oct-Dec Jan-Mar Apr-Jun Jul-Sep
2015 2015 2016 2016 2016 and income generation.
Source: BB Statistic Department Quarterly Report (July-Sept 2016)

ARTICLE
The overall benefits of FDI for

developing economies like
Bangladesh have been
identified as decussating
economic, social and
environmental development.
Preponderance of studies
shows that FDI triggers
technology, spillovers, assists
human capital formation,
contributes to international
trade integration, helps create a
more competitive business
environment and enhances
enterprise development. All of
these contribute to higher
economic growth, which is the
strongest tool for allaying
poverty and providing the
platform for sustainable
development in the middle
income countries including
Bangladesh.
Bangladesh, discourages and existing infra-structures are not
Diffidences on the way derogates FDI vehemently. In jovial and gregarious for
of Attracting FDI in addition, bureaucratic enthralling FDI and local
Bangladesh complexities to get registration investment. Realizing the
or to get permission, work as importance of industrial
Unsatisfactory Business Index stumping block on FDI infrastructure, the high-income
in Bangladesh inflow.The policy-makers and countries (HICs) started to
the appropriate authorities of invest heavily in infra-structure
For investment in any country, Bangladesh must improve the development since 1960s. Poor
the investors always ask for a doing business index for FDI and penurious infrastructure
level field, investment-friendly and also for local investment. vehemently stymies a country’s
atmosphere, good governance competitiveness at national and
in both private and public Declasse Industrial international level and
enterprises, less Infrastructure of Bangladesh slow-downs economic growth.
time-consuming process for Inadequate and skimpy
establishment of business and Better industrial infra-structure infrastructure also causes loss
industry, transparency and is vital for industrial of quality life, illness and death
less-corrupt society. The development and expansion of in middle income and lower
position of Bangladesh in doing investment-local and foreign. income countries. The life and
business is 176 among 190 Industrial infra-structure covers death, in addition to economic
countries in the present world industrial plots, available and progress, have made it a
and this position evidences a affordable energy and power, mandatory responsibility for the
tenebrific picture on investment better ICT, skilled workers, leaders to invest more in
scenario. In most of the cases, technical and professional infrastructure development. To
the opprobrious and schlocky man-power, better roads and improve and develop
“doing business index”of communication systems. The infrastructure is the great

challenge of the time for inflow. This continent is inflow is inspiring but FDI
present world especially for considered as the “emerging outflow, i.e., investing abroad is
Bangladesh. continent” in the present world. either prohibited or restricted
by government rules or by
Political Instability and Political instability is a human Central Bank’s policies. These
Absence of Transparency created “precipice” that kills the restrictions work as a strong
hard-earned development and deterrent on FDI outflow.
“Africa rising: A hopeful progress of a country within
continent” the article was short span of time. Political Financial Constraints
published in The Economist, a instability is regarded by
London based Magazine on economists as a serious malaise, Finance plays a vital role in FDI.
March 2, 2013. It drew my harmful to economic Generally, an investor wants to
attention alike many performance including local invest in foreign country’s soil
economists, analysts and investment and FDI.Bangladesh mostly from borrowing from
philanthropists and I had the is disreputably known as a commercial banks and financial
chance to go through the article country of political instability, institutions of that country
with great enthusiasm. The turmoil, unrest and conflicts where he invests. So, borrowing
article focused the present especially when the change of costs, processing time and
economic and social scenario of government takes place. procedures for establishment,
the African Continent. About a Absence of transparency and greatly matter in decision
decade ago, the continent was presence of cornucopia making. It’s noticed that foreign
considered the most vulnerable corruption are common capital participation with good
problems faced by the investors access to domestic commercial
continent, full of poverty, off and on, that severely affect bank loans innovate more than
anarchism, civil wars, fighting the investment scenario of the others do. Inward FDI at the
between government and the country. sectoral level is positively
rebels, between different sects associated with domestic
of races, racism and on and on. Restriction on Investment in innovative activity only if firms
Presently it appears that “those Outside the Country engage in own R&D and if they
days are gone” and the have good access to domestic
Continent of Africa is rising In most of the SAARC countries finance.
rapidly due to multiple FDI including Bangladesh, FDI
The borrowing costs, viz.,
interest, loan processing fees,
commissions, etc. of local
commercial banks, leasing
companies and other financial
organizations are much higher
in Bangladesh. High borrowing
costs in Bangladesh are an
un-breakable stumping block on
the way of FDI and also for local
investments. Rationalization of
borrowing costs and simplifying
the loan processing rules,
regulations and time are crying
needs for attracting FDI. The
chart shown below is the
corporate tax rate in some

ARTICLE
much job for the state-policy

Corporate tax makers, public and private
rates in different entrepreneurs of most of the
countries countries, irrespective of their
status quo. Bangladesh has to
Corporate
Country prepare FDI friendly stomping
tax rates
grounds so that FDI inflows may
Bangladesh 25%-45% enter into the country within
short time and less hassle-free
India 25%-40% systems, rules and regulations.
The government of Bangladesh The Federal
Indonesia 25%
has recently established an Reserve Bank of
Malaysia 24% Authority named as Bangladesh
New York,
Investment Development
Pakistan 31% Authority (BIDA) with the high Bangladesh
Maldives 15.25% faulting responsibility to create Bank (BB) and
an investment-friendly
Singapore 17% environment, enabling foreign SWIFT have
Sir Lanka 28%-40%
and local investors to invest in reiterated their
different sectors of the commitment to
economy. We had been hearing
Source: Financial Express
the prosaism of “one step work together
dated April 30, 2017
service” for investment for the for recovering
last few years, so far nothing is
visible. We hope that the newly
the remaining
South Asian and South-East
Asian countries: formed BIDA will come forward stolen money of
with new ideas, pro-active $65.75 million
procedures, rules and
High corporate tax in
regulations that will expedite from the
Bangladesh compared to some
other countries, disparages and
the investment process in Philippines.
Bangladesh. It’s expected that
dejects both FDI and local
the state-policy-makers and
investors from investing,
BIDA shall work together as
bloating and exulting in
“investment-matriarchies” not SOURCE
businesses and industries.
as “investment-bureaucrats” The Financial Express
4 July 2017
th
and shall increase the
Conclusion investment both- foreign and
local, move forward with the
Attracting FDI into a country, “ever-speeding and
has become the mattering fastest-moving” world.

Role of Professional Accountants for
Accelerating Economic Development and Growth
This article is based on speech Product (GDP) of a country.

delivered by the author at When these grow, the people
SAFA International Conference experience the growth in the
in Kathmandu, Nepal
form of improved standard of
living, namely economic
S
outh Asia is considered to development.
be the world’s fastest
growing region The roles of professional
economically. Economic growth accountants are mainly, but not
is expected to gradually limited to:
accelerate to 7.3 percent in 2017
from 7.1 percent in 2016. But  The preparation of financial
there are also signs of fading statements and satisfying
tailwinds as well (Martin Rama, the users of financial
statements that the
World Bank South Asia Region's
statements, which represent
Chief Economist). Under these
the accounts of
economic situation, the topic
The Author is a organizations, present a true
“Role of Professional
Chartered Accountant and and fair view of the state of
Accountants in Economic
a Fellow, Council Member and affairs of the business entity
Development” which has been or other enterprises.
Chairman, Committee for Small
and Medium Practitioners of the
selected for SAFA International
Institute of Chartered Accountants Conference is very much  Implement the business plan
of Bangladesh-ICAB relevant with the SAFA as approved by the Board for
objectives. One of the main accelerating business
objectives of SAFA is that SAFA growth.
shall work, in the public interest
towards strengthening the  Risks management and
accountancy profession and establishing better control
ultimately in the interest of the environment, corporate
broad economic development governance for checking
of SAARC Region. The term corruption apart from
“economic development” compliance requirement.
typically refers to the  Ascertaining the cost of
improvements of various production /processes at
indicators such as literacy rate, different levels of operations
life expectancy, and poverty in the manufacture of a
rate etc. Although theoretically product or rendering a
there are some differences service. Providing costing
between economic growth and information for the guidance
economic development. It of management, introducing
cannot be denied that economic cost control methods and
growth is one of the assisting managements in
requirements of economic establishing appropriate sale
development of a country. The price.
development of any country
depends on the economic  Performing taxation related
growth the country achieves functions for the
over a period of time. Economic organizations. Formulation
growth deals with the of policies on day to day
investment, production and the control, performance
extent of Gross Domestic evaluation, etc.

ARTICLE
very much connected with the growing

 Formation of companies, public issues, listing of financial positions of the organizations
and securities management, mergers, and collectively related with the
questions liquidation etc. economic growth of the country.
Professional accountants provide services for the One of the economic growth measuring
organizations which keep contribution to the tools of a country is the measurement of
national economy through generating growth of Gross Domestic Product
employment opportunities, supplying essential (GDP). Main three sectors of GDP are
goods and services for the nation and paying Industry, Service and specially
money to the national exchequer. In essence, it Agriculture in Bangladesh and south
may be said that each and every organization is a Asian countries. Component wise
unit of national economy. The functions breakup of GDP of SAFA member
performed by the professional accountants are countries indicates that industry and
service are the core drivers of GDP
growth and employment. The
contribution of professional accountants
The term “economic development” for industry sector as well as various
typically refers to the improvements other subsectors such as business, trade,
bank, insurance etc. is remarkable.
of various indicators such as literacy Manufacturing industry plays an
rate, life expectancy, and poverty irreplaceable role in driving growth and
economic development. Manufacturing
rate etc. Although theoretically industries are the backbone of all the
there are some differences between developing countries as they have the
capability to make crucial contributions
economic growth and economic to it. Every successful business requires a
development. strong basis of financial management for
sustainable growth. As this is also true for

both manufacturing industries annual budget and accounting burden on the private sector in
and services, professional to the shareholders for the one hand cripples the saving
accounting is required for these company’s performance), and investment resulting
sectors. Professional accounting appointing the chief executive hamper of economic growth
ensures the smooth running of and determining management’s and on the other hand
business with accountability compensation. As chief financial non-collection of required
and transparency. Through officer, professional amount of tax creates obstacles
implementation of efficient accountants have oversight on to meet up the public
record-keeping strategies, it overall matters relating to the expectations of the country. So,
provides useful information to company’s financial affairs. As the first and most important
act proactively so as to make internal auditors, professional issue is to find an equilibrium
good decisions. It helps to plan accountants provide point for imposing the tax
ahead of future needs. A good independent assurance to burden on private sector. This
accountant looks for ways and management that the point of charging tax is the
means to reduce overheads organizations’ risk financial position which is
which ensure maximum profits management, governance and prepared and certified by the
of the business. Accountancy internal control process are professional accountants.
professionals in business assist being operated effectively.
with corporate strategy, Professional Accountants are Throughout the world,
provide advice and help the main consultants of SMEs. accountants, with their
business to reduce costs, They consult with them not only technical expertise and
improve their top lines and on legal matters but also on professional and ethical training,
mitigate risks. As board their day to day operations. play a key role by assisting
directors, professional client and employer taxpayers
accountants in business Economic growth necessitates regarding tax obligations.
represent the interest of the large scale saving and During discharging duties
owners of the company. Their investment in private sector. In professional accountants play
role regulates governing the this connection it is pertinent to an important role in combating
organization (such as approving mention that excessive tax tax evasion. Proper collection of
indirect tax (Value Added Tax)
depends on maintaining
required books of accounts and
financial statements which is
completely a function of
professional accountants. In
addition to this the institutes of
professional accountants
regularly advise the
government on various matters
of taxation with its
recommendations, and thus
ensure robust taxation
framework in each country of
SAFA member bodies.
Contributions of Banks and

Financial institutions, Capital
Market, Foreign Direct
Investment (FDI) etc are also
important for the economic

ARTICLE
development of a country. amount of nonperforming loans. growth of economy and meets

Capital is one of the important For improving the scenario country’s socio economic goals.
elements for setting up any importance has been given to It is an important constituent of
industrial, commercial and strengthen the risk the financial system, given its
business organization. A part of management and corporate role in the financial
capital is supplied by the governance. Most of the intermediation process and
owner/shareholder of the countries have included capital formation of the country.
organization but the main part professional accountants as Professional Accountants play
of required capital is supplied independent members of the roles, as an auditor and as an
by banks and financial boards and audit committees advisor to the company tapping
institutions. For example, at for banks and financial the capital markets. Professional
present total amount of fund as institutions to ensure the Accountants have been playing
provided by the banks and effective corporate governance a significant role in
financial institutions in and risk management. enhancement of governance,
Bangladesh in the form of Professional Accountants play trust, efficiency and
project loan and working capital an important role as Chief Risk transparency in a capital
is BDT 5746 billion which is 33% Officer, Chief Internal Controller, market. With the ethics,
of GDP. Head of Internal Audit and integrity, and professionalism
similar positions and in some professional accountants can
Banking sector may be cases, as Chief Executive provide the foundation of the
considered as life blood of the Officer. basics of efficiency in the capital
economy. But this sector in markets through assisting
most of the countries of South Capital Market in any country operational, pricing and
Asia is suffering from huge plays a pivotal role in the allocation efficiency.

In a typical capital market A properly functioning

scenario, Intermediaries, accounting and auditing
Investors, Issuers, Corporate profession is a critical
and Regulatory Authorities rely component of private sector
on ethics, integrity, development in terms of
independence, and skills of the domestic investors’ confidence
professional accountants in and the ability to attract Foreign
discharging their respective Direct Investment. Accordingly,
obligations to the investors. The most of the countries in South
Asian Region are in the process
entire field of financial services
of adopting and implementing 70% of export
relies greatly on trust of the
work of professional International Accounting and earning of
accountants.
Auditing Standards for both the Bangladesh is
private and public sectors.
generated from
Foreign Direct Investment has a
Accounting profession has only 10 countries
major role to play in the
economic development of the
great Contribution to economic of the world. The
host country. FDI provides
development but the profession export earning of
has also challenges. The
inflow of foreign exchange strength of the profession Bangladesh was
resource and removes the consists in ethics, integrity, USD 34 Billion in
constraints on balance of
payment. It can be seen that a
independence and FY 2016-17. There
professionalism. But, in many
large number of developing countries of the world due to are only 9
countries suffer from deficit losing the professional strength, countries who are
balance of payment for their independent regulator is being importing yearly
demand for foreign exchange established to regulate the
which is normally in excess of accounting profession. So, this
more than BDT 1
their ability to earn. FDI inflows is the time to take necessary billion from
by providing foreign exchange steps to increase the confidence Bangladesh.
resources remove the of general people in the
constraint of developing profession and it is the only way
countries seeking higher growth to enhance its contribution for SOURCE
economic development and Bonik Barta
rates. 15th July 2017
sustainability.
Net income of all banks after provisioning and tax dropped by nearly 33
per cent or Tk. 8.96 billion as of June 30 2017. The provisioning against
total bad debts of all banks rose to Tk. 52.56 billion on June 30, 2017 from
Tk. 34.08 billion as of June 30, 2016, the BB data showed.
SOURCE
The Financial Express
18th September 2017

ARTICLE
The Minimum Tax
A. Wahab FCA
T
he Minimum Tax has been which minimum tax is
introduced as per applicable under section
Finance Act 2016 by 82-C, shall be determined in
substituting Section 82-C of regular manner and tax shall
Income Tax Ordinance 1984. be calculated by using
applicable rate on such
The title of the newly income. If the tax so
substituted section has been calculated is higher than the
termed as Minimum Tax which minimum tax, the higher
is applicable in case of sources amount shall be payable on
of Income as mentioned in such income (Example-5).
clause (b) of sub-section (2) of
section 82-C and effective from 4) Income or loss computed in
the Assessment year 2016-2017. accordance with clause (d)
or proviso to clause (d) of
The sources of Income as sub-section (2) of section
The Author is a referred to above for Minimum 82-C shall not be set off with
Chartered Accountant and Tax are those sources loss or income, respectively
a Fellow Member of the wherefrom taxes are deducted computed for any regular
Institute of Chartered Accountants or collected at sources under source.
of Bangladesh-ICAB different sections mentioned in
the above section. It means loss computed for
sources of income for
The provisions on the basis of minimum tax shall not be set
which the Minimum Tax is off against the income of
assessable are the following: sources of regular income or
the income computed for
1) Tax deducted or collected at sources of income for
source as tax from the minimum tax shall not be set
income under different off against loss computed
sections mentioned in clause for sources of regular
(b) of sub-section (2) of income.
Section 82-C. The sections
referred to above are 52, 5) Where there is regular
52A, 52AAA, 52B, 52C, 52D, source of income in addition
52JJ, 52N, 52O, 52R, 53, to income from sources for
53AA, 53B, 53BB, 53BBB, which minimum tax is
53BBBB, 53C, 53CCC, applicable, regular tax shall
53DDD, 53EE, 53F, 53FF, be calculated on the income
53G, 53GG, 53H, 53M, 53N, for regular sources and the
55. tax liability of the assessee
shall be the aggregate of the
2) Books of account shall be tax determined as minimum
maintained in regular tax under sub-section (2) of
manner in accordance with section 82-C and the regular
provision of section 35 for tax under clause (a) of
sources of income for which sub-section (3) of Section
minimum tax is applicable. 82-C.
3) Income from sources for 6) Besides, the minimum tax

The Minimum Tax
for a firm having a gross receipts of more the sources for which tax has been
than fifty lakh or every company shall deducted or collected at source and
irrespective of its profits or loss in any the provisions of sub-section (4) with
assessment year for any reason whatsoever, regard to the provisions of minimum
including the sustaining of a loss or claiming tax for a firm having a gross receipts
of allowances or deductions (including of more than taka fifty lakh or a
depreciation) allowed under the ordinance, company at the prescribed rate, apply
be liable to pay minimum tax in respect of an then the higher amount of the two
assessment year at the prescribed rate as per shall be the minimum tax of the
clause (a) of sub-section (4) of section 82-C assessee (Example-8);
(Example-6).
9) Minimum tax under section 82-C shall
not be refundable nor shall it be
adjusted against refund due for earlier
The sources of Income as referred year or years or due for the
to above for Minimum Tax are those assessment year from any source,
although refund due on regular
sources wherefrom taxes are source of income is refundable and
deducted or collected at sources adjustable (Example-4);
under different sections mentioned 10) Where any surcharge, additional

in the above section. interest, additional amount etc. is
payable under provisions of this
ordinance, it shall be payable in
addition to the minimum tax
7) Where the assessee has an income from (Example-9);
sources that is exempted from tax or is
subject to reduced tax rate, the gross 11) Where the regular tax calculated for
receipts from sources shall be shown any assessment year is less than the
separately and the minimum tax shall be minimum tax under section 82-C, the
calculated in the manner detailed as under: minimum tax shall be payable
(Example-10);
i) Minimum tax for receipts from sources that
are subject to regular tax rate shall be 12) Where the regular tax calculated for
calculated by applying the rate mentioned in any assessment year is higher than
clause (a) of sub-section (4) of section 82-C; the minimum tax under section 82-C
the regular tax shall be payable
ii) Minimum tax for receipts from sources that (Example-11).
enjoy tax exemption or reduced tax rate shall
be calculated by applying the rate mentioned The exceptions to the minimum tax with
in clause (a) of sub-section (4) of section regard to the tax deducted or collected
82-C, as reduced in proportion to the at source for the following sources as
exemption of tax or the reduction of tax rate; referred to earlier are noted below:
iii) The minimum tax under this sub-section shall
be the aggregate of amount under Under section 52
sub-clauses (i) and (ii) as above (Example-7).
a) Taxes collected from a contractor of
8) Where the provisions of sub-section (2) with an oil company or a sub-contractor to
regard to the minimum tax on income from the contractor of an oil company, as
may be prescribed;

ARTICLE
b) An oil marketing company Under Section 53 the sources mentioned in clause

and its dealers or agents (c) of sub-section (1) and
excluding petrol pump Tax deducted under section 53 sub-section (2) of that section.
stations. from import of goods by an
Industrial enterprise as raw Besides the above exceptions,
c) Any company engaged in oil materials for its own there are incomes with tax at
refinery; and consumption. source deducted or collected
which shall be computed and
d) Any company engaged in tax shall be calculated for
Under Section 53F
gas transmission or gas certain sources in the manner as
distributions. specified in the following:
Tax deducted under section
53F from a source other than
Sl. Amount that will be taken

Sources of income as mentioned Rate or amount of Tax
No. as income
1. Section 52-C tax deducted at source Amount of compensation As mentioned in section 52-C @
from compensation against acquisition as mentioned in Section 2% on Property in the
by govt. 52-C Pourashava @ 1% on Property
outside Pourashava
2. Section 52D deduction of tax at source Amount of interest as at the rate of 5% mentioned is
from interest on Savings instruments. mentioned in Section 52D section 52-D
3. Section 52DDD deduction of tax at Amount of export cash At the rate of 3% mentioned in
source from Export cash subsidy subsidy as mentioned in section 52DDD
Section 52DDD
4. Section 53 F (1) (C) and (2) Amount of interest as As mentioned in section 53F
Tax deduction at source on interest on mentioned in Section 53F
savings deposits and fixed deposits
5. Section 53H Deed value as mentioned in As mentioned in section 53H
Tax deducted at source on registration section 53-H and the rule made there under
of transfer of property

The Minimum Tax
Example-1 So the tax payable is Tk. Example-4

2,00,000/- as collected at
Mr. X is an individual. During the source, besides other dues like The income of an individual
Income year ending on 30th surcharge etc, if applicable. during the year ended 30th
June 2016, he imported goods June 2016 was Tk. 3,00,000/-
worth 40,00,000 for which tax Example-3 from savings certificate on
@ 5% at import stage totaling which tax at source had been
Tax 2,00,000 has been paid by In the year ending on 30th June deducted @ 5% as per section
him. 2016 an individual had income 52D amounting to Tk. 15,000.
from savings certificate of Tk. In addition he had received
In the Assessment year 2016-17 4,00,000 on which Tax of Tk. bank interest amounting to Tk.
he submitted Income tax return 20,000/- @ 5% as per Section 6,00,000/- on which tax at
with a profit of Tk. 16,00,000/-. 52-D has been deducted. There source had been deducted
There was no item disallowed as is no other source of income. amounting to a sum of Tk.
per Section-30.
60,000/-.
In the assessment year
His total Income on import 2016-2017 the tax on this The assessee had no income
business Tk. 16,00,000/-. interest income of Tk. 4,00,000 from any other sources and he
Section 82-C is applicable in this from savings certificate as per had no investment eligible for
case as he dealt in import section 52-D is Tk. 20,000/- as tax rebate.
business with collection of tax deducted from source as per
at source. His tax liability on proviso to clause (d) The total income and the tax
Income of Tk. 16,00,000 as is sub-section (2) of section 82-C. liability of the assessed will be
determined on regular manner as follows:
at slab rate is Tk. 2,05,000.
Calculation of Tax on regular source of Income:
Tax collection at source Tk.
Bank Interest (Regular Source) 6,00,000
2,00,000.
Section 82-C (Savings Certificate) Interest 3,00,000
The higher of the two amounts Total Income 9,00,000
is Tk. 2,05,000.
Tax on Regular source of Income
The assessee will have to pay an Bank Interest 6,00,000
extra amount of Tk. 5,000 as Less: 0% rate tax on Income at slab rate 2,50,000
tax to make the total tax as Tk. Balance 3,50,000
2,05,000 and surcharge etc. will
be payable if applicable. Tax @ 10% on balance 3,50,000 35,000
Tax on Regular Income as above 35,000
Example-2 Tax deducted at source as per 82-C on Income
Tax Savings Certificate of 3,00,000 1 5,000
His income from import
business is 12,50,000 on which Total 50,000
taxes payable in regular manner
at slab rate Tk. 1,35,000/-. Tax refundable on regular source of Income for Bank Interest
Tax deducted at source 60,000
Tax collected at source Tk. Less: Tax due on the Income from Bank Interest 35,000
2,00,000/- Tax Refundable on regular source of Income i. e. Bank Interest 25,000
Total Income (6,00,000 + 3,00,000) 9,00,000
The higher of the two is Tk.
2,00,000/-

ARTICLE
Example-5
His Total Income and tax liability will be as follows:
An Individual during the year
1) Regular source of Income on House Property 4,00,000
ended on 30th June 2016 had
Tax liability will be( at Slab rate) 15,000
imported goods worth Tk.
20,00,000/- on which tax at 2) Tax liability on Import business income as per section 82-C:
source had been paid @ 5% Regular source (House Property) 4,00,000
amounting to a sum of Tk. Import business profit as per account 6,00,000
1,00,000/-. The individual on
that import business had made Total Income 10,00,000
a profit of Tk. 6,00,000/-.
Besides, in that income year the Total Tax on Total Income 10,00,000 (at slab rate) 92,500
individual had income from Less: Tax on Regular Source Income (House Property) 15,000
house property of a sum of Tk.
Balance of Tax on 6,00,000/- Income for Import Business 77,500
4,00,000/-.
At source tax paid on Import business Income: 1,00,000
He had submitted his Income
tax return on Universal Self As per sub-section (2) of Section 82-C the tax liability
Assessment basis for that will be the higher amount of Tk. 77,500 and Tk. 1,00,000
Income year.
3) In this case the Total Income of the Individual
will be 4,00,000+6,00,000 10,00,000
Total Tax liability will be (15,000+1,00,000) 1,15,000
Example-6
1) Regular Source of Income:
An individual during the year House Property 450,000
ending on 30th June 2016 had Tax liability on House Property Income (at slab rate) 20,000
import business of Tk. 2) Tax liability on Import business Income under section 82-C
20,00,000/- on which tax at Regular Source Income (House Property Income) 4,50,000
source @ 5% had been paid Import business income as per account 8,00,000
amounting to a sum of Tk.
1,00,000/-. The individual had Total Income 12,50,000
made a profit of Tk. 8,00,000/-
from the said import business. Tax on total Income at slab rate 1,35,000
Besides, he had an income of Tk. Less: Tax on House Property income (Regular Source) 20,000
4,50,000/- from the house
Tax on Import business Income (Balance ) 1,15,000
property and he had an income
of Tk. 4,00,000/- from savings As per sub section (2) of section 82-C the higher of the two
certificate on which tax @5% amounts that is Tk. 1,00,000/- collected at source and
amounting to Tk. 20,000/- has Tk. 1,15,000 as above will be the tax on Import Business.
been deducted as tax at source.
The individual had submitted 3) Tax deducted from Interest on savings certificate Tk. 20,000/-
Tax Return on Universal Self
Assessment basis. Determine 4) For the Assessment year 2016-17 the Total Income of the Individual
his total Income and his tax will be Tk. 4,50,000+8,00,000+4,00,000 = 16,50,000/-
liability for the year.
Tax liability will be 20,000 + 1,15,000 + 20,000 = 1,55,000/-

The Minimum Tax
Example-7
i) Minimum tax on 10,00,000 being receipts from a source 6,000
A Pvt. Limited Company during where the rate applicable is 0.60% as per sub-section (4)
the Income year ending on 30th of section 82-C
June 2016, had gross receipts of
Tk. 50,00,000 of which the ii) Minimum Tax on 40,00,000 being the receipts from *10,286
gross receipts of Tk. 40,00,000 sources liable to tax at reduced rate
was from a source liable to tax Total Minimum Tax 16,286
@15% and the gross receipts of
Tk. 10,00,000 was from a * Minimum tax at the rate of 0.60% on Tk. 40,00,000/- 24,000
source liable to tax at rate
applicable to regular source. Minimum tax at reduced rate = 24,000 x 15% / 35% 10,286
Note: Regular Tax rate for Private Co. 35%
Example-8 There was no disallowable As per regular method the

expense as per section 30 of the computed profit for the
A Private Limited Company Income tax ordinance and the business was Tk. 8,00,000/-
during the Income year ending depreciation claimed by the
on 30th June 2016 had company and the other Tax as a private Ltd. co. @ 35%
imported goods with Tk. expenses claimed were on Tk. 8,00,000/- is Tk.
40,00,000/- on which at source according to the law. 2,80,000/-
the company paid a tax @ 5%
amounting to Tk. 2,00,000/-. In this case the minimum tax will So as per sub-section (2) the
be as follows: minimum tax would be the
The Assessee company had higher amount i. e. Tk.
sold the goods for Tk. According to sub-section (2) 2,80,000/-
75,00,000 and he made a profit the minimum tax:
of Tk. 8,00,000 as per According to sub-section (4)
statement of accounts prepared At source deduction was Tk. the Gross receipts as sale price
and audited by a firm of 2,00,000/- was Tk. 75,00,000/-
Chartered Accountants.
According to sub-section (4),
the minimum tax on Gross
receipts of Tk. 75,00,000- @
0.60% = 45,000/-.
As a result the minimum tax for

the company as per section
82-C for assessment year
2016-17 will be Tk. 2,80,000
which is the higher amount
between the minimum tax
computed as per sub-section
(2) and as per sub-section (4) of
section 82-C.

ARTICLE
Example-9 Example-11
Example (1) the Individual Had there been the profit of Tk.
Assessee had a Net Asset of Tk. 2,00,000/- of the company the
3 cr. for which surcharge @ 10% regular tax would have been Tk.
on tax is applicable. As the tax 70,000/- @ 35%
payable by the assessee is Tk.
2,05,000/-. He will have to pay The Minimum Tax = 45,000/- @
a surcharge of Tk. 20,500/- in 0.60% on 75,00,000/-
addition to the tax payable. So,
he will have to pay a total sum The Asian
The regular tax being more than
of Tk. 2,05,000 + 20,500 = the Minimum tax, the tax Development
2,25,500/- payable for Assessment year Bank (ADB) has
Example-10
2016-17 would be Tk. 70,000/- approved $526
being the higher amount.
million in loans
A private limited company To sum up whatever may be the for Bangladesh to
providing entertainment
services to the general public,
regular or minimum tax as per help boost
provisions of section 82-C the
had received during the year higher amount will be taken as
infrastructure
ended on 30th June 2016 a sum the Minimum Tax. investment. The
of Tk. 75,00,000/- on which as
per statement of account the
multilateral
company had shown a profit of
Besides, the Minimum Tax as lender said the
dealt with above in Section
Tk. 1,00,000/- There was no 82-C, the assessees of the funds will be
disallowable expenses as per Individual group like an used in financing
section 30 and the company
had claimed depreciation as per
Individual, Hindu Undivided public-private
Family, Firm, Association of
law and it had no other persons, artificial persons
partnership or
disallowable expenses. created by law etc. will be liable PPP projects and
For assessment year 2016-17:
to pay the minimum tax as renewable energy
under:
plants.
The regular tax @ 35% on Tk.
1,00,000/- is Tk. 35,000/- Whatever may be the tax
minimum tax on receipt of Tk. payable at slab rates as per
75,00,000/- @ 0.60% = Schedule (2) first part of SOURCE
Finance Act 2016 the minimum The Asian Age
45,000/- 19 July 2017
th
tax payable by an assessee shall
The Minimum tax being more not be less than the following
than the regular tax, the tax amount:
payable will be tk. 45,000/-
Area of Living Minimum Tax

Dhaka North City Corporation & Dhaka South 5,000/-
City Corporation & Chittagong City Corporation
Other City Corporations excluding the above 4,000/-
Outside the above 3,000/-
Source: Finance Act 2016

Challenges and Opportunities of Accountancy Profession
SAFA Perspectives
ASM Nayeem FCA
I
ntroduction innovation, though there are
other factors unique to South
The accountancy Asia. Let us now look at the
profession plays a key role in challenges being faced by the
optimizing the effective use of accountancy profession and
the productive assets of the how these challenges can be
world. The profession, turned into opportunities,
represented by its members particularly in the context of
called professional accountants, South Asia.
covers the accountability,
financial and strategic aspects Globalization of Business
of business. Most professional
accountants either work in Continued globalization of
public practice or in business. business encourages the free
The area of work of both the flow of investments across the
streams of accountancy globe and intensifies
The Author is a profession is mainly focused on competition. This in turn
Chartered Accountant, the private sector business requires increasing expertise of
a Fellow Member and Past arena. Since the business world, the human resources, manning
President of the Institute of particularly North America and the organizations, to deal with
Chartered Accountants of Europe, has been changing at the varied functions effectively
Bangladesh-ICAB. Currently an accelerated pace over the and efficiently. This has
he is the President of SAFA years, the accountancy impacted the expected role of
profession has been facing professional accountants in
challenges to cater to the business, engaged in finance
changing needs of the business. functions. Their traditional role
And behind these challenges lie of number crunching and
the opportunities for the looking after the financials only
accountancy profession to has now changed. Now they
contribute value to the business, need to be a strategist as well
society and public and in the so that they can contribute
process also to contribute effectively in steering and
towards its own pocket. Similar veering their organizations in
wave has also started hitting the this increasingly competitive
South Asia region---the business environment.
countries of SAFA member
bodies. In the wake of such Though globalization has to an
challenges, professional extent been negatively
accountancy bodies and their impacted by Brexit and Trump's
members should be prepared to taking over of the Presidency of
respond professionally and USA, I think it is a temporary
effectively. hiccup which is likely to fade
away in the foreseeable future.
The challenges mainly stem
from increasing globalization of The globalization has created
business, continued opportunities for the
globalization of financial professional accountants all
reporting standards, increasing over the world including South
regulatory and statutory Asia. It has brought new foreign
requirements and technological investments in the South Asia

ARTICLE
region, a home of about one-fourth of the professional accountants in South Asia

population of the world. This has not only are enjoying the opportunities of such
impacted on the role of professional accountants trickle down effects.
in business, as stated earlier, but has also
impacted on the role of the professional Globalization of Financial
accountants in practice. The professional
accountants in practice are now not only
Reporting Standards
providing audit and assurance services, but also
business advisory services as strategic partners Accounting is the language of business.
of the business houses. The practicing So it is important that the same language
accountants should become trusted advisors to is used in the accounting/financial
the business in order to avail the opportunities to reporting function. This helps
the highest possible level. comparability and understanding of the
financial statements of different business
organizations and thus facilitate
Following the trend in the western world,
investments, particularly in capital market
consultancy companies have been set up in
and also FDIs. Keeping this in mind, the
some parts of South Asia, particularly in India, to
International Accounting Standards
Board (previously International
Accounting Standards Committee) has
The challenges mainly stem from issued a good number of International
increasing globalization of business, Accounting
International
Standards
Financial
(IASs) and
Reporting
continued globalization of financial Standards (IFRSs) over the years. IASB
reporting standards, increasing has also been continuously
revising/amending such standards to
regulatory and statutory requirements cater to the new developments/changes
and technological innovation, in their requirements to service the
business world. Issuance of new IFRSs
though there are other factors and frequent revisions/amendments
unique to South Asia. Let us now thereto pose a challenge on the
professional accountants to keep
look at the challenges being faced themselves updated with the latest
by the accountancy profession and Standards so that the measurement,
recognition and disclosure provisions of
how these challenges can be turned the Standards are duly followed while
into opportunities, particularly in the preparing and presenting financial
statements. This has imparted a
context of South Asia. challenge on the accountancy profession
all over the world including the South
Asian region.
provide such advisory services without
compromising the independence of audit and
assurance services done by their sister India has gone for convergence with
concerns---practicing firms. IFRSs. Whereas, Bangladesh, Pakistan,
Nepal and Sri Lanka follows IFRSs,
though using different names in their
With increasing globalization, demand pressures
respective jurisdictions.
on one side of the world can have significant
impact on the other. This has resulted in
outsourcing of services by the western countries The SAFA member bodies and their
to South Asia, particularly India. And the members have to keep themselves

SAFA Perspectives
updated with the latest clients/organizations so that business solutions. The South
Standards to turn this challenge they not only comply with the Asian countries are also
into an opportunity. This has same, but also take advantage increasingly moving towards
created demand for of the same through timely that direction. As a result,
professional accountants with planning and implementation of professional accountants need
upto date knowledge of IFRSs the same. PAOs should focus to use increasingly
and the required skill for more on capacity building of the sophisticated and smart
implementation of IFRSs. This member firms so that they can technologies to enhance their
enhanced demand has created deliver quality audit, and are not traditional ways of working.
more job opportunities for subjected to disciplinary action These technologies are even
professional accountants in by the accounting oversight replacing the traditional
business and more assignments body when put in place. approach of auditing. The
for advisory and quality audit technological advancement
services for professional Increasing Technological poses more challenges to SMPs
accountants in practice. compared to large accountancy
Innovation firms in practice.
Increasing Regulatory The rapid technological
Increased demand for
and Statutory advancement is gradually
information system audit has
Requirements moving the whole world
created an opportunity for the
towards digital economy. The
professional accountants in
Increasing regulatory and developed countries have
South Asia. Advancement of
statutory requirements pose already increased the use of
technology has also increased
challenges on the professional digital technology as their
the speed, accuracy and
accountants, be they in practice
or in business. In South Asia
such increasing regulatory and
statutory provisions are made in
the security and exchange
laws/regulations, tax laws,
foreign exchange regulations,
etc. Increased regulation is
imminent because of tax
avoidance and evasion, transfer
pricing, capital market
manipulation, money
laundering, etc.
Now that financial reporting

oversight bodies are going to
be in place in some South Asian
countries (Bangladesh and
India) in near future, more and
more regulations are expected
to be on the way.
The professional accountants

need to learn such new
requirements and unlearn the
old ones to advise/guide their

ARTICLE
financial crisis and the ongoing

environmental crisis, the issue of
integrated reporting has started
getting highlighted, particularly
in the developed countries. The
demand for producing
integrated reports is on the rise.
This is likely to be the second
revolution in accounting since
double-entry bookkeeping
began.
The integrated report contains

consistent and unified
information on organizational
overview, external environment,
governance process, business
model, risks, opportunities,
flexibility of the works of the accountants often have fairly strategies, performance and
professional accountants. narrow skill sets, yet technology reporting guidelines.
gives them the ability to
Professional accountants in compete. And businesses do The professional accountants
business as well as in practice increasingly turn to them for need to be well versed with the
need to embrace the change help and guidance, mainly knowledge and skill of
dictated by the increasing because of lower fee producing integrated report
technological innovation so that consideration. The risk that which is a kind of organized
they are not left behind. If they businesses are taking in report that includes interrelated
embrace the change and keep potentially receiving poor information about several
themselves tuned to the latest advice could reflect negatively internal and external aspects of
technologies, they can reap as on the accountancy profession an organization being reported
they sow. and result in an erosion in the on.
trust and reputable status that
the professional accountants Though gradually integrated
Competition from reporting is likely to take over,
have earned over the decades.
Unqualified Accountants particularly in the case of public
The South Asian region has interest entities, I think it will
There is an increasing threat to started to face such challenges take at least another 10 years for
the profession from unqualified increasingly from the integrated reporting to be well
accountants who can now unqualified accountants. The in place in South Asia.
create their own website and PAOs may move with their Nevertheless, the professional
start a business from home. respective governments for accountants should start
Unlike solicitors or so, anyone providing some learning the requisite skill and
can call himself an accountant statutory/regulatory protection become a change agent.
without any form of training or to the profession from such
professional qualification. threats. Marketing of Services
Professional accountants are
subject to the code of
professional conduct issued by Integrated Reporting Unlike the western countries, all
the PAO of which they are the Professional Accountancy
members. Unqualified Because of the world-wide Organizations (PAOs) of SAFA

SAFA Perspectives
countries prohibit solicitation of of the western world. Mr. James think the extended auditor's
clients and advertisement of Roberts, in his article "BANG report, by giving more insight to
their services. As a result, the YOUR DRUM" published in the the users of financial
professional accountants in Issue 218 of 2017 of Audit & statements, will demonstrate, to
practice are at a Beyond, says that "Reforms in a degree, the value of our audit.
disadvantageous position while audit have resulted in new
competing with ethical and technical standards Expectation Gap
non-accountants or and technological innovation
non-professional accountants has led, for example, to
In South Asia, a visible gap
for the same services to increasingly widespread use of
exists between the auditors'
clients/potential clients. I think data analytics. These changes
own perception of their
all the SAFA member bodies have helped to drive innovation
functions and the society's
should revisit their code of in the use of technology by the
expectations from the auditors.
ethics related to marketing of larger audit firms. At the same
This expectation gap arises
services, and bring the same in time, extended audit reporting
because the users of financial
line with the IFAC Code of has given more insight to users
statements are not only
Ethics and the western of financial statements of the
shareholders, but various other
countries. This will create a level biggest companies. It is
groups, including creditors,
playing field, to some extent, to important that professions can
employees, government, banks,
compete with others from express their purpose and their
financial institutions and society
outside the profession for the value to society. It seems to me
at large. The auditors need to
same or similar services. This that we need to "sell" audit in
safeguard the interests of the
will thus enhance the work this way to demonstrate our
shareholders as well as of the
opportunities for the value and, in a sense, to justify
public. Since such diverse
professional accountants in the privilege of being a
interests have to be catered to,
practice. professional service that is
the auditor's role is coming
largely required by law rather
under increasingly microscopic
Change in Audit than brought purely by choice".
scrutiny. The auditors are
Environment expected to detect frauds and
None of the SAFA member thus prevent the issuance of
bodies have yet adopted the defective financial statements.
There has been an accelerating
extended report (ISA 701). I
change in the audit environment
The SAFA member bodies need
to be more proactive to
eradicate this expectation gap
by interacting more with the
society and clarifying about the
purpose of audit and the role of
auditors.
Level of Audit Fee
Generally speaking, the audit

fee in South Asia is much lower
compared to the western
Countries. In Bangladesh the
audit fee is extremely low. As a
result, in most cases the audit
firms, particularly SMPs, are

ARTICLE
Audit
facing problems in attracting South Asia needs to enhance its Audit of World
good students and high quality branding significantly to Bank/ADB Funded
staff to service their clients. This increase its audit fee level.
certainly affects the quality of
Projects
audit and also limits their ability
Public Private Partnership There are a huge number of
to provide diversed and high
quality professional services. in the Field of Audit World Bank and ADB funded
projects in the South Asia
In South Asia the Government ncountries. The professional
The PAOs in their respective
sector auditors are mainly accountants can be engaged in
jurisdictions of South Asia
focused on rules and conducting risk based and
should take up this issue
regulations and also financial performance based internal
seriously for increasing the
irregularities. The professional audit of these projects, instead
audit fee level. There should be
accountants working together of focusing only on the financial
unity among the practicing
with the government auditors and compliance audit. The
firms not to undercut, but to
are likely to bring more PAOs may consider taking up
enhance the fees. Besides, the
professionalism in the audit of the matter with World Bank and
firms should try to add value to
government projects and ADB accordingly.
the audit by conducting quality
audit and giving valuable audit expenses. Because of their
observations along with limited human resources, many Networking Among the
government projects and
recommendations for Accountancy Firms
improving controls in their letter expenditures in some SAFA
to the management. countries remain unaudited for
a long time. Through In South Asia big and mid-tier
outsourcing to the professional firms are comparatively well
Compared to South Asia, the equipped with their professional
accountants in practice, this
branding of accountancy knowledge and skill because of
backlog can be reduced. The
profession is fantastic in Europe sharing of their knowledge,
PAOs may consider working in
and North America. The process and technology
this direction.
accountancy profession in through out the global network.

SAFA Perspectives
But the SMPs in the SAFA Conclusion themselves to cater to the

countries are deprived of such changing needs and demands
sharing of knowledge and skill. With the increasing of the society they service. They
This can be overcome through globalization, roll out of new must embrace and prepare for
networking among the firms at technology, new accounting challenges, and they must also
the national level. Besides, their and auditing standards and prepare for seizing the
capacity may be enhanced regulations, changes in the opportunities. Those
through effective collaboration business environment are professional accountants who
and merger. PAOs can also help inevitable. The changing have the vision, who have the
in their capacity building by business environment is values and who have the
conducting required training constantly impacting the work capacity can work their way
through workshops. of professional accountants, be through.
they in practice or in business.
SAFA can also provide a Such changes resulting in
platform to the SMPs for challenges along with many
enhancing their technical and others have been discussed
professional capacity. This can above. While discussing the
be done through setting up a challenges, I have also focused
effective web-based Virtual on the ways as to how
Knowledge Training Centre professional accountants can
(VKTC) which is already in turn such challenges into
progress. opportunities. It is necessary to
think about some of these
Continuous Professional issues in terms of threats and The revenue
Development competition. Of course, in every
generation from
profession there are challenges
and opportunities. We should VAT is likely to be
The complex and constantly
changing environment in which
be aware of both. around Tk. 83, 600
the professional accountants crore, Tk. 7,675
function requires a broad Automation will replace many crore short of the
jobs, but since employee cost is
understanding of economic
cheaper in South Asia, this
target of Tk. 91,275
issues and a lifetime continuous
impact of automation will be crore for the
education. To some degree
these needs can be met through less and gradual here. At the current fiscal year
participation in the activities, same time, outsourcing of despite
seminars and workshops services to the South Asian non-implementatio
region will increase. And the
organized by PAOs and many
professional accountants can n of VAT Law. NBR
reputable chambers and
institutes/bodies in the business take advantage of this. Of increased the
and financial fields. The PAOs in course, the notion that a revenue target by
South Asia are aware of this professional accountancy 34% to Tk. 91,275
qualification obtained in early
requirement and are trying to
twenties is sufficient for life is
crore in the current
do the needful. But I think it
quickly evaporating. They need fiscal year through
should be much more extensive
and practical oriented. to be on a life-long learning, and VAT.
need to frequently re-skill
SOURCE
Dhaka Tribune
16th August 2017

ARTICLE
Cost of Fund of Commercial Banks

Taslima Akhter1 | Md. Abu Bakkar Siddik2 | Anamul Haque3
A
bstract Introduction
The Authors are:
Cost of fund is a crucial Banking sector of Bangladesh is
fact for banks to achieve their significantly contributing in
profitability and long-term financing different economic
sustainability. This present activities and thus promoting
study aims at investigating the economic growth. A bank is
impact of bank-specific and engaged with receiving
economy-specific determinants deposits and issuing debt
of cost of fund of selected securities for fund raising and
Commercial Banks (SCB) investing the raised fund in
operating in Bangladesh. This different assets (Fama, 1980).
study considers ten prominent Thus, banks bear costs for their
Commercial banks, six bank liabilities and generate earnings
1
Lecturer specific determinants, three from their investments (Sayeed
Department of Banking & Insurance economy-specific determinants et. al, 2012). Theories suggest
University of Chittagong collected as secondary data that a lower lending rate
from 2010-2014. Different encourages higher investment
financial ratios and statistical in an economy. However, cost
tools (descriptive statistics, of fund is an important
Pearson’s correlation & determent for bank’s base rate
regression analysis) have been (Bangladesh Bank, 2015). A high
utilized for verifying the cost of fund results in unviable
hypotheses. The results showed and poor performances of
that capital adequacy ratio banks, which eventually
(CAR) & annual inflation rate increase credit risk (Raknerud
(INFL) have positive impacts and Bjorn, 2013). In recent years
and size of bank (SIZ), credit the determinants affecting the
risk (CLTL), loan to deposit ratio cost of fund requires special
(LDR), profitability performance attention for minimizing
(EPS), growth in money supply banking vulnerability and
2
Lecturer
(MGS), and annual GDP growth instability.
Department of Banking & Insurance
(GDPR) have negative impacts
University of Chittagong
on sampled banks’ cost of fund. Cost of fund is a functional
Moreover, this study reveals outcome of liabilities’
that CLTL and INFL are the composition and the costs
significant determinants of associated with raising the
sampled bank’ cost of fund over composed liabilities (Deans &
the study period. Finally, Stewart, 2012). Initially demand
another multivariate regression and supply interaction
model has been revisited determines cost of funding and
considering only accepted funded amount. Any alteration
variables. in demand and supply level is
adjusted through changing
Keywords deposit rates, re-pricing assets
and changing money market
Cost of Fund, Commercial Bank, rates. Besides, there are several
3
Lecturer
Internal & External determinants external and internal factors,
Department of Banking & Insurance
which influence cost of fund of
University of Chittagong
banks directly or indirectly.

They include ownership structure, age of institutions and their impacts on

business, bank size, deposit portfolio, capital profitability. Section four deals with
adequacy, liquidity ratio, equity ratio, methodology of the study. Section five
profitability, nature of assets as bank specific ascertains the analyzed results and
internal determinants [Nwaoba (2006), findings. In the end, section six provides
Accenture (2008), Al-Jarrah (2010), Raknerud, summary of the study.
et. al, (2011), Deans & Stewart, 2012; Hossian&
Hossain (2013) and Kroszner (2012)] and market Overview of Banking Industry in
concentration, degree of banking development,
tax structure, inflation, money supply, GDP
Bangladesh
growth, exchange rate are considered as
At the beginning of independent
Bangladesh, there were only 12 banks
with 1130 branches across the country
(Saklain, 2012). With the pictures
Cost of fund is a functional outcome depicted at Table-1, it is shown that the
of liabilities composition and the banking sector of Bangladesh comprises
four categories of scheduled banks-
costs associated with raising the State-owned Commercial Banks (SCBs),
composed liabilities (Deans & State-owned Development Financial
Institutions (DFIs), Private Commercial
Stewart, 2012). Initially demand and Banks (PCBs) and Foreign Commercial
supply interaction determines cost Banks (FCBs). Recently, BASIC bank and
Bangladesh development bank have
of funding and funded amount. included as SCB instead of DFI
Any alteration in demand and supply (Economic Review of Bangladesh, 2015).
level is adjusted through changing

deposit rates, re-pricing assets and
changing money market rates.
industry & economy specific external

determinants [Fry, (1995), Cho, (1998), Hossain &
Hossain, (2012) & Musa, et. al, (2015)]. There are
substantial number of researches being done
regularly on cost of fund issue but studies
regarding cost of fund in developing country like
Bangladesh have received scant attention.
Therefore, the objective of this study is to fill up
the existing research gap in this sector. This
paper aims at identifying the determinants of
bank’s cost of fund.
Along with this introduction, the study has been

shown in six sections. Section two provides a
brief overview of banking industry of
Bangladesh. Section three gathers the existing
literature relating to cost of fund of financial

ARTICLE
Table 1: Structure of the Banking System in Bangladesh (End of June 2015)
Types Branches Percentage Percentage

No. of of Total of Total
of
Banks Urban Rural Total Assets Deposits
Banks
SCBs 6 1357 (34.41%) 2312 (44.89%) 3669 (40.18%) 27.53 25.66
SBs 2 110 (2.79%) 1295 (25.15%) 1405 (15.39%) 3.65 5.3
PCBs 39 2402 (60.90%) 1580 (30.68%) 3982 (43.61%) 63.3 64.05
FCBs 9 75 (1.90%) 0 (0%) 75 (.82%) 5.52 4.99
Total 56 3944 (100%) 5150 (100%) 9131 (100%) 100 100
Note: Banks prepare their summarized below. concluded that financial crisis
balance sheet on calendar year caused the variations between
basis, and are obliged to submit With respect to Norwegian cost and cash rate. They further
their audited balance sheet at banks, Study (Raknerud et. al, concluded that cost of fund
the end of every calendar year. 2011) reveals that one percent transmitted into lending rate
That is why banks' increase in three-month and banks have different level of
performance-related figures are Norwegian Interbank offered cost of fund with respect cash
stated in calendar year Rate (NIBOR) results in almost rate set by Federal Reserve.
basis.Source: Economic Review 0.8% increase in bank’s rate.
of Bangladesh, 2015. Hossain & Hossain (2013)
Nwaoba (2006) in his study studied the impacts of internal
The scheduled banks have a concluded that scarcity of loan factors on Non Banking
total number of 9131 branches able funds in banking channels Financial Institutions( NBFIs)
as of June 2015 consists total are mainly responsible for cost of fund in Bangladesh
3944 rural branches. In higher cost of fund. His study on based on sixteen NBFIs using
aggregate pattern PCBs depository money banks (DMB) data from 2007 to 2011. They
dominate the banking industry in Nigeria considered cash considered age of business,
in Bangladesh both in assets reserve ratio, money supply, equity contribution, size of the
share (63.3%) and deposits growth in bank credit, liquidity business, nature of assets and
share (64.05%). ratio, credit risk of the borrower, profitability ratio as internal
prime lending rate, real GDP as determinants of NBFIs’ cost of
Literature Review explanatory variables and found fund and from multiple
that CRR, prime lending rate, regression analysis, they
Generally there is expanding grwoth in bank credit, money revealed that business age and
level of empirical research supply and liquidity ratios as the earnings per share (profitability)
available on cost fund, its important determinants of are the significant determinants
structure and determinants. Nigerian DMBs’ cost of fund. of NBFIs’ cost of fund.
However, it is mentionable that Other studies
empirical research on cost of (Folawewo&Tennant, 2008; and CBN Working Paper (2015)
fund with respect to Haruna 2011) also articulated investigated the determinants
Bangladeshi banking structure similar comments on Nigerian of bank’s cost of fund and found
is too much limited. Some DMBs cost of fund. that salaries and wages, other
findings of previous research overheads including cost of
across the globe have been Deans and Stewart (2012) infrastructure, banks’ risk

as internal determinants, and Where,

economy specific data have
been collected from reports of COF = Cost of Fund as
Bangladesh Bank and Economic Dependent Variables
Review of Bangladesh. Among
CAR= Capital Adequacy Ratio
the sample of 10 banks, 3 banks
are state-owned and the SIZ= Size of Bank, measured as
remaining 7 banks are private natural log of Total Bank Assets.
commercial. Islamic banks and
foreign commercial banks did CLTL= Credit Risk, measured as
not come under this study as Classified Loans to Total Loans
these banks follow different
banking systems. LDR= Loans to Deposit Ratio
premium, liquidity condition and
EPS= Profitability Performance,
inflation as well as money Variables Considered
measured as Earnings Per Share
supply are the principal
determinants of cost of fund. To assess the impacts of MSG= Growth in Money Supply
internal and external
According to other previous determinants on banks’ cost of INFL= Annual Inflation Rate
studies, bank specific variables fund we have considered capital
like; capital adequacy ratio and adequacy ratio, size of bank, GDPR=Annual Growth Rate.
total asset ratios (Al-Jarrah, credit risk, loan to deposit ratio,
2010) and different economy profitability performance, Here we have followed the
specific variables like; inflation, growth in money supply, annual stepwise regression method
GDP growth, exchange rate inflation rate and annual GDP where the model automatically
have significant impacts on growth considering the selects the independent
banks’ cost of fund (Fry, 1995 previous literature and findings variables (Rawlin&Shanmugam,
and Cho 1998, Cukierman and as explanatory variables. The 2014). In this process, all
Hercowitz, 1990). following hypothesis has been potential independent variables
developed to be tested: are initially considered and
This paper investigates the those eliminated which are not
impact of internal and external H.1: Considered explanatory significantly important (Dey,
determinants on cost of found variables have significant 2014).
of commercial banks working in impact on Banks’ cost of fund.
Bangladesh, which extends the Analysis and Findings
research, and findings of recent Model Specification
study (Hossain & Hossain, 2013) Table-1 shows descriptive
with respect to NBFIs cost of This study uses multiple statistics of all dependent and
fund. regression model through explanatory variables that have
applying multivariate analysis as been considered in this study.
Methodology suggested by the study (Dey, Bank’s cost of fund has a mean
2014), where the variables are value of 9.28% with 1.92% of
Sampling & Data Collection continuous in nature. The standard deviation. The
functional regression model minimum level of cost of funds
This study considers secondary used to test the hypothesis is as is found to be 3.70% and the
quantitative data from 2010 to below: maximum is 13.80%. For all
2014. Financial data have been other explanatory variables
collected from 10 local COF= f(CAR, SIZ, CLTL, LDR, means, standard deviations,
commercial banks working in EPS, MSG, INFL, GDPR) maximum, minimum, skewness
Bangladesh, which are identified and kurtosis values are shown.

ARTICLE
Table 1: Descriptive Statistics
Variables N Minimum Maximum Mean Std. Deviation Skewness Kurtosis

COF 50 3.7000 13.8000 9.288800 1.9204938 -.166 1.024
CAR 50 -.9400 14.8800 10.491600 2.9656863 -2.244 6.610
SIZ 50 11.1308 15.6553 12.310079 .8273391 1.562 4.100
CLTL 50 1.2000 33.3100 8.177600 7.9115345 1.744 2.254
LDR 50 43.3900 109.0000 78.575000 13.1176092 -.145 .784
EPS 50 -221.8600 108.3800 3.283400 54.2061347 -2.450 9.015
MSG 50 16.0895 22.4200 18.791448 2.6075561 .396 -1.735
INFL 50 .0000 10.9100 6.640000 3.6860742 -.876 -.326
GDPR 50 5.6000 6.5000 6.140000 .3416646 -.357 -1.178
Source: Done by the researchers Using Data of Sampled Banks through SPSS
.
Table 2: Correlation Matrix
COF CAR SIZ CLTL LDR EPS MSG INFL GDPR
COF Pearson
Correlation
1 .388** -0.217 -.330** 0.067 0.063 -.255* -0.06 0.112
Sig. (1-tailed) 0.003 0.065 0.01 0.322 0.331 0.037 0.34 0.219
CAR Pearson -
1 -0.061 -0.091 .265* -0.082 -0.194 -0.006
Correlation 0.204
Sig. (1-tailed) 0.336 0.078 0.265 0.031 0.285 0.089 0.483
SIZ Pearson
Correlation
1 .277* -.405** 0.021 -.308* -.264* 0.072
Sig. (1-tailed) 0.026 0.002 0.443 0.015 0.032 0.311
CLTL Pearson -
Correlation
1 -.660** -.352** -0.218
0.086
0.068
Sig. (1-tailed) 0.000 0.006 0.064 0.276 0.32
LDR Pearson -
1 0.16 0.085 -0.022
Correlation 0.034
Sig. (1-tailed) 0.407 0.133 0.278 0.439
EPS Pearson
1 0.149 -0.08 -.252*
Correlation
Sig. (1-tailed) 0.151 0.291 0.039
MSG Pearson
1 .560** -.262*
Correlation
Sig. (1-tailed) 0.000 0.033
INFL Pearson
1 .393**
Correlation
Sig. (1-tailed) 0.002
GDP Pearson
1
R Correlation
Sig. (1-tailed)
Source: Done by the researchers Using Data of Sampled Banks through SPSS
**. Correlation is significant at the 0.01 level (1-tailed). *. Correlation is significant at the 0.05level (1-tailed).

Table-2 shows the pattern how (.560) and significant negative impacts on samples banks’ COF
the dependent and explanatory relationship with GDPR (-.262). and SIZ, CLTL, LDR, EPS, MSG
variables are interrelated with At last, there also exist strong and GDPR have negative
one another. Dependent negative relationships between impacts. The model finally
variable, COF has positive EPS&GDPR (-.252) and positive accepted alternative
relationships with CAR (.388), relationship between hypotheses that CLTL and MSG
LDR (.067), EPS (.063)& GDPR INFL&GDPR (.393). have significant negative
(.112) and negative relationships impacts on sample banks’ COF.
with SIZ (-0.217), CTTL (-.330), According to table-3, based on CLTL i.e. classified loans to total
MSG (.255) & INFL (-.06). 450 observations the loans which is an indication of
However, relationship is explanatory power of model R credit risk negatively affects
significant only with CAR and square is at .417 with adjusted R bank’s cost of fund which is
CLTL. From correlation matrix, square is .303. According to R almost exciting in this study. On
it can be seen that SIZ has square value, the regression the other hand, a higher money
significant negative model describes that almost supply will significantly lower
relationships with LDR (-.405), 42% variations in ROA bank’s cost of fund. Table-3 also
MSG (-.308) and INFL (-.264). explained by the considered presents that F value is
CLTL has also significant variables. Durbin-Watson is significant at 0.05 and
negative relationship with LDR 2.184 that assume that there is variations caused by
(-.660) and EPS (-.352). no first order autocorrelation. independent variables is
Further, MSG has significant Regression model specifies that significant.
positive relationship with INFL CAR and INFL have positive
Table-3: Regression Analysis

Sig.
T- R Adjusted Probability Durbin-
Variable B Beta Sig. Relation R F
statistics Square R Square (F Watson
Statistics)
(Constant) 29.001 3.303 .002 Positive
CAR .170 .262 1.928 .061 Positive
SIZ -.634 -.273 -1.945 .059 Negative
CLTL -.133 -.548 -2.846 .007 Negative
LDR -.048 -.325 -1.730 .091 Negative .646 .417 .303 3.666 .003 2.184
EPS -.005 -.134 -.935 .355 Negative
MSG -.365 -.495 -2.611 .013 Negative
INFL .102 .196 .960 .343 Positive
GDPR -.436 -.077 -.448 .657 Negative
Table-4: Modified Regression Analysis with Accepted Explanatory Variables
Model Unstandardized Standardized

Coefficients Coefficients Adjusted F- Durbin-
t Sig. R R Square Sig.
R Square Statistics Watson
B Std. Error Beta
(Constant) 14.84 1.916 7.745 .000
CLTL -.098 .032 -.404 -3.065 .004 0.47 .221 .188 6.6576 0.003 2.017
MSG -.253 .097 -.343 -2.601 .012

ARTICLE
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Financial Liberalization on the
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considering the significant Growth on bank’s cost of fund. Business and Management,
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ARTICLE
Enforcement of Contract for

Doing Business and Alternative Dispute Resolution (ADR)
S M Abu Nayem Ahmed
U
nderstanding business. The biggest cost to
Enforcement of this is that it actually restricts
the businesses from operating
Contract for doing in a fair and just environment.
Business
Enforcement of Contract
An enforceable contract is any
legal contract which carries the for doing Business:
force of law behind it. It is a legal Bangladesh Scenario
agreement between two parties
which is legal and binding. The A study by International
ability to enforce contracts and Finance Corporation,
resolve disputes is fundamental Bangladesh Investment Climate
for markets to function Fund, and the Centre for
properly. Effective Dispute Resolution
(CEDR) (UK) 2009 finds that on
The legal institutions comprise an average it takes Civil (appeal
The Author is a the organization of courts, an & revision) cases to be 15.3
Sr. Deputy Secretary-ICAB and independent and competent years; Writ cases 3.68 years and
a Law Graduate of University of judiciary, the legal profession, Civil cases (original jurisdiction)
London International Program, UK the enforcement services, and 5.78 years. The situation in case
the due process of law. of outstanding litigation under
the Money Loans Court Act
Disputes are a drain on the (2003) is equally time
resources of businesses. With consuming.
the best will in the world,
businesses is likely to encounter Through this is an old findings,
disputes. It is not uncommon Bangladesh is yet to overcome
that global companies’ shy those hurdles. The World Bank
away from operating in the real Business report 2018 published
estate and infrastructure on October 31 had mixed signals
contracts where there are weak for Bangladesh. On the whole,
enforceability of contracts. thought we showed a little sign
Contractual disputes sometimes of improving than that of
linger on for years and increase preceding year, the increased
the cost of doing business. This costs associated with starting a
ultimately ends up hampering new business and some other
economic growth. indicators cost has made our
position unchanged. We top
The longer it takes to resolve only Afghanistan among the
disputes, lower is the implied eight South Asian Countries and
value of the contracts. This scored 40.99 out of 100 while
fosters an environment of our previous score was 40.84.
mistrust among parties which According to the World Bank's
impacts the business Doing Business Index of 2017, in
environment in the country. Bangladesh, out of a
Lower contract enforceability commercial dispute related
also means greater cost to claim suit of Tk. 1 crore, only Tk.
dispute resolution. Hence, most 33.2m is recovered. This means
businesses had to cater cost that the cost of recovery being
into their cost structure causing estimated at 66.8 percent of the
it to be more expensive to do claim. Not only that, the case

took 1,442 days or around four years to see the Enforcing Contract, we have bigger
resolution. This is not at all healthy picture for challenges and alternative dispute
doing business in Bangladesh. Again, every year, resolution (ADR) process can probably
the increase of contractual relationships and come to our rescue.
transactions and eventually, the impact of large
scale disputes put enormous strain on our Enforcement of Contract for
already strained commercial legal system.
doing Business: Other Countries
According to a statistics of Bangladesh Bank,
On Enforcing Contract parameter, India
number of cases pending with ArthaRinAdalat
ranks 164th out of the 190 countries. In
was 49,656 in 2016 which was totaled to Tk.
India, it takes about 4 years to get a
60,142 crore. In the case of a global 'Doing
judgment on a contractual disagreement.
Business Index' Report of 2018 of the World
It is 538 days (about 1.5 yrs) in OECD
Bank, Bangladesh is placed at 177th among 190
countries. China ranked 84 and became
countries. while Sri Lanka is 111th, India 100th and
7th on Enforcing Contracts. Success of
China as a business destination probably
indicates the criticality of the factor in the
We need to embrace the overall scheme of things. This year India
transformation to take the benefit of actually did better in enforcing contract
index, for which they have a reason to
ADR for the enforcement of contract celebrate. Actually they gave due
emphasis on ADR.
for improving doing business index,
where we are repeatedly failing. Figure: The time and cost to resolve a
commercial dispute through the courts
We can not maintain wait and watch
policy. Till we do so, it will not be Court
possible to achieve our economic
growth with such abysmal record
Time
on Contract Enforceability. Cost
Pakistan 147th. For building a positive image of

Bangladesh to investors, this is not an
Company A Company B
encouraging matter. This composite index has 10 (seller & Commercial (buyer &
underlying factors e.g. starting business, dealing plaintiff) dispute defendant)
with construction permits, getting electricity,
registering property, getting credit, protecting Filing & Trial &
minority investors, paying taxes, trading across Enforcement
service judgement
borders, enforcing contracts and resolving
insolvency.
source: www.doingbusiness.org
We have not well in three indicators like Getting
Electricity ranking 185, Registering Property
ranking 185 and for Enforcing Contracts, we have Alternative Dispute Resolution
done worst being 189 out of 190 countries. We (ADR)
are among the five countries at the bottom. For
the first two indicators, government is taking all While Doing Business indicators on
out efforts, undoubtedly. While the indicator on enforcing contracts have traditionally

ARTICLE
The conventional response by

increasing capacity of the legal
system of Bangladesh singularly
may not be viable option for
yielding good results. We need
Institutions that facilitate low
transaction costs boosting
economic growth.
It is the legal system that

ensures 'enforcement'.
However, if enforcement takes
measured dispute resolution Effective systems of domestic longer than expected, we need
through the local court system, commercial arbitration and a paradigm shift. BIAC has an
there is change of focus on the mediation or conciliation do effective role to play. We hope,
mechanisms of alternative matter to investors. Lawyers we do not have to go to
dispute resolution (ADR).In and business owners know that Singapore, Hong Kong,
particular, arbitration, voluntary high litigation costs and long Thailand, Malaysia, UK for
mediation and conciliation has delays make resolving disputes to be resolved. BIAC is
been proved to be effective in commercial disputes in court formed aiming to fulfil those
many countries. In commercial difficult and expensive. They, objectives. We need to come
arbitration the parties agree to thus, tend to look elsewhere for forward to make this initiative
submit their dispute to an dispute resolution. Businesses successful.
independent arbitrator or then pass the costs on to
arbitral tribunal which issues a consumers or abstain from
final and binding arbitral award. investing in that jurisdiction.
In a mediation or conciliation Especially in smaller cases,
process, the parties ask a third having a neutral mediator or
person to assist them in
arbitrator saves business in
reaching an amicable
terms of time and money in
settlement of their dispute.
resolving disputes. It also
ADR should be seen not as prevents the termination of a
something that can replace commercial relationship which
traditional litigation, but also as could occur because of
a tool that can assist courts in disputes.
resolving disputes in a timely,
cost-effective and transparent Role of BIAC
manner. ADR mechanisms can
improve efficiency in the court Bangladesh International
system as a whole by helping to Arbitration Centre (BIAC), has
minimise case backlogs and been making an effort to bring
bottlenecks that the system has. about a major change in settling
They can reduce delays where commercial disputes. BIAC is
these are caused by complex being set up by leading trade
formal court procedures. bodies namely the International
Economies with an integrated Chamber of Commerce, Dhaka
system of courts and ADR tend Chamber of Commerce &
to have a more reliable judiciary, Industry; and the Metropolitan
benefiting the courts, the Chamber of Commerce &
parties involved and the Source: www.doingbusiness.org
Industry. This is an arduous task.
economy as a whole.

Bibliography
1. Overburdened Judiciary and
Disappointed Disputants : Is
Al;ternative Dispute Resolution
an Answer for Trade and
Commerce in Bangladesh?:
Abdul Muyeed Chowdhury,
Former Secretary GOB,
Published in BIAC Journal, 2015
on 4th Founding Anniversary;
2. Methods of Alternative Dispute

Resolution- Justice Md Awlad
Ali, Published in BIAC Journal,
2015, 4th Founding Anniversary;
3. Alternative Dispute Resolution :

Barrister Nihad Kabir, Published
in BIAC Journal, 2015 on 4th
Founding Anniversary;
Suggestion: Case Study Concluding Remarks
Malaysia 4. Doing Business index:
With today’s increasingly Improving Bangladesh's
We cannot resolve the huge complex business dealings, ranking: Muhammad A (Rumee)
backlog of cases by simply specialized ADR mechanism on Ali; published in the ‘Daily Star’,
increasing the number of courts technical or complex disputes Dhaka, Bangladesh on August
or judges. Many countries have resolution can be more effective 03, 2017, 2017at Business Page;
faced this issue of backlog of than before. It is possible to
produce better settlements 5. Enforcing Contracts - Doing
cases and could resolve it by Business - World Bank
making the legal infrastructure than that of courts, if utilized
properly. This can increase Group:www.doingbusiness.org/
ADR friendly and at times, data/exploretopics/enforcing-c
litigants’ satisfaction with
forcing litigants into the ADR ontracts;
outcomes. Economists consider
track. The latest example is
this as one of the cause of
Malaysia that brought down the 6. Contract enforcement and
increasing the economic
index ranking by lowering the dispute resolution - OECD:
transaction cost which lowers
average number of days for the https://www.oecd.org/investm
the efficiency of the economy. ent/.../contractenforcementand
enforcement of a contract to While this being the case, the
425 in 2012 which was 585 in disputeresolution.htm;
challenge would also continue
2011.They in some cases forced to be posed by the mindset of
litigants to use ADR rather than 7. Contract enforcement |
bureaucracy and judiciary which Innovation Policy Platform :
trying to resolve all outstanding do not take change easily. We https://www.innovationpolicypl
cases through the judicial need to embrace the atform.org/content/contract-e
process. Malaysia moved from transformation to take the nforcement;
102 out of 183 countries to 23 benefit of ADR for the
out of 190 countries between enforcement of contract for 8. Editorial and report published in
2011 and 2017. This upward improving doing business index, the Daily ProthomAlo and the
ranking was to a great extent where we are repeatedly failing. Daily Star on 02 November
made possible by their We can not maintain wait and 2017.
improvement in the indicator of watch policy. Till we do so, it will
‘Enforcement of Contract’ with not be possible to achieve our
the adoption of an ADR-friendly economic growth with such
regime. They thus created a abysmal record on Contract
more efficient economy. Enforceability.

ARTICLE
A Comparative Study Between

USA and Bangladesh Stock Market Crash
Md. Toufique Hossain
A
bstract Speculation, Bubble, Crash,
Regulatory authorities
In the financial world the
years 1929 and 2010 are both Introduction
very identical. On the Black
Tuesday on October 29, 1929 There is a saying: “No risk, no
the US stock market collapsed gain.” This is more relevant to
completely. And in Bangladesh investments in stock markets. It
it was the Black Wednesday on cannot happen that any
December 8, 2010-when the investment in the stock market
market headed for the biggest will not involve any amount of
fall in its history. risks. When on one side of the
coin is the gain, on its other side
Basically a speculative boom is the loss. Sometimes the risk
happened in the late 1920s and involved in share trading hits
the rising share prices the zenith sending share prices
The Author is a encouraged millions of into free fall. Experts call it
Stock Market Analyst Americans to invest heavily in market crash. The crash
Now Serving as a Faculty at the the stock market. They happens promptly and
Royal University of Dhaka expected that the share prices devastatingly, faster than the
would rise further. Speculations time the market takes to reach a
thus led to creation of the certain level of progression.
bubble in 1929 that ultimately During such a crisis period the
burst. On the other hand, the investors feel their money is at
Bangladesh stock market risk and therefore, they sell out
landscape experienced a their holdings quickly. Other
historical crash during institutional investors also react
2010-11.The similarity between immediately triggering a wave
the two crashes is that in both of panic throughout the
the cases there was a stock financial sector.
market bubble and then the
inevitable crash happened. When the crisis is over, the
investors, on the other hand,
The purpose of this study is to often become very conservative
examine all the stock market about making new investments,
even though everybody admits
crashes across the world and
that this is, in fact, the right time
analyse their characteristics.
to re‐invest. Thus the crisis
After the crash the US
lingers on.
regulatory authorities handled
the issue more maturely, but the
authorities in Bangladesh failed Objectives of the Study
to show that level of maturity
after the big crashes in 2010-11. The study has the following
objectives-
Keywords
1. To discuss the factors
leading to stock market
Black Tuesday, Black
crash in USA and
Wednesday, Stock market,
Bangladesh

2. To find out the similarities and dissimilarities Data Processing

between USA and Bangladesh stock market
crashes After collection of the raw data, using the
following computer packages were done
3. To figure out the impact of stock market editing and processing.
crashes both in USA and Bangladesh
economy • MS-Excel
4. To provide forward looking plan of USA • MS-Word

regulatory authorities that Bangladesh
should implement.
Review of Related Literature
White (1990) explained that speculative

bubble existed confliction views in USA
stock market. During 1920s bull market
was a bubble and concede only a small
There is a saying: “No risk, no gain.” role for real factors, some contemporary
This is more relevant to investments observers attributed most of the market's
rise to fundamentals. At the height of the
in stock markets. It cannot happen market in August 1929, many began to
that any investment in the stock fear that there was excessive speculation.
market will not involve any amount Long et al. (1991) in their article, have
of risks. When on one side of the described that during the turmoil period
the sharp rise and subsequent crash of
coin is the gain, on its other side is stock prices in 1929 is perhaps the most
the loss. Sometimes the risk involved striking episode in the history of
American financial markets. During that
in share trading hits the zenith time Some observers have interpreted
this price pattern as reflecting changing
sending share prices into free fall. fundamentals in the economy. For
Experts call it market crash. Instance, Irving Fisher (1930) argued
throughout 1929 and 1930 that the high
level of prices in 1929 reflected an
expectation that future corporate cash
flows would be very high.
Methodologies of the Study
Sirkin (1975) in his paper has revealed
The data collected for this study is mostly that the prices of common stocks in the
secondary data, which was originally collected United States in 1929 were the product of
for other purposes. This data includes Annual a “speculative orgy" in a "time of
Report of DSE (Dhaka stock Exchange), BSEC( madness."
Bangladesh securities and Exchange
Commission), DSE monthly review, periodicals
Mc Grattan and Prescott (2004) studied,
published by the Bangladesh Bank, different
during 1929, stocks were overvalued.
publications regarding banking functions,
Irving Fisher argued just before the crash
Operation Manual etc. In addition quantitative
that fundamentals were strong and the
data was collected mostly from different journals
stock market was undervalued. Authors
and web sites.
developed a growth theory to estimate

ARTICLE
the fundamental value of response subsequently, fraudulent activities of the

corporate equity and compare however, offer an important unscrupulous manipulators just
it to actual stock valuations. contrast. After the crash of 1929, hastened the fall of the market.
And their study showed that at the Federal Reserve Board
the 1929 peak, stocks were maintained its tight monetary Mansur (2010) in its research
undervalued relative to the policy, helping to push the paper showed that during 2009
prediction of theory. economy into deeper recession. through February 2010, “the
The stock market continued to market valuations may reach
Mishkin and White (2002) in collapse and distress to the bubble proportions within a
their study paper have financial system led to the short time. The common
attempted to describe the highest ever risk premiums. characteristics that are
impact of monetary policy generally associated with a
during stock market crash in Hossain (2014) in his article has stock market bubble episode
USA, They argued that ,the two emphasized that the capital also visible in several ways in
“great” crashes of 1929 and 1987 market in Bangladesh does not Bangladesh today. Some of
are an important pairing. The always act based on the these characteristics include:
pattern of the crashes with fundamentals. The stock market exuberant demand manifested
spectacularly rapid declines in crash in 2010-11 was the biggest through weak correlation
stock prices were similar, as was shock for the economy. A between economic values and
the Federal Reserve’s successful section of greedy investors prices, high price volatility,
lender-of-last resort resorted to manipulation at acceleration in margin lending
intervention to prevent effects different levels to cash in on the for stock market investment,
of a crash from spilling over to lack of small investors’ proper narrow market leadership,
the rest of the financial system. knowledge about market structural weaknesses like weak,
The monetary authority‘s fundamentals. The excessive and sometimes inconsistent

signals from the regulatory An insight into Wall But unfortunately the boom
regimes.Existence of exuberant Street Crash in 1929 1 didn’t sustain forever and burst
demand has been quite visible so badly that it led to a major
during the August-February economic crisis known as the
The US stock market collapse,
period, although a bit tempered Great Depression. Millions lost
popularly known as the Wall
by some regulatory measures in their lifelong savings,
Street Crash, was one of the
recent weeks. Record high companies went out of business
most devastating. It was
levels of market turnover and and all faith in banks was lost.
Thursday when the initial crash
new records of the DSE general Depositors’ money to the tune
began and it ended on the Black
index week after week are of $ 140 billion disappeared and
Tuesday with the market
certainly pointing to market 10,000 banks failed.
collapsing completely.
exuberance.”
After the panic selling on the
For market participants,
Researchers show tiny interest Black Thursday on October 24,
investors, prospective financial
about a comparative study 1929 with record 12.9 million
institutions and other
between USA and shares traded, on Friday,
stakeholders, it is very
BANGLADESH stock market October 25, several top Wall
important to understand the
crashes. A small number of Street bankers met to find a
stock market circumstances
studies have been conducted clarification of the panic and
that existed before 1929. In early
regarding stock market crashes chaos on the trading floor. But it
1920 it was easier to get loans
between USA and Bangladesh. left no effect. On Monday next,
from banks and the people felt
Previous findings have reported the trading volume was nearly
the stock market was the best
mostly results that are based on 9.25 million shares and the
option to put money in. Many
purely the details of stock investor confidence declined
investors were tempted by this
sharply. By the end of the day
market bubble and its impact. idea of investing in shares. So
the market fell by about 13
Given the circumstances, the they borrowed heavily and
percent. Finally the hard part of
present study takes the invested more in the US capital
the blow came on the Black
initiative to conduct an market. Over the period from
Tuesday, October 29, 1929
historical investigation based on 1926 to 1929, the market index
when the market collapsed
a new approach that evaluates rose nearly to 400 points. In
completely. On that day 12.4
the reasons of crashes of both 1928 the stock market saw the
million shares were traded. The
USA and Bangladesh stock most bullish trend going up at a
index again recorded a big fall
market respectively in 1929 and faster pace. On September 3,
on November 11, 1929.
2010-2011. 1929 the Dow Jones Industrial
Average (DJIA) touched its
peak at 381.17 points. Many Table 1: Percentages of Index
The findings from this study are change during Wall Street crash2
valuable in guiding investors thought that the
professionals and policy-makers fabulous boom would continue
forever. In the fall of 1929, Date Close Net change %change
to further formulate effective
compliance of world stock economist Irving Fisher 28/10/1929 260.64 -38.33 -12.82
market. announced: "Stock prices have 29/10/1929 230.07 -30.57 -11.73
reached what looks like a
permanent plateau." 06/11/1929 232.13 -25.55 -9.92
1
Note: This piece made extensive use of the book The Great Crash 1929 by John Kenneth Galbraith. Basically a speculative boom
happened in the late 1920s and the rising share prices encouraged millions of Americans to invest heavily in the stock market.
They expected that the share prices would rise further. Speculations thus led to creation of the bubble that ultimately burst.
2
Table 1 adapted from Historical Index Data, Wall Street Journal, and also published in Economic Insights
-Trends and Challenges, page-48

ARTICLE
In 1928, the USA central bank

Illustration 1: Bubble Formation During 1929 Great Stock Market
was very much worried about
Crash in USA 3
the alarming price rise in the
stock market. They took a lot of
initiatives to avert overheating
of the economy and the stock
market. In 1929 the central bank
raised interest rates several
times to cool the overheated
economy and the stock market.
At the same time it reduced the
government securities holding
rate and increased the open
market rate with alteration of
the call loan rate. All these failed
to stop the continued
speculation that led to the
bubble, which ultimately burst.
(iii) Margin Investors
The Illustration 1 shows the Dow Causes of the Wall Street Many investors became
Jones Industrial Average’s Crash millionaire by buying on the
movement during 1920 to 1932. margin. But when the market
The graph also shows the Dow There are three main factors crashed on October 28 and 29,
at its peak of 381 points on that overheated the US stock the millionaire margin investors
September 3, 1929 and the two market and led to the burst of went bankrupt almost instantly.
massive collapses—it slid to 261 the bubble. Those factors are- Many banks that had invested
points on the Black Thursday their depositors’ money in the
and 230 points on the Black (i) Speculation and Bubble stocks lost it as the stocks
Tuesday. plunged.
Basically a speculative boom
After the 1929 crash, policy happened in the late 1920s and Dhaka Stock Market
makers went for official the rising share prices Crash in 2010-11: The
investigation into it. The U.S. encouraged millions of
Congress approved
Inside Story
Americans to invest heavily in
the stock market. They expected
The Dhaka stock market
the Glass-Steagall Act in 1933 , that the share prices would rise
which was a crucial mechanism suffered two big blows. The first
further. Speculations thus led to
aimed at barring banks from one was in 1996 and the second
creation of the bubble.
investing depositors' money in one began at the fag end of
stocks.4 2010. On November 5, 1996 the
(ii) Central bank failed to
market lost 233 points in a
contain the bubble
3
Source: The illustration 1 adapted from http://kosmixmedia.com/static/4f9a36a50991ad3c005048f9dc00b888.GIF
4
The term Glass–Steagall Act usually refers to four provisions of the U.S. Banking Act of 1933 that limited commercial bank
securities activities and affiliations within commercial banks and securities firms.
Source: http://en.wikipedia.org/wiki/Glass%E2%80%93Steagall_Legislation

single day. The first market Wednesday” on December 8, Exchange (DSE) reached its
plunge happened in 1996 when 2010. 5 peak at 8,918 points on
a spurt of foreign investments in December 5, 2010. Ultimately,
the capital market was greeted As time went by, the market the inevitable happened. The
with withdrawal of the lock-in saw a sluggish but sound trend DGEN lost 6 percent or 547
system leaving at risk the small during the period between points within half an hour on the
investors doing paper-based 2002 and 2008. The year of Black Wednesday in December
trading at the kerb market. It 2009 and the last quarter of 2010. It far exceeded the
was blamed then on the 2010 were the golden periods of momentum of the crash that
unlawful kerb market trading the market when a lot of people happened on November 5, 1996.
and the extreme manipulation jumped headlong into the
resorted to by many dishonest market to invest in shares. In The market crash in 2010
broker houses. 2010 the market reached its happened in three phases. The
peak and market regulators graph below shows the three
Long 14 years after the first predicted something would go phases beginning in early
market crash in 1996 the stock wrong because of the strange December 2010. The phases are:
market in Bangladesh growth of stock market. For The end of December 2010 to
experienced another historical instance, the DSE General Index March 2011, then August 2011 to
crash on the “Black (DGEN) which was the main mid-November 2011 and finally
index of the Dhaka Stock January 2012 to February 2012.
5
Bangladesh Stock market experienced the third highest nose-dive on December 8 of 2010 since 2001. The DGEN/
general Index closed at 8585.88 with a loss of 185.53 points.

ARTICLE
Table 2: DSE General Index changes during 2010-11 6 The market crash in 2010
happened in three phases. The
DSE Change DSE Change Illustration 2 shows the three
Date
General General Date General General phases beginning in early
Index In Index Index In Index December 2010. The phases
are- the end of December 2010
29/11/10 8599.411 -- 20/02/11 6389.625 +810.120 to March 2011, then August 2011
05/12/10 8918.514 +319.103 28/02/11 5203.085 -1186.540 to mid-November 2011 and
finally January 2012 to February
19/12/11 7654.405 -1264.110 10/03/11 6639.181 +1436.096 2012.
02/01/11 8304.589 +650.184 27/03/11 6094.639 -544.542
Causes of the Bangladesh
05/01/11 7948.431 -356.158 10/04/11 6556.520 +461.881 stock market crash
10/01/11 6499.436 -1449.000 26/04/11 5806.309 -750.211
Major reasons of 2010-11
12/01/11 7690.690 +1191.254 03/05/11 5865.709 +59.400 Bangladesh stock market are-
20/01/11 6326.345 -1364.350 08/05/11 5611.471 -254.238
i. Decisions Led to Panic
30/01/11 7572.610 +1246.265 11/05/11 5482.874 -128.597
07/02/11 6394.531 -1178.080 12/05/11 5612.519 +129.645 Basically during the period of
December 3-19, 2010,
The Table 2 shows the movement of the DSE General Index from Bangladesh capital market was
November 2010 to May 2011. overvalued and overheated.
Two decisions triggered some
Illustration 2: Three Stages of Market Peak Observed in sort of panic in the capital
Bangladesh Stock Market 7 market. Firstly, clients of
brokerage houses and
merchant banks were barred
from buying shares until their
cheques were cashed. And
secondly, it was the netting
facility. For instance, no
brokerage house provided
advance finance to their clients
for investment in shares.
ii. Corrupt Practices
The market crash in 2010-11 also

occurred due to a number of
corrupt practices. Those
corrupt practices included
window-dressing of balance
sheets, book building method,
6
Table 2 adapted from International Journal of Economics and Finance; Title: Catastrophe in Stock Market in Bangladesh,
Page 120 (Data based on www.bloomberg.com)
7
Source: Three distinguishable downward trends are noticed from the peak of 2010 Bangladesh stock market crash.
Figure adapted from “ Road to Rags from Riches, Business Times, Issue March 2012.

Graph 1: Dhaka Stock Exchange general Index movement during to gamble in the market. It is not
December 8 , 2010 to December 20,2010 possible to find out issue-wise
or client-wise transactions or
the actual number of shares
under omnibus accounts. There
was no transparency in
transactions conducted through
these hidden accounts. The big
account holders, although
well-known figures, traded
through omnibus accounts, not
beneficiary owner (BO)
accounts.
iii. Stock Splits
Stock splits had been used as a

tool to mop up small investors'
Graph 2: Chittagong Stock Exchange general Index movement
money. The manipulators
during December 8 , 2010 to December 20,20108
played with the psychological
weakness of retail investors and
encouraged them to buy
smaller denomination shares
that had a big impact on the
stock market.
iv. Banks’ involvement in

Capital Market
During the recession of

2009-2010, the banks in
Bangladesh had a lot of idle
money in reserve. Honestly
speaking, when the banks had
such reserves, acquaintances of
The Graph 1 shows the DSE price movement on the main index the bank officials and other
during the period of December 8-20, 2010 while the Graph 2 shows people as well took bank loans
the movement of three Chittagong Stock Exchange (CSE) indexes, for investment in the share
namely CSE 30, CSCX and CASPI, during the same period. market. It generated an
overflow of liquidity in the share
market. The overflow of floating
direct listing, private placement, market. Some big players funds helped the concerned
share split, inflated dividend manipulated the stock market circle to manipulate and control
declarations, issuance of through omnibus accounts the share prices at will. For
preference shares and price during the market swings. They example, the price of a share
manipulations in the secondary chose those omnibus accounts increased by Tk 40 in a single
8
All the graphs including 1 and 2 prepared by the author based of different DSE monthly reviews on Year end special editions.

ARTICLE
Secondly, minimum corporate the US stock market. Next, the

tax for listed companies was stock market crash can create a
also a good initiative, but it negative impact on an economy
raised a very pertinent question: and the Wall Street crash is the
How many companies got this best example of it. The sudden
benefit and how many fall in stock prices caused
merchant banks could cope bankruptcies. As credit shrank,
with their profitability in this businesses were closed down,
agile market? It is also workers dismissed, banks failed
important to think that and money supply declined
excessive bank borrowing alongside other severe
under a budgetary plan created economic problems. Finally,
another liquidity crisis in the investors should have a proper
money market. investment plan and do not
borrow money from financial
Drawing Lessons from institutions or even beloved
ones. They should just invest
the Past their own money that they can
put at risk.
Many think there is not much
business session, whereas it impact of a capital market crash
wouldn't have increased even When it comes to the Dhaka
on the economy. But it is not
by Tk 3-4 in a normal market Stock Exchange (DSE), there
true. The Wall Street crash is the
condition. In addition, some are also three key lessons we
best example of it. The
commercial banks’ exposure to learn.
devastating meltdown in 1929
the capital market seriously caused the Great Depression in
contributed to creation of a the economy of the US. So, in Justice Delayed, Justice
bubble. countries like Bangladesh if the Denied
stock market crash happens
The Post-crash Issues one after another, then we must There is no example of
be ready to see the worst punishment to stock market
(a) The Stimulus Package Issue economic condition, If we look manipulators. They always go
at the Wall Street crash in 1929, scot-free. The ultimate result is
After the crash the government we can learn five main lessons the market crash one after
announced a stimulus package the policy makers applied to another. The DSE headed for
to spur the market. But the solve the crisis. Firstly, financial the biggest crash on the Black
stimulus package failed to bring markets, banks and the real Wednesday in December, 2010
the market back to normal. It economy are connected with after the 1996 collapse. The
also failed to help restore each other. So an unsettled funny thing is that in both the
investor confidence. problem in one sector can put cases investigation committees
the other sector in trouble. were formed—the first one
(b) Impact of budget on capital Secondly, the dynamic and swift headed by a vice chancellor of
market government interference to Jahangirnagar University and
relieve pressure on the the other by Khondoker Ibrahim
Firstly, a budgetary provision economy is essential during the Khaled. It is a matter of great
was there allowing investment time of a real economic crisis. concern that we failed to
of black money in the capital Thirdly, the commercial banks properly examine these two
market. It created an illusory were affected as they were too reports and take action against
demand for shares only for a daring to go to put depositors’ the manipulators.
short term, not for a long term. money at risk by investing it in

Two Crashes, Similarities

and Dissimilarities
The distinctiveness of all major

market debacles, especially the
Wall Street crash in 1929 and
the Bangladesh stock market
crash in 2010 is pretty same.
When the stock markets deviate
from the fundamentals, the
share prices start showing the
symptoms: prices of stocks
increase rapidly and fall
massively, and the markets lose
buyers and everyone looks for
the way out by selling their
holdings in a hurry. There was
no exception for these two
stock market crashes in the two
countries.
If we look at the Wall Street

crash in 1929, we see how crazy
the people were about making
investment in the share market.
Similarly, investors’ mania and
Knowledge is Power BSEC (Bangladesh Securities panic played their part in
and Exchange Commission), the sending the share prices
All types of investors entered MoF (Ministry of Finance), the downward on the Black
the Bangladesh capital market, Bangladesh Bank, financial and Wednesday. Then the role of
especially the small investors non-financial institutions, flimsy the banks regarding the stock
who did not have sound surveillance in the stock market market crash for both the
knowledge about the market, and the political mindset are the countries was same. In both the
acted on hearsay and showed major causes of what happened cases, the central banks
herd behavior. That’s why on the Black Wednesday and concerned failed to tackle the
Bangladesh capital market saw thereafter in Bangladesh. situation.
excessive speculations and
rumors as happened to the Wall It is estimated that over three The main dissimilarities are in
Street market in 1929. million people - many of them the US many commercial banks
small individual investors - have faced bankruptcy whereas in
lost money because of the
Responsibility of Policy Bangladesh it did not happen.
plunge in share prices.
Makers Educated middle class people
The US did really well to
introduce the Glass-Steagall Act
of Bangladesh, who invested in to separate commercial banks
The abuse of related rules due shares as it is a popular
to structural blunders, frequent from the stock market
business, were left frustrated involvement, especially in
changes in policies regarding with the sudden loss of their
stabilization of the stock buying stocks from the market.
capital. They were groping for But in Bangladesh it did not
market, the expected level of ways and means to exit the
coordination among all like happen.
market and minimize the losses.

ARTICLE
Conclusions increase, then automatically the When a bank invests in the

investor confidence will get a stock market, it actually puts
Stock market crashes are big boost. the depositors’ money at risk.
recurrent incidents in the world
financial market. It is important The 1929 stock market crash References
to bear in mind that markets do destroyed the world economic
structures. By the trough of the SORNETTE, DLDIER. Why stock
not go straight up forever.
depression in 1933 the market market crash “Critical Events in
Crashes happened in the US and Complex financial systems”.
also in Bangladesh. Prevention had lost 85 per cent of its 1929
of this type of incidents need value. After that, President White, E. N. (1990). The stock
strong national coordination Franklin D. Roosevelt himself market boom and crash of 1929
and straightforward activities of took a corrective measure revisited. The Journal of Economic
regarding reforms and was able Perspectives, 4(2), 67-83.
big players like BSEC, DSE, CSE
and political leaders. to bring normalcy to the market De Long, J. B., & Shleifer, A. (1991).
and the economy as well. But in The stock market bubble of 1929:
Last but not the least, the main Bangladesh we did not see any evidence from clsoed-end mutual
crisis of Bangladesh stock such move from the decision funds. The Journal of Economic
makers. However, the US History, 51(3), 675-700.
market is confidence, not
liquidity. In restoring investor enacted the Glass-Steagall Act Sirkin, G. (1975). The stock market of
confidence, the liquidity to keep banks away from 1929 revisited: A note. Business
position also plays a big role. If investing in the stock market. In History Review, 49(2), 223-231.
we are able to solve the liquidity Bangladesh also we need to
separate the money market McGrattan, E. R., & Prescott, E. C.
problem, then obviously (2004). The 1929 stock market:
day-to-day transactions will from the stock market as they
Irving Fisher was right. International
increase. If transactions both are two separate entities. Economic Review, 45(4), 991-1009.

Mishkin, F. S., & White, E. N. (2002). ABBREVIATION

US stock market crashes and their
aftermath: implications for BOA = Beneficiary Owner’s
monetary policy (No. w8992). Account
National bureau of economic SEC = Security and Exchange
research. Commission
Hossain, M. T. (2014). The BSEC = Bangladesh Security and

Fundamental Deviation and the Exchange Commission
Riddle of Manipulation: A Critical CSCX = CSE Selective Categories
Analysis in the Context of Index
Bangladesh Stock Market Crash in
CDBL = Central Depository The Internal
2010-11.
Bangladesh Ltd. Resources Division
Ahsan Mansur (2010). Is the Bull
Market Sustainable? Forum,
NBFIs = Non-banking financial (IRD) has issued a
institutions
Monthly publication of Daily star,
TREC = Trading right entitlement
directive to audit
Volume 3 Issue 4 | April 2010.
http://archive.thedailystar.net/foru certificate maximum 25,000
m/2010/april/bull.htm SWOT = Strengths, Weaknesses, income tax files
Opportunities, and Threats
Bhattacharya, D. Rahman, M., (1.96% of submitted
Khatun, F. , Moazzem, K. G. , Iqbal, FIIs = Foreign Institutional
Md. Ashiq. , Khan, Tawfiqul. Islam, Investors Tax Returns) of
Nabi, Ashiqun. (June 4, 2011). SCBs = State-owned commercial both individuals
Analytical Review of Bangladesh’s banks
Macroeconomic Performance in and corporate
DSE = Dhaka Stock Exchange
Fiscal Year 2011‐12, Second Reading, taxpayers in FY
45-64. CSE = Chittagong Stock Exchange
DGEN = DSE General Index
2016-17 for the
Bhattacharya, D. Rahman, M.,
Khatun, F. , Moazzem, K. G., Iqbal, DSI = DSE All Share Price Index submitted to detect
Md. Ashiq., Khan, Tawfiqul. Islam.,
CASPI = CSE All Share Price Index tax evasion and
Nabi, Ashiqun. (January 4, 2011).
Analytical Review of Bangladesh’s OTC = Over-the–Counter Market concealment of
Macroeconomic Performance in
Fiscal Year 2011‐12, First Reading,
P/E = Price Earnings Ratio actual income. This
71-86. EPS = Earnings Per Share rate was 2.5 percent
Galbraith, J.K.(2009).The Great
M1 = Narrow Money in 2015-16 and 3.63
crash 1929, Houghton Mifflin
Harcourt, Boston, New York, 66-88
M2 = Broad Money
in FY 2013-14.
CRR = Cash Reserve Ratio
SLR = Statutory Liquidity Ratio
Websites IPOs = Initial Public Offering SOURCE
Bangladesh Bank, New Age
BB = Bangladesh Bank 16th August 2017
http://www.bangladesh-bank.org/
MoF = Ministry of Finance
Central Depository Bangladesh
Limited, http://www.cdbl.com.bd/ IMF = International Monetary Fund
Chittagong Stock Exchanges, SOEs = State Owned Enterprises

http://www.cse.com.bd/ DMAT = Dematerialization
Dhaka Stock Exchanges, CPD = Centre for Policy Dialogue
http://www.dsebd.org/ NBR = National Board of Revenue
Bangladesh Security and exchange TIN = Tax Identification Number
c o m m i s s i o n ,
http://www.sec.gov.bd/ EMH = Efficient-market hypothesis

ARTICLE
Roles of Forensic Accountants in Improving

Corporate Governance (CG)
Md. Kamal Hossain ACA
A
bstract Objectives and
Methodology
It is crystal clear that
‘poor’ corporate governance The present study has been
(CG) is a leading factor in poor taken with an overall objective
performance, manipulated of highlighting the roles and
financial reports, and unhappy activities of Forensic
stakeholders. Corporations and Accountants for improvement
regulatory bodies are now of corporate governance in the
trying to analyze and correct context of growing frauds and
any existing defects in their financial crimes. The study is
reporting system. In the current basically exploratory in nature
reporting environment, forensic and depends exclusively on
accountants are in immense secondary data.
demand for their accounting,
auditing, legal, and investigative
skills. Forensic accountants are
Meaning of Some Terms
The Author is a
Chartered Accountant and positioned to explore the design
a Fellow Member of the of CG systems, the role of the Forensic
Institute of Chartered Accountants financial reporting system in CG,
of Bangladesh-ICAB the effect of the governance The noun forensic, meaning “an
board on employee and argumentative exercise” derives
managerial behavior, and the from the adjective forensic,
efficacy of the internal control whose earliest meaning in
systems. As part of the English is “belonging to, used in,
governance committee, or suitable to courts or to public
Forensic Accountants can make discussion and debate.” The
significant contributions in the English word was derived from
area of CG, fraud prevention a Latin word forensic meaning
and investigation, creating “of the market place or form,
positive work environment, public,” which in turn comes
establishing effective lines of from the Latin word forum,
communication and vigilant meaning “market place, forum.”
Oversight. As the Forensic Indeed, the term 'forensic' as
Accountant is “a blood-hound defined in Webster's Dictionary
of book-keeping’’, they can means 'belonging to, used in or
prevent corporate frauds and suitable to courts of judicature
improve CG through accounting or to public discussion and
reforms using regulatory debate'
actions.
Forensic Accounting
Keywords
The term "forensic accounting"
Corporate governance, forensic was first used in 1946 by
accounting, forensic Maurice E. Peloubet, a partner in
accountant, internal control and a New York based accounting
regulatory action. firm. According to Oxford
Dictionaries Online, forensic

accounting is: “the use of accounting skills to Forensic accountants often have to give
investigate fraud or embezzlement and to expert evidence at the eventual trial.
analyze financial information for use in legal Forensic accountants not only utilize
proceedings. Broadly forensic accounting is the their accounting and auditing skills, but
action of identifying, recording, settling, also use their investigative skills to
extracting, sorting, reporting and verifying past determine what events actually took
financial data or other accounting activities for place in a financial setting.
settling current or prospective legal disputes or
using such past financial data for projecting Corporate Governance
potential financial data to settle legal disputes.
Corporate governance refers to the way
in which a corporation is directed,
administered, and controlled. Corporate
governance also concerns the
Corporate governance refers to the relationships among the various internal
way in which a corporation is and external stakeholders involved as
well as the governance processes
directed, administered, and designed to help a corporation achieve
controlled. Corporate governance its goals. Of prime importance are those
mechanisms and controls that are
also concerns the relationships designed to reduce or eliminate the
among the various internal and principal-agent problem.
external stakeholders involved as Introduction
well as the governance processes
designed to help a corporation To improve and ensure corporate
achieve its goals. governance(CG), forensic accountants
utilize an understanding of economic
theories, business information, financial
reporting systems, accounting and
Forensic Accountant auditing standards and procedures, data
management & electronic discovery, data
“Forensic accountants inhabit a cloak and analysis techniques for fraud detection,
dagger corner of the accounting world. Their evidence gathering and investigative
job: respond at a moment’s notice when a client techniques, and litigation processes and
spots trouble – anything from procurement procedures to perform their work.
fraud to a top executive cooking the books to Forensic accountants are also
industrial espionage.” increasingly playing more proactive risk
reduction roles by designing and
– Justin Pope, Associated Press performing extended procedures as part
of the statutory audit, acting as advisers
“You have an external auditor – that’s like a to audit committees, fraud deterrence
guard dog. Maybe a bulldog,” he said. “An engagements, and assisting in
internal auditor is a seeing eye dog. A forensic investment analyst’s research. A forensic
accountant is a bloodhound.” accountant can provide valuable insights
for many different scenarios such as
–Dr. Larry Crumbly financial reporting fraud,
Editor – “Journal of Forensic Accounting” shareholder/partner disputes, intellectual
property infringement, asset impairment,

ARTICLE
Causes of Failure of
Corporate Governance
Corporate governance (CG)

first came into vogue in the
1970s in the United States.
Within 25 years, CG had
become the subject of debate
worldwide by academics,
regulators, executives and
investors. The recent financial
crisis has been a trigger for
regulators, policy-makers,
investors, and others to
consider what improvements
could be made to the corporate
reporting system.
An increasing number of
researchers now are finding that
poor CG is a leading factor in
poor performance, manipulated
business valuation, dissolution according to GAAP continue financial reports, and unhappy
of marriage and white-collar and many professional bodies stakeholders. Corporations and
criminal investigations, among have chosen to adopt a more regulatory bodies are currently
other instances where their regulated approach. Many trying to analyze and correct
expertise in assessing the groups in society are expecting any existing defects in their
financial situation can be useful. accountants to adopt a more reporting system. The interests
FA uses accounting, auditing, active role in providing of investors and other
and investigative skills to assurance regarding reliable stakeholders are usually
conduct investigations, and financial reporting, responsible protected by a three-tier
thefts and frauds cases. Over CG and detection and security system. At the top-level
the past few years, these issues prevention of frauds. Perhaps a is the company’s “corporate
have been in the spotlight and forensic accountant may be governance code,” which is
accountants have been asked to able to track these complex directed towards enforcing
question the ‘traditional’ view, puzzles before the fallout from company policies, achieving
i.e., accounting is about these events and highlight them company objectives, monitoring
assessing whether financial to investors. In the USA, the company performance, and
statements meet Generally Sarbanes-Oxley Act (SOA) of ensuring adequate disclosure of
Accepted Accounting Principles 2002 has forced top the company’s activities. At the
(GAAP) as outlined by their management to certify that other end is the “reporting
professional bodies. financial statements are free of system,” which is regulated by
Accountants, therefore, need to “fraud and material various public and private
make sure that their misstatement”. This may mean institutions. As corporations
interpretation of GAAP ensures that using an auditor may not scramble to realign their
“a true and honest be enough and the inclusion of a interests with those of their
representation of accounting forensic accountant on the stakeholders, three main areas
data.” Debates the world over audit team may be required in of weaknesses are emerging.
about what is ‘true and fair’ the future. They are summarized below.

reporting requirements,
because of the Sarbanes-Oxley
Act of 2002 (SOA). Companies
are spending millions of dollars
examining their existing
systems, and adopting or
improving their CG and internal
controls to meet the standards
set by SOA sections 403 and
404.
Means and Roles of

Forensic Accountants in
Improving CG
Companies need a centralized

program and an established
system to measure and monitor
internal controls’ effectiveness
and the alignment between CG,
Non-Standard Corporate system is under stress. It has internal control, and external
Governance Policy traditionally been an auditor’s reporting activities. Many are
responsibility to express an setting up “Governance Officers
opinion on whether financial or Governance Committees” to
The primary goal of CG is to
statements are presented meet the demand for corporate
enhance the value of a company
according to GAAP. Contrary to integrity. The governance
through ethical behavior,
the expectations of many in the committee must be active in
espousing a policy of openness
public, the auditor does not every area of corporate activity
and fairness and ensuring
have an absolute duty to to ensure that the company is
informed decision-making
uncover fraud. operating as a synergistic
throughout the company.
whole. As part of the
Unfortunately, the centre of
Inefficient and Governance Committee, a
corporate ethics (viz., board of
Forensic Accountant can make
directors) in certain cases Ineffective Internal a significant contribution in
became a magnet for unethical Control System each of the following areas:
practices.
A good system of internal Governance Policy
Lack of Honesty and control will usually help a
Transparency in company to achieve its With a strong background
Reporting objectives of profitability and knowledge of the legal and
minimize loss of resources. institutional requirements of CG,
Internal control cannot, a forensic accountant can help
The financial reporting
however, change an inherently to formulate and establish a
standards in most countries are
weak management system, or comprehensive governance
“highly specified”. But falling
provide absolute assurance as policy that: ensures an
stock markets, corporate
to the reliability of financial appropriate mix of
failures, dubious accounting
reporting. Companies are now management and independent
practices, abuses of corporate
facing increasing levels of legal directors on the board; sets out
power, and criminal
regulatory, and economic the appropriate responsibilities
investigations indicate that the

ARTICLE
of the board and the audit and compliance, or there are Fraud deterrence should also
committee; has a fair allocation unreasonable profit and budget include an expectation of
of power between owners, goals. It is also necessary to punishment. The forensic
management, and the board; have well-defined hiring policies accountant can help in creating
and ensures there is a company that result in honest, policies that clearly state the
code of ethics for employees well-qualified employees. company’s intent to take action
and management. Ethical against any criminal activities,
behavior is reinforced when top Establishing Effective Lines of and that such action will apply
management shows, through its Communication to all levels of employees.
own actions, that questionable
behavior will not be tolerated. Communication is a key Fraud Investigations
element in ensuring that
Procedural Control employees and other A forensic accountant can
stakeholders are aware of their ensure the integrity of financial
Forensic accountants rights and responsibilities. statements by actively
understand that the best way to Effective communication must investigating for fraud,
prevent fraud is to establish an flow not just from the top to identifying areas of risk and
efficient control system that lower levels, but also across associated fraud symptoms,
encompasses: a good control employee lines of responsibility. pursuing each anomaly
environment determined by Forensic accountants can, no aggressively, and delving into
management’s philosophy of doubt, support the the minute details of accounting
ethical behavior and strong CG dissemination of the required and financial anomalies. By
policies; a superior accounting information about governance helping companies to prevent
system that ensures the proper and ethics policies to interested and detect fraud, therefore, the
recording, classification, and parties within and outside the forensic accountant’s role can
reporting of all relevant organization. Adequate easily evolve into a key
transactions; and strong reporting is also necessary to component in the CG system.
procedural controls that meet the compliance
provide for safeguarding of requirements of the SEC and Establishing Computer
assets, proper authorizations, the stock markets. Forensics
audit mechanisms, and proper
documentation. Vigilant Oversight The proliferation of
e-commerce has led to an
Ensuring Conducive Work Any system needs to be increasing e-fraud in recent
Environment constantly monitored and times, which in turn has meant
evaluated to make sure that it is an increasing demand for
A good fraud prevention functioning well. A forensic forensic IT services aimed at
program also accompanies a accountant can monitor not identifying unauthorised or
positive work environment only compliance at the top unethical IT activities. It is
where highly motivated levels of corporate power, but undeniable that this is the
employees are not tempted to also management procedures fastest growing forensic
abuse their responsibilities. and employee activity. discipline that will assume
Forensic accountants can Information gathered as a result greater importance; hence no
ensure that CG policies are of the monitoring can be used paper on forensic accounting
formulated to avoid high-risk to readjust and reformulate would be complete without a
environments where governance, ethics, and control passing mention of this
management is apathetic, pay is policies. specialised field. Computer
inadequate or too high, there is forensics is simply the
a serious lack of proper training Establishing Consequences application of computer science

approach to study and

investigate the behavior of
board of directors, CG
practices, and financial
reporting systems. There is no
doubt that a qualified, trained
and mature Chartered
Accountant, possessing
forensic accounting (FA) skills,
can prove to be a valuable asset
to the corporate-sector, and
gradually help to improve their
CG system.
References
[1] Crumbley, D.L., Heitger, L.E.,
and Smith, G.S. (2007),
“Forensic and Investigative
Accounting,” Chicago: CCH
Incorporated.
[2] Cheffins, B.R. (2012) “The

to the investigative process. As techniques of data matching History of Corporate
Governance,” ECGI Working
investigative accounting is an and data mining would be
Paper Series International
important aspect of forensic impossible without the Journal of Accounting
accounting, computer forensics application of computer Research Vol. 1, No.1, 2013 18 in
and its sub-disciplines are forensics Law, available at
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as an Investigative Tool,” The
CPA Journal, August, pp.
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th
www.indiaforensic.com. www.aicpa.org.

ARTICLE
Investment Climate and Opportunities

in Bangladesh
Arif Hussain ACA
xecutive Summary easy or difficult it is for a local

E Bangladesh is considered
entrepreneur to open and run a
small to medium - size business
as a developing economy. Yet, when complying with relevant
almost one-third of regulations. It measures and
Bangladesh’s 160m people live tracks changes in regulations
in extreme poverty. In the last affecting 11 areas in the life cycle
decade, the country has of a business: starting a
recorded GDP growth rates business, dealing with
above 5 percent due to construction permits, getting
development of microcredit and electricity, registering property,
garment industry. Although getting credit, protecting
three fifths of Bangladeshis are minority investors, paying taxes,
employed in the agriculture trading across borders,
sector, three quarters of exports enforcing contracts, resolving
revenues come from producing insolvency and labor market
The Author is a ready-made garments. The regulation.
Chartered Accountant and biggest obstacles to sustainable
an Associate Member of the development in Bangladesh are Bangladesh - Market
Institute of Chartered Accountants overpopulation, poor Overview
of Bangladesh-ICAB infrastructure, corruption,
political instability and a slow
• Bangladesh, the world's
implementation of economic
eighth most-populous
reforms .The main objective of
country with a population of
the study is to understand the
160 million people in an area
key economic indicators and
the size of Iowa, has
trade statistics, which countries
registered steady annual
are dominant in the market, the
growth in Gross Domestic
market share, the political
Product (GDP) of
situation if relevant, the top
approximately six percent
reasons why U.S. companies
since 1990, driven primarily
should consider exporting to
by a booming garment
this country, and other issues
industry and strong
that affect trade, e.g., terrorism,
remittance flows.
currency devaluations, trade
agreements, barriers to market
• Thanks to a relatively stable
entry and local requirements,
m a c r o e c o n o m i c
i.e., things to be aware of when
environment and dynamic
entering the market for this
private sector, Bangladesh’s
country, best prospect sectors,
GDP in 2015 rose to
major infrastructure projects,
approximately $202.3 billion
significant government
according to the
procurements and business
International Monetary Fund
opportunities, the best strategy
(IMF).
to enter the market, e.g., visiting
the country; importance of
relationships to finding a good • The IMF estimates real GDP
partner; use of agents. growth of approximately 6.8
percent in Fiscal Year (FY)
2016 (July 2015 – June 2016),
The study sheds light on how

in Bangladesh
while the World Bank predicts real GDP Bangladesh has an opportunity to
growth to be somewhat lower at 6.3 percent replicate its success in RMG
during the same time period. production by developing other
labor-intensive industries.
• Led by aircraft, capital machinery, gas
turbines, and agricultural products, U.S. • Rapid growth in Bangladesh’s RMG
exports to Bangladesh were over $948 industry and investment in
million in 2015, down from $1.1 billion in 2014. energy-sector projects have created
U.S. exports to Bangladesh in the first quarter growing opportunities for U.S.
of calendar year (CY) 2016 were $176 million. exports of machinery and raw
materials.
• U.S. imports from Bangladesh consist
primarily of ready-made garments (RMG) • Bangladesh is one of the top 10
and were $6 billion in 2015, an increase from remittance earning countries in the
$5.28 billion in 2014. world and remittance growth
remained buoyant through the global
• Nearly ten million Bangladeshis, economic downturn in 2008 - 2009.
concentrated mainly in Dhaka and Remittances for FY 2014 (July 2013 -
June 2014) were $14.2 billion and
registered an increase in FY 2015
(July 2014 - June 2015) to $15.3 billion.
Investing such a huge amount may The central bank of Bangladesh, the
not be possible from internal sources Bangladesh Bank, estimates
only. We must have to go for foreign remittances will hit a record high of
$16 billion in FY 2016 (July 2015 - June
investment to achieve vision 2021 in 2016).
time, increase GDP growth rate into • Great potential exists for expanding
8% in near future, and be a middle intra-regional trade with other South
income country by the year 2021. Asian countries. In a positive
development, Bangladesh signed a
Land Boundary Agreement with India
on June 6, 2015 that settled a
Chittagong, a major commercial center and longstanding territorial dispute and
Bangladesh’s second largest city, have annual paved the way for the signing of
incomes exceeding $12,000, offering a several agreements to enable
sizable market for a wide range of goods and increased trade between the two
services. countries as well as significant Indian
investments in power-generation
• Bangladesh’s RMG industry currently infrastructure in Bangladesh.
accounts for roughly 80 percent of the
country’s exports. RMG exports have Bangladesh - Market Challenges
expanded steadily since 1990 despite chronic
energy shortages and infrastructure
• Despite relatively strong economic
constraints, occasional labor dispute and
growth over the past decade,
political turmoil, and periods of weakening
investment climate constraints,
global demand.
notably deficiencies in energy and
transportation infrastructure, and an
• With a workforce growing by roughly two opaque regulatory environment have
million per year and low labor costs,

ARTICLE
the ongoing need for

improved worker safety and
labor rights in Bangladesh
and led to pioneering
initiatives to improve factory
safety.
• Economic weaknesses
include an undeveloped and
undercapitalized financial
sector, an inefficient and
chronically loss-making
public sector, and a
d e c i s i o n - a v e r s e
bureaucracy that often
resists measures to improve
the investment climate.
• Shortages of land, gas, and

power are also major
prevented Bangladesh from • Political unrest stemming impediments to investment.
achieving higher growth. from the January 5, 2014 Bangladesh’s long-term
national elections was energy security could
• Corruption is widely minimal in 2016 compared to benefit from domestic gas
perceived to be endemic at past years. The war crimes prices that more closely
all levels of society and tribunal verdicts have led to match international gas
discourages some some non-violent general prices. Development of
investments and inhibits strikes. Extremist attacks infrastructure to allow
economic growth. claimed by the Islamic State Bangladesh to access
in Iraq and the Levant (ISIL) liquefied natural gas (LNG)
• Reputable companies have and Al-Qaeda in the Indian imports would also support
complained that the Subcontinent (AQIS) economic development.
National Board of Revenue, targeting bloggers and
Bangladesh (NBR) is unduly vulnerable minority groups
are now a concern for the Bangladesh - Market
reopening prior year tax
returns for additional country. However, Opportunities
scrutiny. While this process projections of continued
is taking place, normal GDP growth of The leading commercial sectors
business activities such as approximately 6.8 percent for exports and investment by
banking, immigration show the resilience of USA, UK, China, Russia, India,
procedures, and branch Bangladesh’s economy in Japan etc include:
office license permission weathering these
may be slowed or stopped challenges. • Power and Energy
entirely. Some companies
have either exited the • A series of RMG industry • Agricultural Industries and
market or minimized their accidents, including the business
presence as a result of these tragic death of more than
activities. 1,100 workers in the Rana • Architectural, Construction
Plaza Complex collapse in and Engineering Services
April 2013, have highlighted

in Bangladesh
Figure 1.1 Private Investment

office in Kolkata to offer • Successful companies adapt
PRIVATE INVESTMENT, IN % OF GDP services to help identify and their products to the
SOURCE : BBS
assess Bangladesh demands of the local
23.01
companies as potential marketplace. This may

22.5
22.07
22.99
business partners. include smaller packaging to

21.75
reduce retail pricing and

22.03
• Many firms service marketing strategies that

Bangladesh from their appeal to local consumer
FY12 FY13 FY14 FY15 FY16 FY17 preferences.
regional offices in India,
Singapore and other offices
• Heavy Industrial and Capital in South or Southeast Asia. The Business
Equipment Environment
• As companies become more
• Textiles, Textile Machinery established in the market, an
For policy makers, knowing
and Equipment increasing number choose
where their economy stands in
to open a branch or
the aggregate ranking on the
• Light Engineering and subsidiary office.
ease of doing business is useful.
Electronics Also useful is to know how it
• Consumer goods companies ranks relative to selected other
• Pharmaceutical are now establishing economies and relative to the
manufacturing facilities in regional average (figure 1.2).
• Leather and Leather Goods Bangladesh. The economy’s rankings (figure
Production 1.3) and distance to frontier
• Some companies have scores (figure 1.4) on the topics
• Information Communication begun granting franchise included in the ease of doing
and Technology (ICT) licenses in Bangladesh, business ranking provide
including casual theme another perspective.
restaurants, clothing, health
• Land, sea and railway
spas and specialty goods.
transportation infrastructures
Bangladesh - Market Figure 1.2 How Bangladesh and selected other economies rank on the ease
of doing business
Entry Strategy
United Kingdom (Rank 7) 82.74
• Personal relationships are
important when selling
products in Bangladesh. Sri Lanka (Rank 110) 58.79
Many companies identify
distributors or local agents India (Rank 130) 55.27
to sell their products on an
exclusive or non-exclusive Regional Average (South Asia) 52.87
basis. U.S. companies can
evaluate potential business
partners based on technical Pakistan (Rank 144) 51.77
capacity, market experience
and other factors. The U.S. Bangladesh (Rank 176) 40.84
Trade Center at the U.S.
Embassy works in
coordination with the 0 100
Distance to frontier score
Foreign Commercial Service

ARTICLE
Starting a Business (122)

Just as the overall ranking on
the ease of doing business tells
Resolving Insolvency (151) Dealing with Construction Permits (138)
only part of the story, so do
changes in that ranking. Yearly
Enforcing Contracts (189) Getting Electricity (187)
movements in rankings can
provide some indication of
Trading across Borders (173) Registering Property (185) changes in an economy’s
regulatory environment for
Paying Taxes (151) Getting Credit (157) firms, but they are always
relative. Moreover, year-to-year
Protecting Minority Investors (70)
changes in the overall rankings
Figure 1.3 Rankings on doing business topics–Bangladesh do not reflect how the business
regulatory environment in an
economy has changed over
Starting a Business (81.74)
time—or how it has changed in
Resolving Insolvency (27.02) Dealing with Construction Permits (61.60)
different areas. To aid in
assessing such changes, the
Enforcing Contracts (22.21) Getting Electricity (16.17)
study introduced the distance
to frontier score.
Trading across Borders (34.86) Registering Property (27.58)
This measure shows how far on
Paying Taxes (55.56) Getting Credit (25.00) average an economy is from the
best performance achieved by
Protecting Minority Investors (56.67) any economy on each doing
business indicator. Comparing
Figure 1.4 Distance to frontier scores on doing business the measure for an economy at
topics-Bangladesh 2 points in time allows users to
assess how much the
2015 2016 2013 2014 economy’s regulatory
environment as measured by
100
the study has changed over
90
80
time—how far it has moved
70 toward (or away from) the most
60 efficient practices and strongest
50 regulations in areas covered by
40 the study (figure 1.5).
30
20 Note: The distance to frontier
10 score shows how far on average
0 an economy is from the best
es
s its ity rt
y it rs
xe
s
er
s ts y performance achieved by any
n rm ic e re
d to rd ac nc
si Pe tr op C ves Ta o tr l ve economy on each doing
u ec B n
B tio
n
El Pr in
g In in
g
ss C
o so
a uc ng tt ity ay ro g In business indicator. Getting
g t r n g r i e r P c i n g
tin ns ti G o a in
et te in rc lv credit, protecting minority
ar Co is M ng fo so
St i th G eg n g a di E n e investors and resolving
w R ti Tr R
ng ec insolvency had methodology
e ali rot
D P changes in 2014 and thus are
only comparable to 2013.
Figure 1.5 How far has Bangladesh come in the areas measured Dealing with construction
by the study? permits, getting electricity and
trading across borders had

in Bangladesh
methodology changes in 2015 The absolute values of the strengths in an area of business
and thus are only comparable to indicators tell another part of regulation—such as a regulatory
2014. Starting a business, the story (table 1.1). The process that can be completed
registering property, paying indicators, on their own or in with a small number of
taxes and enforcing contracts comparison with the indicators procedures in a few days and at
had methodology changes in of a good practice economy or a low cost. Comparison of the
2016 and thus are only those of comparator economies economy’s indicators today
comparable to 2015.The in the region, may reveal with those in the previous year
measure is normalized to range bottlenecks reflected in large may show where substantial
between 0 and 100, with 100 numbers of procedures, long bottlenecks persist—and where
representing the best delays or high costs. Or they they are diminishing.
performance (the frontier). may reveal unexpected
Table 1.1 Summary of Doing Business indicators for Bangladesh

ARTICLE

in Bangladesh

ARTICLE

in Bangladesh

ARTICLE
Note: DB2016 rankings shown insolvency—it receives a “no the top ranking on the indicator.
are not last year’s published practice” mark. Similarly, an
rankings but comparable economy receives a “no Ranking of Starting a
rankings for DB2016 that practice” mark if regulation
capture the effects of such exists but is never used in
Business in Bangladesh
factors as data revisions and practice or if a competing
changes to the methodology. regulation prohibits such Globally, Bangladesh stands at
The global best performer on practice. Either way, a “no 122 in the ranking of 190
time for paying taxes is defined practice” mark puts the economies on the ease of
as the lowest time recorded economy at the bottom of the starting a business (figure 1.6).
among all economies in the ranking on the relevant The rankings for comparator
DB2016 sample that levy the 3 indicator. economies and the regional
major taxes: profit tax, labor average ranking provide other
taxes and mandatory useful information for assessing
* Two or more economies share
contributions, and VAT or sales how easy it is for an
the top ranking on this indicator.
tax. If an economy has no laws entrepreneur in Bangladesh to
A number shown in place of an
or regulations covering a start a business.
economy’s name indicates the
specific area—for example, number of economies that share
Figure 1.6 How Bangladesh and comparator economies rank on the ease of starting a business
United Kingdom (Rank 16) 94.58
Sri Lanka (Rank 74) 87.52
Regional Average (South Asia) 83.98
Bangladesh (Rank 122) 81.74
Pakistan (Rank 141) 77.88
India (Rank 155) 74.31
0 100

in Bangladesh
Time, cost and procedures for entrepreneur must complete to Following is a detailed summary
starting a business in incorporate and register a new of those procedures, along with
Bangladesh firm. These are identified by the the associated time and cost.
study through collaboration These procedures are those that
Underlying the indicators shown with relevant local professionals apply to a company matching
in this chapter for Bangladesh is and the study of laws, the standard assumptions (the
a set of specific regulations and publicly “standardized company”) used
procedures—the bureaucratic available information on by the study in collecting the
and legal steps that an business entry in that economy. data.
Name of the company: Standardized Company

Legal form: Private Limited Company
Paid-in minimum capital requirement: BDT 0
City: Dhaka, Chittagong
Start-up Capital: 10 times GNI per capita

ARTICLE

in Bangladesh

ARTICLE
Conclusion last decade. Present the sectoral composition of

government aimed to reach into output with the shares of
Bangladesh is one of the the status of middle income agriculture, industry, and
promising Least Developed country by 2021 and graduate services approximating 15
Countries (LDCs) having from the list of LDC. To percent, 38 percent, and 47
potentials to grow further. transform Bangladesh into a percent respectively by 2021.
Goldman Sachs investment middle income country we must
bank described Bangladesh as have to attain few targets like; We have to reduce the
one of the Next-11 countries achieve and sustained annual unemployment rate to 15 per
(N-11) due to its prompt growth rate of GDP at 10 per cent by cent; change the shares of
potentials. 2021, substantially eradicate agriculture, industry, and
poverty by bringing down the services in employment to 30
The economy of Bangladesh is number of people living below per cent, 25 per cent, and 45 per
growing with an on an average the poverty line to 15 percent of cent respectively by 2021. The
6-7% GDP growth rate during the population estimated at no year 2017 has arrived with a
more than 25 million, change very good news for the nation
that 10 power plants with
generation capacity of 1,840
MW are expected to be
commissioned this year and
make provisions to meet the
expected demand for power of
20,000 MW by 2021.
On the other hand about 31.5%

of Bangladeshis are living below
the poverty line. There are 56.7
million workable population in
Bangladesh with 2 million
unemployed population.
Another 1.8 million educated
workforce is entering into the
job market per year. Providing
employment opportunity to

in Bangladesh
such a huge population is quite References

difficult task for the government
as well as for the local private http://www.doingbusiness.org
sector. Therefore government
has to go for foreign investment http://www.doingbusiness.org/
into Bangladesh to facilitate research
employment opportunity, foster
economic growth and poverty
http://www.doingbusiness.org/
alleviation.
law-library
The tax
To achieve all of the above
mentioned targets by 2021
http://www.doingbusiness.org/ authority is in a
contributors/doingbusiness
Bangladesh has only one option process to
i.e. increasing investment. GDP
growth rate was 6.06% in
http://www.doingbusiness.org/ gradually phase
2013-14 FY but it was supposed
data/exploretopics/entreprene out the
urship
to be increased into 8% by 2013 truncated-base
furthermore 10% by 2017 as per
vision 2021. http://www.doingbusiness.org/ of Value Added
data/distance-tofrontier Tax (VAT) within
The Gross Domestic Product
http://www.doingbusiness.org/ the next two
(GDP) in Bangladesh expanded
7.05 percent in 2016 from the data/good-practice years before
previous year. GDP Growth Rate implementation
in Bangladesh averaged 5.72 https://albd.org/index.php/en/
percent from 1994 until 2016, updates/news/4390-power-ge of the new VAT
reaching an all-time high of 7.05 neration-capacity-to-be-increas and
ed-by-1840-mw-in-2017
percent in 2016 and a record Supplementary
low of 4.08 percent in 1994
https://www.omicsonline.com/ Duty (SD)
Investing such a huge amount open-access/investment-climat act-2012 from
e-in-bangladesh-performance-a
may not be possible from
nd-possibilities-2162-6359-1000
July 1, 2017.
internal sources only. We must
have to go for foreign 290.php?aid=63727
investment to achieve vision
2021 in time, increase GDP http://www.tradingeconomics.
SOURCE
growth rate into 8% in near com/bangladesh/gdp-growth The Financial Express
future, and be a middle income 27 August 2017
th
country by the year 2021.

ARTICLE
Thoughts for a Reformed Banking Sector
M Idris Ali FCA
D
uring the past few years Following data depicts the state
the banking sector of of disgraceful performance of
Bangladesh has been the SCBs:
showing a persistently gloomy
business performance. Hues & Dec’14 Dec’15 Dec’16
Cries from intellectuals &
intelligentsia cropped up NPL to Total Loan:
centering Banking Sector’s SCBs 22.2% 21.5% 25.1%
deplorably poor performance.
DFIs 32.8% 23.2% 26.0%
All these resulted into
staggeringly increasing non PCBs 5.0% 4.9% 4.6%
performing loans (NPL). FCBs 7.3% 7.8% 9.6%
Bangladesh stands second
among the South Asian ROA
countries in terms of SCBs -0.7% -0.1% .02%
Non-performing loans (NPL) as
a share of total loan. The first DFIs -0.8% -1.2% -1.40%
The Author is a
Chartered Accountant and place goes to Pakistan. PCBs 1.0% 1.0% 1.0%
a Fellow Member of the State-owned commercial banks
FCBs 3.3% 2.9% 2.5%
Institute of Chartered Accountants (SCBs) in Bangladesh are the
of Bangladesh-ICAB major delinquents in Banking ROE
sector causing huge amounts of SCBs -10.4% -2.0% - 7.0%
NPL (45.57%).Contrary to it
however only about one fifth of DFIs -6.0% - 7.0% - 7.0%
total loans of the banking sector PCBs 10 .0% 11.0% 11.0%
are disbursed by the SCBs. The
FCBs 10.5% 18.0% 14.0%
highest amount of loan is
disbursed by private
Source:
commercial banks (PCBs) which
account for 42.12 percent of http://cpd.org.bd/wp/
total NPL .Huge amount of NPL content/uploads/2017/06/
in the SCBs has deterred their Bangladesh -economy-in-FY2016-17
profitability, return on equity
(ROE), return on assets (ROA) & http://cpd.org.bd/banking-sector-
so froths. IT has eaten up their search-respite-fahmida-khatun-cpd/
capital and reserves and
sqeezed their liquidities
available to expand loans.

The above data clearly manifest that as the Poor and ill motivated selection of
non-performing loans of SCBs have been piling creditors and politically influenced
up, their ROA and ROE have been going down. lending, poor risk management, lack of
Negative trend of ROA and ROE is astoundingly due diligence, weak monitoring and
jeopardizing credibility of the banking system. misreporting, lack of transparency and
This situation has generated dearth of capital accountability in approval,
and eaten up shareholders’ funds. Consequently administration, monitoring and recovery
Government injected an additional amount of Tk processes of credit are responsible for
11,705 crore from FY 2010 to FY 2016.The highest staggering defaults. Political &
amount of Tk 4,447 crore was added in FY 2014 bureaucratic influences also led to
in the name of recapitalization funds to bail out concentration of outstanding loans in the
hands of a few business groups. The top
20 are the holders of big default amounts
making the sector as a whole vulnerable
Poor and ill motivated selection of to their misdeeds & wishes. Another
creditors and politically influenced challenge is reserve heist from the central
bank forcing the release of its Governor
lending, poor risk management, long ahead of his tenure. Such an
lack of due diligence, weak unprecedented incident underscores the
importance of stronger & better cyber
monitoring and misreporting, lack security regime in the central bank and
of transparency and accountability the banking sector as a whole.
in approval, administration, Strengthening Recovery
monitoring and recovery processes Process
of credit are responsible for
staggering defaults. ‘Justice delayed is justice denied’, this
saying applies to every sphere of life.
Bringing the offenders of scandals at
books for defaults of loans of Sonali bank,
Basic bank and other SCBs has already
the SCBs. This tax payers’ money was infused
been prolonged for reasons better known
but could hardly improve the capital adequacy
to the Government. Yet any further delay
ratios of the ailing SCBs. Sonali Bank received the
would surely make the banking process
highest amount, Tk. 2,794.8 crore followed by
more vulnerable. Moreover the ‘Ortho Rin
BASIC Bank -Tk. 2,390 crore. The financial health
adalat ‘ being the specialized law court to
condition of both these SCBs deteriorated due to
recover defaulted loans has also been not
massive loan anomalies, malpractices and scams.
appreciably successful in disposing over
Hall Mark group, Bismillah group and many
suits filed to recover debts in time.
others are in the list for fraudulent appropriation
Judicial proceedings are lengthy and
of loans, delinquencies and defaults in repaying
warrants documentary evidences which
the borrowed amounts often becoming
at times are not available or were found
highlights in news about big scandals. Most of
faulty due to collaboration or inefficiency
the defaulted & delinquent borrowers did so in
of the dealing officers of the banks. A
connivance with bankers at desk & above. But
third option may be constituting a
yet those could not yet been brought into books
Tribunal to deal with defaulted, forgery,
under law. Failure to recover and punish the
misappropriation cases. While existing
defaulters often encouraging defaults by more
Women and Child oppression Tribunal,
borrowers caused many more malpractice by
Land Tribunal etc are proving successful
bankers, officials and Directors.

ARTICLE
implant good governance in the

banking sector. The practice of
rescheduling or rephrasing out
loans once and again and
writing off bad debts only help
the banks to window dressing
of the Balance Sheet for the
time being. Bad loans must be
recovered and rules must be
adhered to in approving fresh
loans in order to improve the
financial health of banks. Debt
servicing liability from the
business for which loans are
routed must get best attention
before sanctions of loans & of
course before disbursements.
in delivering verdicts in really willing to recover the Bangladesh Bank (BB), its
tolerable span of time, the looted public money in the executives and inspectors
proposed Tribunal may also banner of loan instead of should be empowered with
succeed. Another option may infusing more of tax payers’ accountability to take
be forming Bankruptcy Tribunal money in lost equity. Such disciplinary action against the
by the Government and refinancing of banks of in fact anomalies and malpractices of
applying the Bankruptcy Act to greatly benefits the defaulters banks & bankers to be more
the defaulters. If a few giving them impetus to do it particular.
defaulters are declared more depriving the public.
bankrupt and bank debts are BB had made some efforts to
recovered by auctioning off Methods of Improving ensure an effective banking
their assets and properties by system and to bring SCBs and
Financial and
appointment of Liquidators, DFIs under strict monitoring
other defaulters will be alert and Administrative Strength and control. The introduction of
constrained to pay off their the Bank Company (Amended)
borrowed loans. This is, because Good governance has no Act 2013, formation of risk
most of the borrowers would substitute in any sphere of the management committee,
not like to destroy their social society. Good governance implementation of credit and
image of dignity. As for example comprises a set of rules and risk management training,
in the month of May’ 2017 an regulations under law and spelling out the terms of
Ordinance has been passed in norms to be adhered to in any reference (ToRs) and
India by the President in which society, organization, responsibilities of the board of
the Central Government has enterprises etc. Banking sector directors, and a number of
empowered the Reserve Bank constitutes the backbone of an reform measures at the
of India to declare the bank loan economy which acts as administrative level are from
defaulters Bankrupt. custodian of depositor’s money. those measures. Despite various
Consequently all properties of Banks provide loan capital to initiatives taken by BB the
the defaulters will be public entrepreneurs. amount of NPLs has been
confiscated in order to recover Bankruptcy of a bank affects persistently soaring up. During
the bank‘ debts without much of the depositors very severely January-March FY2016-17
difficulties. Time is now ripe for and harms the economy badly. period it rose to Tk. 73,409
Bangladesh to follow Indian It is therefore, very crucial for crore from Tk. 62,170 crore in
experience if the Government is the regulating authority to the preceding quarter. Banking

Companies Act was amended in in larger numbers in the SCB resistance to adopting
2003 introducing an Audit Boards. It would bring more corporate regulations. In PCBs,
Committee, and two transparency & accountability it is not uncommon to observe
independent directors. This step with efficiency in bank owner-management joint
modestly improved the management and its decision efforts to get involved in
corporate governance of banks making. Government should not irregularities. Owners’
bail out the ailing SCBs by interference in the management
In current amendment of injecting more and more capital of PCBs also led to various
Banking Companies Act for indefinite periods .However malpractices in these banks.
authority of inspectors of BB in SCBs render free services to its This most recent amendment is
classifying loans has been owner the Government for not really practical & need
curtailed. This is regressive and which service charges may also based in the recurrent
in all likeliness will discourage accrue to SCBs from perspectives of Bangladesh. It
the inspectors in performing Government .This will entail will on the contrary be
their task professionally. competitiveness in SCBs with regressive in nature and only
Moreover in view of the PCBs while capital injection aggravate the corporate
increased number of banks and despite such free services by governance in banking sector.
branches number of qualified SCBs will not be required. On Family control will be more
inspectors and supervisors in such charges by way of adding vibrant & the corporate culture
the Central bank should again value to income of SCBs its with professionalism in banking
be increased. Computerized losses will be reduced to sector will only remain a far cry.
returns sent by the scheduled substantial extent. Tax payers’ The PCBs would further fall into
banks to BB are one kind of money should be used for more darkness.
remote inspection. But economic development of the
correctness of data must be country. In order to save the Conclusion
verified on surprise and SCBs and tax payers’ money
periodical checks in persons. Government should enlist the Banking sector being a vital
This requirement may be filled SCBs to a reasonable extent of ingredient of the economic
up by appointment of more ownership through IPOs. This development amidst our
number of inspectors by BB. dilution may be 30 % of stakes journey to MIC in 2021, should
causing accountability be made sound and healthier.
In the SCBs Board members are shareholders. This will enlarge An ailing Banking sector as it is
appointed by the Government the magnitudes of Capital now cannot make necessary
(Ministry of Finance) from Market which is a crying need contribution to the economy.
among the non-professional and establish accountability for Growth in all the segments of
people, e.g. public servants. The SCBs in a self regulated manner. the economy as well as in GDP
Directors and Executives of the Previously 2 members from one is hugely supplemented by
banks are often influenced by family could be Directors in the banking sector. It is therefore
the top level public servants and Board of PCBs. Recent crucial that a sound banking
public representatives due to amendment of the Banking sector which is a sine qua non
which loans are disbursed to Companies Act provided for 4 for the development has to be
improper & untested borrowers. members instead of 2 allowed nurtured & nourished. The
This is a chronic reason of piling to remain in the Board. This Government has none but only
bad debts in SCBs which needs provision may be an obstacle to option to work out plan to be
a quick address. Professionals promote corporate governance acted upon for a sound banking
as Directors viz. Former which is so much essential for sector & then nurture & nourish
Bankers, Chartered banks. Bangladesh’s PCBs are it.
Accountants, Lawyers among dominated by family members.
others etc should be appointed Such dominance would mean

ARTICLE

Time Cannot be Ours Without Challenges
“Nothing is easier than Sustainable Development Goals

spending public money. (SDGs). The size of economy
It does not appear to belong grew around 14 times during
to anybody. The temptation
last 25 years (Year 2015-16: USD
is overwhelming to bestow
on somebody.” 221 Billion vs. Year 1980-81: USD
16 Billion) and size of National
- John Calvin Coolidge Jr., Budget of Bangladesh is also
(1872–1933), the 30th experiencing a sharp upward
President of the United States
trend.
Size of National Budget 2017-18
A
report of PWC, one of the has crossed the landmark of
big 4 accounting firms BDT 4 Trillion while capacity of
on “The World in 2050” successful implementation
reveals that Bangladesh is thereof has raised many
expected to become one of the questions in light of the past
The Author is a 32 most powerful economies in records. It is undoubted that
Chartered Accountant and the world by 2050 leaving many Bangladesh will not experience
a Fellow Member of the large economies including a turbulence-free journey to
Institute of Chartered Accountants Australia, South Africa, Spain, achieve the ambitious
of Bangladesh-ICAB Thailand and Malaysia behind. milestones amid evolving global
This forecast is based on the economy.
momentum that Bangladesh
has been experiencing during Some critical challenges in
last decade coupled with the implementing National Budget
fastest growth potentials and maintaining the growth
among the emerging momentum have been
economies. highlighted in the succeeding
sections.
The GDP growth rate has been
above 6% since 2010. This was Investment and
7.24% in 2016-17 while it was Employment
7.11% in 2015-16. It is expected
that the economy will grow at
In 2016-17, total investment in
7.4% in next Fiscal year. Per
Bangladesh was 30.3% of GDP
capital income has increased to
where share of public sector
USD 1,602 in 2016-17 from USD
was 7.3%. In 2017-18,
1,465 of immediate preceding
Government estimates 31.9% as
financial year ( FY). Government
Investment-GDP ratio with
set a valiant target to reach USD
23.3% of private investment and
12,000 by 2041. Almost all the
8.6% of public investment.
macroeconomic indicators are
Government targeted to
giving the impression of short
improve this ratio to 34.4%
and mid-term financial stability.
within 2020 to reach growth
Country is now planning to
target. Every year, 1.5 million
eradicate poverty by 2041 and
workforces join the queue in the
aiming to graduate to a
labor market while sufficient
developed country. All the
number of job opportunities are
efforts are accumulated to meet
not created due to lack of
17 points of UN declared

investment in private sector. This will foil the than 57% of total remittance flows to
ultimate target to graduate to middle income Bangladesh is from Middle East region.
country by 2021. Foreign Direct Investment (FDI) The lifeline of Gulf economy is oil while
in Bangladesh rose by 4.38% to $2.33 billion in the price of oil slumped by 64% (Crude oil
2016-17which was mainly invested in Telecom price: USD 141 in July 2008 vs. USD 50 in
sector that did not generate sufficient number of July 2017) during last almost one decade.
employments. Land has been considered as the Moreover, political instability in Middle
scarcest and the most expensive resource to East has also slowed down the economic
establish a manufacturing industry in growth in that region. Though the
Bangladesh. With an objective to attract the remittance through informal channel is
investors of home and abroad, the agenda of somehow fueling the economy, this
unrecorded part of remittance has a
negative impact on Balance of Payment.
A study from School of Economics and
This is considered as one of the Business Administration, University of
Navarra, Spain Government reveals that
critical hurdles for the growth-journey remittance through informal channel is
of any developing economy. It can cheaper than that of banking channel.
Hence, the initiative of Bangladesh
wipe out the ultimate benefit reaped Government of removing the remittance
from the overall economic charge is expected to reduce the volume
of remittance through non-banking
development. The inflation rate in channel. Government needs to find new
June 2017 was 5.44 percent which geographic locations to export skilled
manpower.
was well below than the target
of 5.8 percent. Inflation
This is considered as one of the critical
hurdles for the growth-journey of any
Government to develop 100 private economic
developing economy. It can wipe out the
zones is underway. However, political
ultimate benefit reaped from the overall
uncertainty, shortage of power and energy
economic development. The inflation rate
supply, inefficient and inadequate infrastructure
in June 2017 was 5.44 percent which was
and bureaucracy are the main bottlenecks. It is
well below than the target of 5.8 percent.
very unlikely that top agenda of Government to
This happened due to the stable price of
improve private investment as well as
rice and other commodities in local and
employment generation will be successful in
international market. The inflation target
short-run.
for 2017-18 is set by Government at 5.5
percent and it was recorded at 5.57
Remittances percent in July, 2017. Due to the surge in
the price of rice and other essentials both
Shocking dip in foreign remittance is triggering at urban and rural areas resulted from
high risk to the adequate foreign exchange massive flood, it will be a massive
reserve. Moreover, rural economy in particular is challenge for Government to keep the
largely dependent on the funds of remittances. inflation rate as planned.
Total remittance in 2016-17 was 14.48% lower
than corresponding period of previous year Export: Export of Bangladesh in 2016-17
(USD 14.9 Billion). The remittance in the 2016-17 registered USD 34.8 Billion which was 5.8
was also the lowest in the last five years. More percent below than the target of USD 37

ARTICLE
highly dependent on the

successful roll-out of new VAT
law though it was eventually
decided to defer by another 2
years. Moreover, the progress in
so-called capacity building of
tax administration, expansion of
tax net, digitalization of revenue
management system etc. is very
sluggish and unsatisfactory.
Though NBR is sanguine to hit
the target revenue collection
leaning on old VAT law, the
countrywide flood has put a big
question mark on the successful
land up of this target. Excessive
pressure for tax on business
enterprises will hinder the
Billion. A slight 1.7 percent depending on the initiatives of growth of Firms. Again, without
year-on-year growth in 2016-17 exporters in exploring new the mobilization of local
is the slowest in last 15 years. market and products, resources in sizeable amount
Readymade garment is the Government should ensure through revenue collection, the
single largest source of export more focused initiatives of the implementation of a large
(83%) has experienced only Embassies of Bangladesh budget of BDT 4 trillion will
0.2% growth over preceding FY. working across the globe. remain as a far-fetched dream.
RMG’s export of USD 28.15 Extending cash Hence, to deal with this dicey
Billion was 7.34 percent below incentive/subsidy cannot be situation, Government should
than the target. It is undoubted considered as the sole speed up the implementation of
that Bangladesh will continue to responsibility of Government in Tax Administration reform,
dominate the global RMG boosting up competitive export accountability of taxmen,
market for its low cost earnings. integration and automation of
production. However, it also revenue departments,
needs to concentrate into value Revenue Collection exploration of new areas of tax
addition part in pricing strategy. collection etc.
Bangladesh Bank's quarterly Total tax revenue for 2016-17
review on RMG sector showed was targeted BDT 2.43 trillion Deficit, Foreign
that local value addition of the (12.4% of GDP) while this was
industry was 73.12 per cent in Assistance and
revised at BDT 2.19 Trillion (11.2%
2008-09, which rose to 75.35 of GDP) i.e. 10% of estimated
Government Borrowings
per cent in FY16-17 which is 0.43 revenue was slashed in revised
percentage points lower than budget. However, actual As always, Budget deficit is
that of the FY 2015-16. Without collection of NBR was BDT 0.71 around 5% of GDP. Budget
developing industries for Billion higher than the revised deficit of 2017-18 is estimated to
various backward linkages NBR Tax target of BDT 1.85 be hiked by 13% over the revised
(fabrics, trims etc.), this value Trillion. In Budget of 2017-18, Budget of 2016-17 (BDT 987
addition rate cannot be target of Total Tax Revenue was billion). The deficit in National
improved from the current level. set at BDT 2.88 Trillion which is Budget is funded by foreign aid
Government should engage its more than 32 percent higher and Government borrowings.
endeavor to diversify export than revised budget of 2016-17. Since the deposit rate of bank is
products’ basket. Instead of This aggressive target was decreasing, Government

Savings Certificates has been especially mega projects has state owned banks and several
very popular for its double digit been hindering the overall private commercial banks are in
development of infrastructure, shortfall of capital. Commercial
return rate. As of April 17,
poverty alleviation, banks are providing excessive
savings certificates worth of Tk.
improvement in health and provision for bad and doubtful
420 Billion were sold against the
education sectors etc. advances which is eventually up
target of Tk.196 Billion for the
According to Govt. sources, the surging lending rate for sincere
current fiscal year. This may entrepreneurs. Deposit to
Govt. has been able to
ease the financing of deficit lending ratio of some banks has
implement only 64.72% of ADP
budget from internal sources exceeded the stipulated limit of
in the first 11 months of the
yet this will create additional the Central Bank. In order to
current fiscal year. The total
interest burden on Budget maintain this ratio, commercial
budgetary allocation in the FY
expenditure. This will also banks are forced to obtain
2016-17 was BDT 1.19 trillion for
induce people to purchase deposit at higher interest rate.
1,668 ADP projects. Of them, the
savings certificates instead of government implemented 166 Moreover, BDT 20 Billion has
investing in commercial projects with its own funds. The been disbursed by the
ventures, stock markets. Banks allocation was BDT 939.05 Government with an objective
are currently having pressure on Billion in 1,557 projects in FY to deal with the shortfall in
cash flow due to upward trend 2015-16. The Govt. implemented capital of several state owned
of non-performing loan and 143 projects with its own banks. Central Bank appointed
private credit flow. Many of the funding. The ADP administrator in some
banks are taking alternative implementation rates were 67% commercial banks to control
routes to collect funds. On top and 66% respectively in the FY their reckless top management.
of that, if Government intends Banking system is one of the
2014-15 and FY 2013-14. So,
to source fund to manage lifelines of macroeconomic
capacity-building of project
deficit finance from commercial development of any country.
teams, strengthening
banks, this will definitely hold Instability in banking sector will
coordination among different
back new private investments. affect the sustainable
Govt. agencies, easing land
Again, the slow pace in global development of Bangladesh.
acquisition process etc. are
economy and dissatisfaction of Government decided to establish
extremely important to ensure
a separate commission to
development partners in reform speed up the ADP
monitor and guide the operation
activities of Bangladesh, inflow implementation. of commercial banks. However,
of funds from external
this action will not be effective as
resources will remain as a big NPL of Commercial long as politically-blessed people
question.
Banks get the access to the banking
system.
ADP Implementation Significant rise in the magnitude
of non-performing loan (NPL) Bangladesh is now one of the
Annual Development has squeezed the ability of fastest growing economies of
Programme (ADP) is a critical Banks to extend advances to the world. Its economy is
part of country’s Annual private enterprises. All four greatly influenced by both
Budget. ADP includes many state-owned commercial banks external and internal factors.
projects of various sectors failed to recover loans from the These factors evolve very
developed in line with the policy top 20 defaulters as per targets frequently which requires
of five-year plan. Timely set by the central bank for the immediate response. Good
implementation of ADP plays a first half of the year. One third of Governance should be in core
key role for the sustainable the country's state owned places duly implemented by
development of Bangladesh. banks' bad loans are in the grip visionary leadership to address
The slow pace in of only 20 defaulted borrowers. country’s growth agenda.
implementation of ADP As a consequence, almost all

ARTICLE
Incongruous Amendments in Tax Laws Incorporated

in the National Budget 2017-2018
Akhter Zamil FCA
F
inally the National budget Act by independent and
for the fiscal year experienced committee to be
2017-2018 is dramatically formed so that all arbitrary and
passed by the members of the inconsistent laws could be
parliament with declaration of avoided. But proposed fiscal
stay for introducing the VAT budget estimates remained
Act 2012. While passing the without any change. So, budget
budget the members of the estimates of 4.02 trillion is yet
parliament were found to be to be reconsidered and revised
very agitated and critical in the light of the suspension of
against the most senior and the VAT Act 2012 and relevant
aged Finance minister who had amendments in the finance Act
the unique record of planning 2017-2018 as may be required.
National budget for the last ten Much has been talked about the
years for the country. The Prime VAT Act so far; therefore, we
minister had also expressed her would skip this fact and jump
The Author is a resentments towards the straight into the finally passed
Chartered Accountant and Finance Minister. But all on a Finance act 2017-2018 to point
a Fellow Member of the sudden, few senior members of out the anomalies of the newly
Institute of Chartered Accountants the parliament came forward to passed laws incorporated in the
of Bangladesh-ICAB salvage the honor of the finance income tax ordinance 1984.
minister and supported the past
performance of the finance While going through the
minister and made the passage Finance Act, 2017 we find that
for passing the budget finally this year also as many as 45
and dramatically for the relief of (Forty Five) sections are either
the people of the country. revised or amended or replaced.
Some sections are found very
VAT Act 2012, which was lengthy & critically presented
supposed to be introduced and found to be very difficult to
from 1st July, 2017 had been understand the proposals of the
stayed for next two years law. Some sections are found to
because of some arbitrary and be duplication of other sections.
illogical law being included in There are sections which are
the proposed VAT Act 2012. found to be the repetition of
The business communities were other sections. The law which
very much vocal and critical had been revised last year again
against the introduction of the had been brought for
VAT Act 2012 and had been amendments this year. The
serious and declared not to contents of the law had been
accept the VAT Act 2012, until it made clumsy and ambiguous.
is amended further in keeping All these actions had made the
with the interest of the business law in accessible for the readers.
communities and consumers.
We now discuss few sections of
Ultimately the Prime Minister the Finance Act 2017 which may
sensing the troubles, had come give some bad impression
forward to declare stay of VAT about the amended law.
Act 2012 for the next two years
Amendments are made in sub
and further scrutiny of the VAT
clause (ii) of clause 62A, of

section 2 fixing the date of submission of Tax attached under sub-section (28).
Return by the assessee company only. The “Nothing of this sub-section shall be
language inserted after the word, “Income Year” applicable to a loan or gift from spouse or
followed by the words “or the fifteenth day of parents if any banking channel or formal
September following the end of the income year channel is used in the process of such
where the said fifteenth day falls before the loan or gift”. It is not understood as to
fifteenth day of September”. The law is intended why other classes of people are denied
to mean, tax return should be submitted within from this benefit.
15th September following the end of income
year. In case income years fall before the 15th day Amendment is also necessary in
of September, the Return should be filed in 15th sub-sections (1), (21) of section 19. Our
September. This law is applicable in case of all view is that when the identity of the
assessee-companies only. We do not find any Debtors/Creditors are established and
justified reasons, to present the language so banking channel used are disclosed by
critically. The law should be very clear and simple the recipient of loan, the process of such
but why the above information is so critically loan or gift may also be accepted.
Amendment should also be brought in
other sub-section of section 19 to remove
all sorts of ambiguity in law.
Ultimately the Prime Minister sensing
the troubles, had come forward to A replaced sub-section 31 of section 19 is
inserted as below:
declare stay of VAT Act 2012 for the
next two years and further scrutiny “Where an assessee files revised return or
an amended return u/s 78, 82 BB or 93
of the VAT Act by independent and and shows any income which is subject to
experienced committee to be tax exemption or a reduced tax rate, so
much of such income as exceeds the
formed so that all arbitrary and amount shown in original return shall be
inconsistent law could be avoided. deemed to be the income of the assessee
for that income year classifiable under
the head” income from other source.
Exempted income is the inherent right of
presented by the law maker could not be an assessee on which charging of Tax is
understood. undesirable.
Possibly NBR is in a fix in fixing the date for This point could be discussed in the
submission of Tax return in case of an assessee relevant section 78, 82 BB and 93. There
company. It will be as under: is no need for duplication of the law to
confuse the assessee.
(1) Company whose “income year” ends on 30th
June, the Tax return be filed by 15th January A new clause (aaaa) under section 30 is
of the next year. introduced under which any payment
made after Tax day by, way of salary to
(2) Company whose “income year” ends on 31st an employee, when the employee is
December, Tax return be filed on 15th required to file his return of income but
September of the next year. fails to file the return before Tax day, or
fails to obtain time extension as the case
Amendments are made in sub-section 28 of may be, shall not be admissible under Tax
section 19 of the ITO 1984. Here, a new proviso is law. This is a very harsh law for the

ARTICLE
section again for section 30(o)

of ITO 1984.
Existing Section: 53E is fully

withdrawn and a new section 53
E is inserted in the Finance Act
2017.
This section is related to

deduction, collection of Tax
from commission, discounts,
fees, incentive for the
distribution or marketing of the
goods.
(1) TDS rate is 10% on the

assessee. Where there is a manufacturing company as payments of Discounts,
provision to charge Interest for the case may be. Then who commission etc or benefits
delayed submission of Return is to determine cost of sales allowed
with payment of Tax, this sort of or cost of goods of a
(2) Any company making
amendment is not desirable. manufacturing company
payment in relation to
incase of purchase of direct
promotion of the company
Existing “Proviso” under section materials from local market?
or its goods to any
52 is withdrawn and a new
distributor or any other
“Proviso” is inserted. Under (c) “Where any imported goods
person under a contract to
which: on which tax has been paid
any person is entitled to
at source under section 53 is
discount or commission.
(a) The rate of Tax shall be 50% supplied, the TDS on the
Such discounts, commission
higher if the payee does not said supply shall be A-B
is subject to Tax @1.5% (one
have twelve digits Tax where,
point five percent) on the
payers identification number
payment.
at the time of making A= the amount of Tax paid u/s
payment. The NBR should 53 (3) Any company other than an
extend the assistance to the oil company, which sells
asseessee to get the B= the amount of Tax goods to at a price lower
certificate without any cost applicable under this section than retailed price fixed by
and wastage of time. Under if no Tax was paid u/s 53.” such company, shall collect
different plea if payment is tax @5% (Five percent) from
not made to payee in time New clause (o) after clause (n) such distributor or such any
the collection of TDS will be of section 30 has been brought other person in the following
delayed and planning will be under which any payment made manner.
frustrated. to a person under section 184
(xxviii), (xxix) and (xxx) shall On the amount equal to B*C
(b) Tax shall not be deducted require submitting a twelve where
from supply of goods in digit TIN number and if failed to
respect of purchase of direct submit, shall not be admissible B= The selling price of the
materials that constitute by Tax authority. Sub-section 3 company to the distributor or
cost of sales or cost of of section 184(A) had already the other person
goods sold of a Trading contained the above conditions;
Company or a there is no need to repeat this C= 5%

We think that this formula is not This sort of collection is thoroughly revised again in the
necessary. Simply, amount of detrimental & opposed to the Finance Act, 2017. This section
rate or factor is enough to Business Policy. has been revised several times
calculate the discount on in the past including the
commission. Formula is An “Explanation” is attached immediate preceding year
required by the Researcher not under the Section 73. 2016-2017.Every time for the
the professionals of accounting Amendment includes the words acceptance of the Return of the
subject. This will be futile “Regular Assessment” includes asseessee, some sort of
exercise if. acceptance of revised return or conditions and restrictions were
the assessment made as a result brought into clauses of sections
Cigarette Company shall collect of the audit under section 82 BB by the tax authority. For this the
tax @3% (three percent) or the (7) is placed additionally in the law had become complicated
difference between sale price section 73. and critical to comply with by
and retail price payable to the assessee. This time, this
distributor or any other person The question of audit is related section is expanded like
and the retail price fixed by such to section 82BB only. anything and covers 9(Nine)
company. Application of effect of audit pages of the Finance Act 2017.
may not be fit to be included in This is interesting when more
(4) This sub-section also section 73. This is contradictory sections are available for
includes, law and not maintainable. This assessment of income; in the
point may be included in section Tax Act. The assessee will not
(a) “Payment” includes a 82BB only. be interested to prefer filing of
transfer, credit or return u/s 82 BB.
adjustment of payment. The existing section 73A is
amended to withdraw clause (i) The frequent changes of the law
(b) Contract includes all and in its place a new clause (i) cannot be stated to be fair &
agreement whether written is inserted under which a return logical. It strikes in the minds of
or not when assessed under section the assessee otherwise. It
82BB, and if tax under any other creates adverse views in the
this section restricted the free minds of the asseessee who
sub section of section 82BB is
operation of business by ultimately finds no interest to
found higher than the tax under
creating some arbitrary and adopt such law, when
sub-section (ii) of that section,
contradictory law in order to alternative option is available.
the higher tax will be applicable.
collect Tax. Business should be
allowed to run without any This time section 82 BB contains
This is a clear factory nature of
restriction, interference or some conditions and
law under which TDS to be
limitation. restrictions for the return to be
determined between Tax
payable u/s 82BB and or Tax accepted under 82BB it which
The payments are also
payable under other are as under:
restricted by inserting a clause:
sub-sections or clauses of the
“Payments” includes a transfer,
section 82BB to find out the (a) The return should be clear
credit or an adjustment of
higher tax and the higher tax and without any mistake.
payments”
will be applicable. This clause is
entirely related to section 82BB. (b) Due tax to be paid in full,
Payment is a regular feature in a
Higher Tax rate under 82BB there should not be any
business house and between
cannot be basis for the section short payment of Tax or
parties. If payment is of revenue
73A. This amendment should be without any mistake.
nature it will be subject to TDS.
made lawfully & clearly.
But TDS on capital payment is
(c) Interest @2% percent per
unjust.
The Existing Section 82BB is month will be charged on

ARTICLE
short payment of Tax. common between the (a) Contractor of an oil

current year and the company
(d) No amendment is allowed preceding year, in that case
after expiry of 180 days from preceding year shall be (b) Oil marketing company
the date of filing original considered.
return. (c) Any company engaged in oil
Besides, these conditions, an referring
(e) Return shall not be allowed asseessee will have to go to the
for amendment after the following Sections, Sub-section, (d) Any company engaged in
original return has been clause or sub-clauses, gas transmission or gas
selected for audit. paragraph or sub-paragraph distribution
mentioned in the Finance Act
(f) The total income should 2017. This is a lengthy and Section 82 C also includes a
show at least 15% (Fifteen critical section by no means. clause (d) of sub-section (2)
Percent) higher total income under which calculation of
than the last assessed All these conditions may be a minimum Tax shall be made at
income. burden for an assessee and may the rate indicated in each
discourage him to follow. section/under chapter VII. At
(g) Does not show any the same time, calculation shall
exempted income. The objective for which section also be made by using applied
82BB was enacted, perhaps has rates on such income. If tax so
(h) Does not show the receipt of lost its value because of framing calculated is higher amount, the
gift during the year. of such a lengthy law with higher amount shall be payable.
complicated terms & conditions, This is also likely to be an unfair
(i) Does not show any for its compliance, and its proportion.
exempted income, or alternatives procedure. This no
income on which reduced longer can be termed as If payment of Tax is to be paid
rate of Tax is applicable. universal self assessment under regular assessment at
scheme. This is a lengthy applicable rate of Tax, then
(j) The return does not show section to keep in mind of the what is the justification of
results of any refund. assessee. introducing of section 82BB?
(k) The DCT shall have the right Section 82C was thoroughly Recently, in application of such
to assess the income u/s 83 revised in 2016. sub section (d) of section 82BB
or 84 in case of any by DCT, the income from a Jute
non-compliance. This section appears in the Act goods export by an assessee,
under the head sections 82 exceeded the normal tax
(l) In case of initial capital “Minimum Tax”. payable, thus tax payable by the
investment, the asseessee assessee stood at TK. 23,62,767
should show total income That word, “Minimum Tax” on u/s 53BB and TK. 86,62,213
exceeding threshold limit income has been explained out under section 53 DDD( on
which is not less than 10% of in clause (a) and (b) of subsidy), aggregating TK.
the initial capital sub-section (2) of section 82C. 1,10,24,980 lakh to consider as
sales in one assessment year.
(m)Tax rate is applicable at the It is also mentioned in the law What a fantastic amount of Tax
regular rates, that in certain cases, tax is computed by DCT because of
collected or deducted U/S 52, the statute. This deserve
(n) 15% (Fifteen percent) higher 53 shall not be treated as immediate rectification of the
total income, the income “Minimum Tax” Sources under statute.
from other sources that are Section 52)

(a) No return is filed and no

assessment is completed
(b) Within six years no return is

filed from the end of the
relevant assessment year, or
no assessment is completed.
(c) Within five years from the

end of the relevant
assessment year in any
other cases.
To compute the period of

limitation, any proceedings
stayed by court, Tribunal and
any other authority shall be
excluded.
Certain situations can be

considered by DCT to be
“escaped income “in the law
which appear to be arbitrary
and unlawful when we find that
(a) The income has been

understated
(b) Excessive loss deduction

allowance or relief in the
It is no doubt a harsh and hard Existing Section 93 has been re return has been claimed,
law for an assessee. This sort of constructed to include several
harassment and hardship new terms and conditions. The (c) Misreporting of any assets,
cannot be prevailed to impose new section contained as many expenditure
tax on the assessee to hurt the as 9 sub-sections together with
sentiment of assessee for the many clauses, sub-clauses, (d) Income chargeable to tax
cause of justice & equity. paragraphs & sub-paragraphs. has been under assessed
Now we can understand that This section is applicable (e) Income that is subject to tax
under the coverage of section against an assessee when the has been made the subject
82C, the Tax authority wants to DCT has reason to believe that of Tax exemption
collect more tax from the any sum payable by assessee
assessee but in a evasive under this ordinance had (f) When excessive Relief or
manner. This is not fair and escaped payment of Tax in any excise loss are allowed.
logical that once you allow assessment year.
deduction of tax at minimum This is not fair to treat the above
rate and again under another Notice may be served by the situations as stated above as
plea you collect “Maximum Tax” DCT on the assessee with the “escape Assessment” rather
from the assessee it will be prior approval of Inspecting DCT has the right to re-open the
hardship and for towards Joint Commissioner of Taxes in file to rectify the case u/s 173 of
assessee. the following cases-when, IT ordinance 1984.

ARTICLE
free income is restricted for the

assessment year 2016-2017.
Such directions were not found

in the Act up to Assessment
year 2015-2016, thus the law
contained a legal lacuna and a
legal fiction in the paragraph 33
and the law has become a
difficult to comply with.
This needs to be resolved in the

interest of the business
communities of IT sector whose
appeals are unnecessarily being
turned down by the appellate
authority.
The assessing officers and

Existing section 173 has been be detrimental to the interest of appellate authority are
amended to insert sub-section the assessee and who may face unnecessarily adopting
(I) & I (A). harassment and hardship to assumption and presumption to
have the deserved correction. impose tax on the assessee
Existing section 173 is amended unlawfully. This should be taken
for authorizing Appellate Existing Paragraph 33 of sixth care of for the cause of Justice
authority and DCT in case of schedule part A of ITO 1984 has & Equity.
errors committed under section been thoroughly amended
173 (1) & 173 (1A). Here, the DCT again in the Finance Act 2017. In
VAT
has been given power by the the said paragraph, it is stated
finance act, 2017 to rectify any that resident and non-Resident
We want to write few lines
claim if he finds the claim to be Bangladeshi assessees shall
about VAT. It has now become
valid and correct. For any follow the period from 1st July
a national issue. The nation was
mistakes found in an order 2008 to 30th June 24, for the
in a head on collision during
responsibilities lies with the income derived from business
Budget discussion on VAT. It
DCT. The claim of correctness (mentioned in the Act) shall be
had been the instant
arises when DCT failed to allow considered for income u/s 44 (i)
intelligence and prompt
Tax credit or in advertently, if he on the condition that the person
intervention of the honorable
fails to allow genuine claim of an shall file tax return in
Prime Minister, who could avert
assessee. This is rectifiable by accordance of this law exclusion
the crisis from further escalation
the DCT of his own motion or he with the provision of section 75.
of the issue. Now the problem
may reject the case for some
needs to be resolved as early as
reason or other. In that case, Paragraph 33 is revised
possible.
Appellate authority has the thoroughly in the Finance Act
power to direct DCT to admit 2017, directing assessee to
The fixation of reasonable VAT
the rectification or reject the comply with the provisions of
rate is the Prime demand from
claim. section 75 of the ITO 1984 by
the business communities
replacing the sub-section 75 (2)
where as NBR desires to collect
But power given to DCT, to (C) of ITO 1984.Under
VAT as much as possible for the
determine the validity sub-section (5) of section 44 (1)
development of the country.
correction of claim appears to of ITO 1984, the benefit of Tax
We have seen the fight in the

to be constituted and who will

be the members of the said
committee. In our view, the
members to be picked up for
the assignment should have
enough knowledge and
expertise in the field of VAT
operation.
We therefore urge the Govt.

that proposed committee be
formed by inducting such
person who has clear &
transparent knowledge and
concept over the VAT issue. As
such we recommend a team of
professionals like Chartered
Accountants (CA) for analysis
of the VAT issue and frame
day light between Bureaucrats without any recovery policy for VAT collection, Cost
and members of the chamber particularly in case of Accountant (CA) for finding out
and commerce. The long 5 professional service renderer. acceptable rate of VAT and
years have been elapsed in This has created discrimination Base Value of VAT for charging
resolving the issue by Revenue among the VAT payers for a VAT, Economist to look after
authority. long time. economy of the country to
absorb the pains of the VAT,
As far as we understand, VAT It is peculiar to note that
ex-Justice of the High Court to
problem has been the creation producer, manufacturer pay
oversee the suitability of the
of Revenue authority. It has VAT on inputs but get back
new law, by the users of VAT
created several categories of their VAT from buyers of these
Act, ex Members (Customs &
VAT payers with colorful rates goods. Service renderers as all
VAT) to put their practical
of VAT i.e. flat rates at 15%, output VAT has to be deposited
experience and knowledge of
truncated rates varying from 4% without nothing off input VAT.
VAT application and finally the
to 10% or more. This has created No doubt, professionals exert
Bureaucrats from VAT related
discrimination in the rate of VAT their labour, time and energy
Ministries to have an acceptable
among the VAT payers, without and wisdom towards their jobs
VAT Act for its proper
considering its overall effects in but without any reduction in the
implementation in the Field of
the society. At the moment, flat rates of VAT. At the same
VAT. Here, the govt. may
according to VAT Act, VAT time, the end consumers are the
oversee the procedures so far
payers are Producer, worst sufferer of VAT payment.
adopted by neighboring
Manufacturer, Importers, countries for implementation of
We feel, the honorable Prime
Suppliers and Service renderers. VAT policy.
Minister had rightly understood
But the rates for collection of
the situation and ordered for
VAT from these categories of We believe inclusion of such
constitution of a committee to
VAT payers are quite different. Technical resources and
look into the issue to have a
Some pays VAT and get backs professionals in the proposed
healthy and business friendly
from next buyer as per system committee would yield good
act for future.
of VAT, in addition to rebate, results in the collection of VAT.
discount commission etc. While Now, the question arises before
others are paying VAT but us as to how the said committee

ARTICLE
Sophistication of Pillar-2 of Basel II

Supervisory Review Process (SRP)
Had it been Considered/Addressed Properly Before
Adopting/Migrating into the Arena of Basel III Accord?
M. Golam Kibria FCA
I
Introduction implementation of Basel III from
2015 to 2019.
Banking Industry of
Bangladesh is ushering to the The Basel Committee on
arena of Basel III Accord fully Banking Supervision (BCBS) in
from 2019. Bangladesh Bank the backdrop of Financial Crisis
vide BRPD circular #18 dated (began in 2007) came up with
December 21, 2014 issued Basel III guidelines in the year
Guidelines on Risk Based 2010 with a view ensuring a
Capital Adequacy (Revised more resilient banking sector.
Regulatory Framework for Unlike Basel II, the following
Banks in line with Basel III ) issues have been covered by
which replaced guidelines on Basel III accord in a bid to make
Risk Based Capital Adequacy the banking system more shock
(Revised Regulatory Capital resilient:
The Author is a Framework for Banks in line
Chartered Accountant and with Basel II) issued vide BRPD i. Strengthening the capital
a Fellow Member of the Circular No. 35/2010. Basel III framework
Institute of Chartered Accountants guidelines has provided Road
of Bangladesh-ICAB Map/Action plan for ii. Enhancing Risk Coverage
Table 1: Phase-in arrangements for Basel III implementation in Bangladesh
Particulars 2015 2016 2017 2018 2019 2020

Minimum Common Equity Tier-1 (CET-1)
4.50% 4.50% 4.50% 4.50% 4.50% 4.50%
Capital Ratio
Capital Conservation Buffer - 0.625% 1.25% 1.875% 2.50% 2.50%
Minimum CET1 plus Capital Conservation
4. 50% 5.125% 5.75% 6.375% 7.00% 7.00%
Buffer
Minimum T-1 Capital Ratio 5.50% 5.50% 6.00% 6.00% 6.00% 6.00%
Minimum Total Capital Ratio 10.00% 10.00% 10.00% 10.00% 10.00% 10.00%
Minimum Total Capital plus Capital
10.00% 10.625% 11.25% 11.875% 12.50% 12.50%
Conservation Buffer
Phase-in of deductions from CET1
Excess Investment over 10% of a bank’s
equity in the equity of banking, financial 20% 40% 60% 80% 100% 100%
and insurance entities
Phase-in of deductions from Tier 2
Revaluation Reserves (RR)
RR for Fixed Assets, Securities and
20% 40% 60% 80% 100% 100%
Equity Securities
3%
Leverage Ratio 3% 3% Readjustm Migration to Pillar 1
ent
≥100%
Liquidity Coverage Ratio ≥100% ≥100% ≥100% ≥100% ≥100%
(From Sep.)
> 100%
Net Stable Funding Ratio >100% >100% >100% >100% >100%
(From Sep.)

Sophistication of Pillar-2 of Basel II Supervisory Review Process (SRP)
Had it been Considered/Addressed Properly Before Adopting/Migrating into the Arena of Basel III Accord?
iii. Leverage Ratio Banking business. However, besides

these three risks there are so many other
iv. Countercyclical Buffer inherent risks in banking business and
these are the areas which are covered by
v. Addressing Systemic risk SRP. Key principle of SRP is that each
bank would furnish process document
vi. Addressing Liquidity risk through Liquidity called as Internal Capital Adequacy
Coverage Ratio (LCR) in short term and Net Assessment Process (ICAAP) for
Stable Funding Ratio (NSFR) in long term assessing its overall risk profile, and a
strategy for maintaining adequate
However, both Basel II and Basel III principle capital. On the basis of the ICAAP
stands on following three pillar: documents submitted to Bangladesh
Bank (by May 31 every year based on the
latest audited financial report)a bilateral
dialogue is held between the members of
However, besides these three risks Supervisory Review Process (SRP); team
of the Bank and members of Supervisory
there so many other inherent risks in Review Evaluation Process (SREP); team
banking business and these are the of Bangladesh Bank (BB). Ultimate
capital charge under SRP and therefore
areas which are covered by SRP. adequate capital requirement of the bank
Key principle of SRP is that each bank is to be decided in the said dialogue
under SRP. It is worth mentioning that
would furnish process document total Capital Requirement of the Bank
called as Internal Capital Adequacy under Basel II and Basel III is Minimum
Capital Requirement under Pillar 1 plus
Assessment Process (ICAAP) for adequate capital requirement under pillar
assessing its overall risk profile, 2.
and a strategy for maintaining As per Bangladesh Bank’s policy

adequate capital. guideline Banks are to prepare and
submit their yearly “Statement on Internal
Capital Adequacy Assessment Process
(ICAAP)” under pillar 2 of Base III accord
 Pillar 1: Minimum Capital Requirement on the basis of each financial year’s
ending position covering following 9
 Pillar 2: Supervisory Review Process (SRP) (nine) risk areas:
 Pillar 3: Market Discipline 1. Residual Risk
It is in this backdrop that this article aims to focus 2. Concentration Risk

on the underlying sophistication of Supervisory
Review Process and its implementation status in 3. Liquidity Risk
the Banking industry of Bangladesh, let’s see the
details of SRP and matrix for charging capital 4. Reputation Risk
against each risk under SRP
5. Strategic Risk
Mentionable here that Pillar 1 requires Bank to
assess Minimum Capital Requirement against 6. Settlement Risk
Credit Risk, Market Risk and Operation Risk of

ARTICLE
 Copy of National ID
 Credit Approach in Business

Basel III Pad of the Borrower
 Credit Application in
prescribed format duly filled
in
Pillar I Pillar II Pillar III
Enhanced Minimum Enhanced Enhanced Risk  Photograph of the Borrower
Capital & Liquidity Supervisory Disclosure & Market
Requirements Review Process for Discipline
 Up to date CIB Report
Firm-wide Risk
Management &
Capital Planning  Credit report of the
Borrower/Supplier
 Liability Declaration of the

borrower along with an
Undertaking that they have
no liability with any bank or
7. Evaluation of Core Risk On the other hand, if loan is financial institution
Management given against overstated excepting as declared.
collateral value then capital will
8. Environmental Risk and also be charged against that  Liability Declaration of the
Loan Account. However, to borrower along with an
9. Other Material Risk avoid duplication in capital Undertaking that they have
calculation, when capital charge no liability with any bank or
A brief introduction of the is imposed for error in financial institution
above 9 (nine) risks and capital documentation of a loan excepting as declared.
requirement criteria against the account, no capital charge is
same is following: required for error in valuation of  Undertaking stating that,
collateral on that loan account. they will not avail any credit
Residual Risk facility from any other bank
In General, required papers and or financial institution
Residual Risk arises due to documents to be without prior consent of the
Documentation Error (lack of obtained/maintained bank.
required and duly filled-up irrespective of type of borrower,
documents and erroneous or loan and security are:  Undertaking stating that
fake or forged documents that customer does not have any
threaten the loan recovery  Demand Promissory Note relationship as Director or
probability) and Valuation Error Sponsor with the bank.
(over valuation of collaterals  Letter of Authority
value). If any Loan Account  Undertaking stating that
lacks required documents then  Letter of Arrangement customer shall not sell or
capital charge will be required transfer the ownership of
against that particular loan  Letter of Disbursement the business/factory/shop
account. In this way all the loan until bank dues are fully paid
accounts have to be o rought  Letter of Revival or without NOC of the bank.
under capital charge against
Residual Risk, if any.  Personal Networth  Credit Risk Grading Score
statement Sheet (CRGS)

 Post-dated cheque covering Concentration Risk securities) wise investment

the credit facility concentration
This risk arises from
 Acceptance of the Borrower investmenting/lending to the f. Sector wise investment
single or a few individuals or concentration
 Proper Stamping entities or sectors or securities
or geographical location wise g. Currency wise investment of
Alongside these general involvement. Concentration risk foreign exchange portfolio
documents, banks have to denotes that the concerned concentration
collect document on basis of bank fails to diversify its risk
type of borrower, type of loan asset classes across the To measure the Concentration
and type of security. Capital borrowers, business sectors as Ratio following indicators are
charge against residual risk is as well as geographical dispersion. applied:
follows: Concentration risk can be the
following types: 1. Herfindahl Hirschman Index
Capital Requirement against (HHI)
Residual Risk = Base for Capital Credit Concentration Risk
Charge × Factor weight 2. Simpson’s Equitability Index
[Minimum Capital Requirement a. Sector wise concentration (SEI)
(MCR) under pillar 1 of Basel II
i.e. 10%] for documentation b. Division wise concentration 3. Shannon's Index (SI) &
error or valuation error.
c. Group wise concentration & 4. Gini Coefficients (GC)
Where, Base for Capital Charge
= Outstanding Amount - d. Single borrower wise Determination of capital charge
Provision (General/Specific) – concentration against Concentration risks:
Minimum Capital Requirement Matrix for measuring degree of
(MCR) under pillar 1 of Basel III - Market Concentration Risk Concentration in terms of
Value of qualified financial aforesaid four indicators is
collaterals. e. Instrument (financial stated in Table 2.
Indicators \Rating Homogenous Satisfactory Moderate High

HHI ≤ 0.01 > 0.01 to ≤ 0.1 > 0.1 to ≤ 0.18 > 0.18
SEI =1 > 0.7 to < 1 > 0.3 to < 0.7 ≥ 0 to < 0.3
SI =1 > 0.6 to < 1 > 0.2 to < 0.6 ≥ 0 to < 0.2
Gini Coefficient =0 > 0 to < 4 > 0.4 to < 0.8 > 0.8 to ≤ 1
Table 2: Matrix for meaning degree of concentration
Each of the ratings will be given points in the following manner:
Ratings Points
Homogenous 0
Satisfactory 1
Moderate 2
High 3

ARTICLE
Credit Concentration Risk and Cash Reserve Requirement Reputation Risk

Market Concentration Risk have (CRR)
been divided into 7 (seven) Reputation risk is the current or
categories and separate points a. Statutory Liquidity Ratio prospective risk in relation to
have been assigned as per (SLR) earnings and capital that arise
above matrix to each of the from decline in the customer
category and to be factored in b. Medium Term Funding Ratio base, costly litigation due to
calculation. If total points in a (MTFR) adverse perception of the
category exceed 9, the bank will stakeholders. It can originate
be required to maintain c. Maximum Cumulative from the lack of compliance
additional capital @ 1% of MCR Outflow (MCO) with industry service standards
for that particular category or regulation, failure to meet
except for the instrument d. Advance Deposit Ratio commitments, inefficient and
(financial securities) wise (ADR) poor quality customer services,
investment and currency wise lack of fair market practices,
investment of foreign exchange Determination of capital charge unreasonably high costs and
portfolios. against Liquidity risk is as inappropriate business
following: conducts. In a nutshell,
Liquidity Risk “reputation risk arises from the
If annual average of any of RLIs failure to meet stakeholders’
Liquidity risk is the risk that a of any bank falls bellow reasonable expectation of an
given security or asset cannot Bangladesh Bank’s requirement organization’s performance and
be traded quickly enough in the the bank will be required to behavior” Key driving forces of
market to prevent a loss (or maintain additional capital for reputation risk and criteria for
make the required profit) or that RLI (or those RLIs). capital charging against those
when a bank is unable to fulfill Additional capital will be risks are as follows:
its commitments in timely calculated @ 2% of MCR for
manner. each of CRR, SLR and LCR and Strategic Risk
1% of MCR for each of the rest of
Regulatory Liquidity Indicators RLIs. Strategic risk means the current
(RLIs) for measuring Liquidity or prospective risk to earnings
Risks are as under:
Area or Reputation Risk Capital charge required, if Determination of capital Charge

MCR (under pillar 1 of Basel III) X
the rating grade of any bank is
Credit Rating of Bank 20% of minimum CAR set by BB
below 2 of BB rating grade
from time to time.
any internal fraud occurred Unrecovered amount
Fraud
any external fraud occurred Unrecovered amount
the total value in taka
from such cases in a year MCR(under pillar 1 of Basel II) X
Non payment or delayed payment of
(reporting year) is greater than 20% of minimum CAR set by BB
accepted bills (foreign & domestic)
or equal to 5% of the total loans from time to time
and advances
SREP team of BB will apply it’s
bank has no methodology to
Quality Customer Service prudence to determine capital
evaluate its customer services
charge during dialogue with Bank

Table 3: Key driving areas of strategic risk and criteria for capital charging against those risks
Area or Strategic Risk Capital charge required, if Determination of capital Charge

CAMELS Rating of the rating grade of any bank falls MCR (under pillar 1 of Basel II) X 10% of
Bank below 2 minimum CAR set by BB from time to time.
operating expenses as % of operating
Operating Expenses Do.
income exceeds 45% in a bank
Classified Loan classified loans as % of total
Do
Ratio outstanding loans exceeds 5%
Recovery of classified loan recovery as % of total
Do
Classified Loan classified loans falls below 20%
written-off loans as % of total
Written-off Loans Do
classified loans exceeds 15%
Interest waiver as % of total classified
Interest Waiver Do
loans exceeds 5%
10% on the residual amount after netting off
(Where, netting off =
Rescheduling of any bank reschedules any of the loan
Outstanding loan- provision, MCR, value of
loans and advances accounts for more than 3 times
qualified financial collaterals
and capital charge against residual risk)
Table 4: Area of Settlement Risk and determination of capital charge against this risk
Capital charge against settlement risk required, if Determination of capital Charge

Total value of non-receiving or delayed receiving of receivable MCR (under pillar 1 of Basel II) X 10% of
bills (foreign & domestic) in a year (reporting year) minimum CAR set by BB from time to
equals at least 5% of the total loans and advances of a bank time.
Table 5: Capital charge against Appraisal of Core Risk Management Methodology
Core Risk Capital charge required, if Determination of capital Charge

Credit Risk Mitigation (CRM) risk ratings is worse than 2 MCR (under pillar 1 of Basel II)
(satisfactory) category. That X 15% of minimum CAR set by
means capital charge BB from time to time.
Asset Liability Management (ALM) required for 3 (Fair), 4 Do
Internal Control and Compliance (ICC) (Marginal) and 5 Do
Anti Money Laundering (AML) (Unsatisfactory) rating Do
Foreign Exchange Risk (FEX) category Do
Information and Communication Do
Technology (ICT)
and capital arising from Strategic risk induces settled as the standard
imperfection in business operational loss that settlement system suggests or
strategy formulation, consequentially hampers the within predetermined method
inefficiencies in implementing capital base. or time. The banks pose to the
business strategy, risk when it fulfills its
non-adaptability/less Settlement Risk contractual obligations
adaptability with the changes in (payment or delivery), but the
the business environment and Settlement risk arises when an counterparty fails or defaults to
adverse business decisions. executed transaction is not do the same.

ARTICLE
Outstanding Amount -
Provision (General/Specific) -
Minimum Capital Requirement-
Value of qualified financial
collateral- Capital Charge
against Residual Risk (if any)-
Capital Charge against
Strategic Risk (if any)
Other Material Risks:
SRP requires that the bank’s

internal capital allocation
process should cover all risks
which have not been identified
earlier but are material for the
institution. The institution needs
to consider all risks not
specified above but it can be
captured in the institution’s
operation and can be regarded
Appraisal of Core Risk adverse environmental or as material.
Management Practice climate change events (natural
or manmade) and/or the
On the basis of the
non-compliance of the
Bangladesh Bank introduced aforementioned criteria and
prevailing national
core risk management system calculation matrix, Banks
environmental regulations.
for assessing the risk prepare their overall risk profile
management environment and which is called Internal Capital
practices in banks in 2003. In To evaluate this risk, Adequacy Assessment Process
that respect, BB identified 6 Environmental Due Diligence (ICAAP) documents and
(six) risk areas which are termed (EDD) Check List specified in calculate their capital
as core risks through issuing Guidelines on Environmental requirement under SRP- the
industry best practices Risk Management (ERM) issued second pillar of Basel II and
framework. Those frameworks vide BRPD Circular No. 01/2011 Basel III. However, this may not
provided benchmark to be dated 30/01/2011 will be used. be the final calculation as
followed by the banks and For the loans under the sectors regulator i.e. Bangladesh Bank
suggested the banks to develop specified in the guidelines and may not accept the ICAAP
own assessment methodology which will have EnvRR of ‘High documents submitted by the
for each core risks as well as to (H)’will be considered for the bank. Adequate capital
calculate own risk rating at least capital charge against this risk. requirement under SRP is
once a year. determined through a bilateral
Determination of capital charge dialogue between the SRP team
against Environment and
Environmental & Climate of respective Bank and SREP
Climate Change risk is as (Supervisory Review Evaluation
Change Risks follows: Process) team of Bangladesh
Bank.
Environmental and climate Capital Charge = 10% X base for
change risk refers to the capital charge. Through the SRP-SREP
uncertainty or probability of
dialogue Bangladesh Bank
losses that originates from any Where, Base for capital charge= mainly targets to review the

process by which a bank Basel III accord did not bring Mention may be made that
assesses its capital adequacy, any changes to the SRP under failure of identifying and
risk position, resulting capital pillar 2 as compared to that mitigating the risks inherent
levels and quality of capital held. under Basel II. Albeit in the with the banking business will
BB’s assessment will emphasize phase-in implementation plan, cause to charging additional
on the harmony and Basel III accord underlined some capital for the Banks under SRP.
effectiveness of internal limits, risk areas which remained However, enhancement of
control procedures, risk untouched in the Basel II accord capital is very costly initiative
management and internal like introduction of LCR, NSFR, and therefore, doing the same
governance. And a bank’s total Leverage Ratio, Countercyclical may be ad-hoc solution not
capital requirement under Basel buffer etc., but it did not say permanent. Needless to say that
II and Basel III is determined by anything new regarding SRP capital may be the necessary
summing the capital under pillar 2. Therefore, even safety cushion for banks but by
requirement under SRP (pillar 2) under the Basel III arena, banks no means it could be sufficient
with the minimum Capital are still conducting their ICAAP enough to protect banks from
Requirement (MCR) under pillar process documents under SRP any extreme unexpected loss
1. and reporting the same to events.
regulator as per earlier format
It is to be mentioned here that, if that prevailed under Basel II Therefore, banks must have to
BB is not satisfied with the accord. establish a risk management
results of the bank’s own risk culture by increasing their
assessment and capital So far so good! But the question standard in assessing and
allocation they may consider is how much progress the managing risk accordingly at
the following penalty : banking industry of Bangladesh every sphere of its business
has made in preparing dynamic where every employee of a
 intensifying the monitoring and comprehensive risk bank should act as a risk
of the bank e.g. monitoring management technique in manager in his/her own area.
under early warning system, monitoring and managing their Necessary policy making and
problem bank category risks? Is preparation of ICAAP direction from the Board of
documents is a regulatory Directors and senior
 restricting the payment of requirement only? It seems that management is also a must in
dividends banks are persuading to this process.
establish a stable method for
 restrictions on the bank’s identifying and addressing the Last but not the least,
activities risks properly. But they have to sophistication of SRP should not
go far as there are no significant be restricted only in the frame
 the bank must prepare and strides in this regards and more of yearly reporting to
implement a satisfactory importantly risk management Bangladesh Bank for regulatory
capital adequacy restoration tools techniques are a dynamic compliance. Rather, banks
plan and hence continuous process should chalk out a
in the backdrop of ever comprehensive, well designed
 the bank has to raise changing banking business. and dynamic risk mitigation
additional capital Various scam reports coupled policy including but not limited
immediately and with higher NPL ratio in the to system improvements and
banking sector bears the setting control for better risk
 imposing other restrictions testimony that banking sector management over the years.
suited to the circumstances lacks the required degree of The word Risk Management
of the bank and its operating corporate governance and should not be in mind but in
environment subsequently well functioning process.
risk management technique.

ARTICLE
Effect of Income Tax Provisions

Muhammed Omar Faruk Ripon ACA
P
reface business is structured. There are
several major ways in which
Taxes are a fact of life businesses can be structured,
and it has impact on investment each of which has different tax
and business decisions which impact. A sole proprietor is
depend on the type of business taxed as an individual, and the
run and the specific decision individual normally files a
made by you. Every company personal tax return that includes
and Individual having income business profits and losses. For
exceeding threshold limit is partnerships, the individual
taxed on income. Return must partners of the organization can
be furnished within specified also claim business profits and
date to avoid fines, interest and losses on personal tax returns.
even possible jail time. For most More complex business
companies and businesses, structures, however, have
paying taxes is a necessary evil different tax structures.
The Author is a and the aim is to reduce the
Chartered Accountant and amount of taxes owed as much Understanding the
an Associate Member of the as possible. Thus, the impact of Impact of Tax
Institute of Chartered Accountants tax on investment and business
of Bangladesh-ICAB decisions usually comes down
For most investors and small
to how to reduce taxes as much
business people, taxes play a
as possible on income earned.
role in how business and
The taxes paid on return
investment decisions are made,
reduces the amount of money
but ultimately the most
you actually make from a given
important thing is to determine
investment. In reality, most
which investments or business
assessees pay more than 10%
decisions will have the best,
tax on their income in
effect on personal or businesses
Bangladesh.
value. It is important to keep
taxes in mind when investing in
Impact of Tax on the stock market. If you don't
Business Decisions consider the tax consequences
of your stock investments, you
Tax can impact business will end up with much less than
decisions in a number of ways. you planned.
Since businesses can deduct
expenses of running a business, Advantageous IT
the company may wish to make Provisions Favoring
a purchase within a given year
in order to get the tax benefit
Share Business
for that year. Businesses can
also take depreciation on Stock Dividend is Exempted
certain property, so this can
impact how and when new As per section 2 (26), dividend
items are purchased. The does not include bonus share
biggest impact of taxes on issued by a company. Therefore,
business decisions, however, bonus/stock dividend is
normally focuses on how the excluded from total income in
the hand of the recipient. But

when bonus shares are sold and resulting net Cancellation of Indebtedness does not
wealth exceeding cut off limit (BDT 2.25 crore), Apply to Investment in Shares
individual assessee has to pay Sur-charge.
As per section 19 (11), any benefit derived
on account of cancellation of
Gain on Shares Transaction is Exempted for
indebtedness shall be deemed to be
most Investors, Except – Company, Firm
income for that income year classifiable
under the head “Income from other
Reduced Tax Rate is allowed on income from sources”, but this provision shall not
selling of securities except Govt. Securities apply in case of a benefit or advantage, of
(Stocks, Shares, MF, UF, Bond, Debenture) an assessee being an individual, not
traded in any Stock Exchange approved by the exceeding taka 10 lakh resulting from the
BSEC [SRO: 196-AIN/IT/2015, date-30.06.2015] waiver of margin loan or interest thereof
by a holder of Trading Right Entitlement
Certificate (TREC) in respect of the
The biggest impact of taxes on assessee’s investment in shares,
debentures, mutual funds or securities
business decisions, however, transacted in the stock exchange. This
normally focuses on how the business provision encourages individual to invest
in security market.
is structured. There are several Statutory Investment in Shares by
major ways in which businesses can Companies Enjoying Tax Holiday
be structured, each of which has Benefits
different tax impacts. A sole U/S - 46B and 46C, tax exemption for
specific periods (5/10 years) has been
proprietor is taxed as an individual, allowed to newly established industrial
and the individual normally files a undertakings and physical infrastructure
facility set up between the period of July
personal tax return that includes 2011 and June 2019, where one of
business profits and losses. statutory conditions is that 10% of the
exempted income has to be invested in
the purchase of shares of a company
listed with any stock exchange, in each
Table 1: Capital Gain Tax on Shares year before the expiry of three months
from the end of the income year.
Taxpayer Rate
Non-Assessable Share Related Income
Company, Firm u/s – 53O 10%
As per Schedule- 6, PART- A, share
Sponsor/Director [u/s – 53M] of a 5% related following income are excluded
bank, Financial Institute, Merchant from total income -
Bank, Insurance, Leasing, Portfolio  Dividend up to taka 25,000/-
Management Co., Stock received from a listed company in
Dealer/broker Co. Bangladesh [Para-11A].
Shareholders having 10% or more 5%  Income from a MF/UF up to taka

shares of total paid up capital 25,000/- [Para-22A].
 Capital Gains arising to a
Other shareholders are exempted Nil Non-Resident from the transfer of

ARTICLE
Stocks or Shares of a Listed Commission. stocks/shares/mutual

Company in Bangladesh, on fund/debenture listed with any
• That the Zero Coupon Stock Exchange using full
compliance with certain
Bond is issued by eligible investment limit.
conditions [Para-43].
institution other than
 Income derived from Zero Bank, Insurance or any
Coupon Bond received by a Financial Institution with Benefit of Tax Holiday
person other than Bank, prior approval of the
Insurance or any Financial Securities Exchange a) For Industrial Undertakings
Institution, subject to the Commission. U/S- 46B
following conditions
[Para-40]- Rebate by Investing in Shares If the undertaking set up in
Bangladesh between 1st July
• That the Zero Coupon As per 6th Schedule, Part – B
2011 & 30th June 2019 [both
Bond is issued by Bank, and under section - 44 (2),
days inclusive], its income,
Insurance or any Financial Maximum aggregated amount
profits or gains will be
Institution with prior eligible for rebate is as under -
exempted from tax for the
approval of the period beginning with the
Bangladesh Bank and the An eligible assessee being an commencement of its
Securities Exchange individual may invest in buying commercial service –
Table 2: Tax an Eligible Investment b) For Physical Infrastructure

Facility U/S- 46C:
Rebate % Limit of Rebate Condition
If the physical infrastructure set
Total income up up in Bangladesh between 1st
15%
to Tk. 10 Lac July 2011 & 30th June 2019
25% of Income [excl.
tax exempted, reduced [both days inclusive], its
Total income income, profits or gains will be
15% for 1st 2.50 lac tax rated, 82C(2)(a) exceeding Tk. 10
and 12% for Rest income] or 1.5 Crore exempted from tax for 10 years
Lac to 30 lac beginning with the
or Actual Investment
[excl. Para-15&16 of commencement of its
15% for 1st 2.50 lac; Total income commercial service –
6th Sch. Part-B]
12% for next 5 lac exceeding
and 10% for Rest Tk. 30 lac Inadequate Threshold Limit or
Minimum Non-Assessable
Table 3: Tax Holiday for Industrial Undertakings
Period of Year wise Rate of
Specified Areas
Exemption Exemption Exemption
Dhaka and Chittagong divisions For the first 2 years 100% of income
(excluding Dhaka, Narayangonj, For the 3rd year 60% of income
5 Years
Gazipur, Chittagong, Rangamati, for the 4th year 40% of income
Bandarban and Khagrachari) for the 5th year 20% of income
For the first 2 years 100% of income
Rajshahi, Khulna, Sylhet, Barisal
For the 3rd year 70% of income
and Rangpur divisions
for the 4th year 55% of income
(Excluding City Corporation 10 Years
for the 5th year 40% of income
Area) and Rangamati,
For the 6th Year 25% of income
Bandarban and Khagrachari
For the 7th to 10th year 20% of income

Table 4: Tax Holiday for Physical Infrastructure Facility

Period of Rate of Period of Rate of Income limit
Exemption Exemption Exemption Exemption It is allowed to Non-Company
For the first 2 years 100% of income For the 6th year 50% of income Assessees only, not consistent
For the 3rd year 80% of income For the 7th year 40% of income with life prospect. For different
For the 4th year 70% of income For the 8th year 30% of income types natures of assessees, it
For the 5th year 60% of income For the 9th Year 20% of income varies (as stated in Table 5)
For the 10th Year 10% of income where in general limit – Tk. 2,
Table 5: Tax Free Limit 50,000/-.
Types of Assessee Limit (Tk.) Chart of Tax Rate for different
Female 3,00,000 Companies
Aged 65 or above 3,00,000
According to the nature of
Disabled 4,00,000
business, tax rate varies, some
War Wounded Freedom Fighter listed in Gazette 4,25,000
of which are appended in Table
Table 6: Tax Rate Chart 6 the A/Y 2017-18.
Type of Assessee Tax Rate Through SROs, some sector of
3% of gross companies are allowed
Foreign Airlines receipt; Nil – for enjoying Reduced Rate or
tax treaty Exemption, subject to not
8% of gross enjoying Tax Holiday, for
Foreign Shipping receipt; 4% - for example -
tax treaty
Export Oriented Ready Made Garments Industries 10% • Public University -
Exempted.
Export income of Jute goods manufacturers 10%
Export of Knitwear and Oven Garments • Income of BSEC - Exempted
- If having Green Building Certification 10% for the Assessment Period
- If having no Green Building Certification 12% 2017-18 to 2021-22
- For other than Company Assessee 12% (Max.)
• Income from Pelleted
Capital Gain arising by Company except Share Sales 15%
Poultry Feed Production -
Cooperative Society 15%
3% to 15%
Dividend Income 20%
Lower of Slab • CG on Sale of shares of
Lottery Income
Rate or 20% Private Limited Companies -
Company Listed with S/E (Publicly Traded Company) 25% 10%
Autonomous Bodies 25%
• Income of Private Dental
Non Resident Foreigner except Company 30%
College, Private Medical
Local Authority 35%
College, Private Engineering
Private & Non-Publicly Traded Company [Non-Listed] 35% College, Architect and
Merchant Bank 37.5% Private College or
42.5%, if not listed; Universities imparting
Bank, Insurance, Leasing, Finance
40%, if Listed (teaching) only information
Mobile Phone Company [Not Listed] 45% technology - 15%
Mobile Phone Company [Listed] 40%
Mobile Phone Company [if transferred to the
• Income of any Industry set
Capital Market, more than 20% of Paid up Capital 36% up in specified EPZ will be
through IPO] exempted from tax
Any kind of Cigarette Manufacturer 45% (25%-100%) for a period of
5/7 years from the date of
Cigarette manufacturer shall pay advance tax @ 3% on net sale
price in every month and surcharge @2.50% on income annually.
commencement of its
commercial production.

ARTICLE
• Reduced Tax Rate or under Liquidation, Dissolution, • Provisions of Inadmissible

Exemption (20%-100%) for a Discontinuance, upon Expenses under section-30
period of 10 years are Retirement, Death and haring are impractical Blockade for
allowed for Business carried Approval of the DCT, income Businesses:
in Economic Zone by year will end on 30th June each Whatever the real expenses, the
Companies having ETIN and year for any kind of Assessee. Income Tax Authority (ITA)
maintaining Accounts Fixing such Common Income disallow claimed expenses and
U/S-35 and furnishing Year affected adversely small add with income, hence
Return U/S 75 investors in share market. Most businesses have to pay more
investors in security market in tax than that of on computed
• Reduced Tax Rate or
Bangladesh are small and due to income. For example –
Exemption (30%-100%) for a
small investable amount they
period of 12 years are
fail to switch over their A) Limitation on Entertainment
allowed for Business carried
investment from one stock to Expenses: [Rule 65]
in Economic Zone by
another, as most companies
Economic Zones Developing  On the 1st Tk. 10 lakh of
close their accounts at a time.
Companies having ETIN and Tax/Assessed Income
For the betterment of stock
maintaining Accounts before charging such
market and facilitating small
U/S-35 and furnishing allowance- 4%
investors, different income year
Return U/S 75
should be allowed further. This  On the balance income - 2%
• Some other sectors enjoying is also troublesome for group of
reduced tax rate, subject to companies to close/prepare all B) On disclosed Net Profit
fulfilling specified conditions of its concerns’ accounts to before charging
in SRO or Provisions, are, for meet compliance with Tax Day allowance/expense
example – Fisheries; Dairy for submission of Income Tax
Return.  HO Expenses by a company
Firm; Private Power
not incorporated in BD: Not
Generation Company;
• Tax Day is a hurdle for small exceeding 10% of the
Organizations engaged in
Businessmen to Comply disclosed net profit.
the production of Freezer,
Motor Cycle, Air fairly:
 Royalty, technical
Conditioner; Company services/technical
“Tax Day” has been inserted by
setting up outside city know-how/technical
Finance Act 2016, where 30
corporation (s); IT Business; assistance fee: Not
November following the end of
Handicrafts; SME; Corn Exceeding 8% of the
the income year shall be ‘Tax
Production, etc. disclosed net profit.
Day’ for all taxpayers, other than
companies and for a Company,
IT Provisions Creating tax day will be 15th day of the
 Incentive Bonus - Not
exceeding 10% of the
Obstructions on Business 7th month following the end of disclosed net profit.
the income year or the 15th day
• Fixing Common Income C) On Turnover: Allowable
of September following the end
Year obstructed Small expenditure on distribution
of the income year where the
Investors in Share Market: of free-Sample [Rule 65C]
said 15th day falls before the
15th day of September. This is [Section-30(f) (iv)]:
As per section 2 (35)
substituted by Finance Act also an onerous compliance for D) Perquisites - Not exceeding
2015, except for Bank, small businessmen, as Tk. 4.75 lakh per employee is
Insurance, Financial Institution employing efficient personnel allowed annually. Not
Subsidiary Branch/Liaison are not cost effective for them, exceeding Tk. 25 lakh for
office of Foreign company to maintain proper records to any employee who is a
haring different years and those draw true and complied person with disability.
accounts within stipulated time.

Table 7: Allowable Expenditure on Free Sample

FA-2016 FA- 2015
Ceiling of Turnover Pharmaceuticals Food, Cosmetics and Other Pharmaceuticals Other
Industry Toiletries Industry Industries Industry Industries
Turnover up to Tk. 5
2% 1% 0.50% 2% 1.50%
crore
Turnover exceeding
Tk. 5 crore but not 1% 0.50% 0.25% 1% 0.75%
exceeding Tk. 10 crore
Turnover exceeding
0.50% 0.25% 0.10% 0.50% 0.375%
Tk.10 crore
Distorted Limitation on periods of business, where

Expenses or Allowances under depreciation is charged as Table 8: Minimum Tax
Different Sections, SROs, per 3rd Schedule
Types of Organization Rate of Min. Tax
Schedules or Rules:
Minimum Tax for Company & Firm [if gross receipt
 Medical Allowances are Firm [U/S-82C] exceed Tk. 50 Lac]
o Tobacco goods
allowed for assessee having Company, irrespective manufacturers –
income from Salary. No  Provision of Minimum Tax is of profit or loss [0.10% 1%
room of consideration is disadvantageous for for new manufacturing o Mobile Phone
business, as assessee has to industries, for first 3 Operator – 0.75%
seen even for elderly citizen,
years from the date of o Any Other Cases
if having no income under pay tax on turnover, in spite - 0.60%
commercial production]
the head of salary. Does this of running business even
mean, only salaried persons with loss.
may be sick!! Reimbursement
of Medical Expenses for
 Rebate on declaring Conclusion
dividend should be restored:
surgery relating to heart, Income Tax rules are partially
Up to A/Y 2013-14,
kidney, eye, liver and cancer business friendly in Bangladesh
companies listed with
is not allowed to a context, but compared to first
Securities Exchange (s)
shareholder director. world countries these sales are
enjoyed Tax Rebate @10%
 Certificate or on applicable Tax Rate for more liberal. In the USA, the
acknowledgment receipt declaring divided capital gains rate varies to 15%,
containing 12 digits TIN is (Cash/Stock). Subsequently, 28%, 31%, 36% and 39.6%. In UK,
mandatory for director or through Finance Act 2014, in April 2016, a new tax-free
sponsor shareholder of a the said rebate was brought Dividend Allowance of £5,000 a
company. This provision under condition to pay Cash year was introduced for all
compels such persons to Dividend exceeding 30% taxpayers (this tax free
submit return irrespective of and thereafter this benefit allowance will fall to £2,000 in
their total income. was repealed by Finance April 2018). Dividends above
Act 2015. As a result, this level are taxed at – 7.5% for
 Irrespective of actual basic rate taxpayers; 32.5% for
companies used to pay high
expenses, repair and higher rate taxpayers; 38.1% for
stock dividend, now
maintenance are allowed @ additional rate taxpayers.
declaring stock lower than
25% or 30% of Annual Value
previous trend, ultimately
of Rented House Property
interest of small investors Source
for using residential or
are hampered. Therefore, for ITO 1984, ITO Rule 1984, SRO, GO,
commercial purpose
boosting stock market Finance Act, Paripatra, Internet.
respectively.
interest, it should be
 COGS goes up in initiation reintroduced.

ARTICLE
The Usefulness of Annual Report to

Evaluate the Performance of Companies:
Investor’s Perspective
Dr. Sumon Das1 | Dr. Shilpi Das2
A
bstract Introduction
The Authors are:
An investor requires The annual report contains all
sufficient information before the qualitative and quantitative
making their investment information of the company.
decisions. One important source The Income Statement
of such information is corporate (Statement of Comprehensive
annual report. The main Income), Balance Sheet
objective of the study is to find (Statement of Financial
out to what extent Bangladeshi Position), Statement of Cash
individual investors use annual Flow, Statement of Changes in
report and how it adds value to Equity and notes to the
their investment decision. Financial Statements provide
Moreover, the study focuses on the quantitative data, while
the significance of different Chairman’s Review, Directors’
contents of annual report to Report, Corporate Governance
investors in making their Report etc. provide the
1
Associate Professor investment decision. This study qualitative data. Investors
Department of Management uses Non- probability sampling expects that the data provided
University of Dhaka method. Judgmental sampling in the annual report would be
has been used and the total authentic, relevant, reliable and
sample size was 179. Required useful for decision making. This
data were collected through study attempts to find out
questionnaires and the whether the individual investors
respondents were asked to give use these sections of annual
their opinion on the different report and to what extent these
items of questionnaire using 5 factors help them to take
points Likert Scale. Findings investment decisions. This study
revealed that majority of the aims at finding the individual
investors are male and job investor’s responses in
holder. Moreover, before evaluating the annual report.
investing, Bangladeshi investors
put the greatest emphasis on An investor requires sufficient
their own analysis when information before making
compared to other factors. investment decisions. One
Steady income generation important source of such
2
Assistant Professor appears to be the principal information is the corporate
Department of Accounting & motivator of share investment. annual report. The general
Information Systems Many of the share investors purpose of annual reporting is
Jagannath University attribute the lack of readership to provide important
of annual report to disinterest information supposedly aiding a
caused by questionable wide variety of decisions.
creditability of annual report. Existing and potential investors,
This study is expected to be of lenders, creditors and other
immense benefit for the stakeholders draw information
information provider to assess from this report.
such investment decision.
Annual report is generally
Key Words: Annual Report, regarded as an important
Investment Decision, Investor. medium of disseminating

The Usefulness of Annual Report to Evaluate the Performance of Companies:
company information to external users. Since simply means a declaration of what is

“the content and format of company annual believed to be true and which is
reports are specified by company law, case law, communicated in terms of monetary unit.
standards set by the accounting profession, and It describes current state of a company
for listed companies, the Stock Exchange” (Firth that is considered to fairly represent its
,1984. p. 269), such reports are expected to financial activities. According to Meigs
reflect the operational reality of a reporting and Meigs (2003), the purpose of
entity and therefore should assist market financial statement analysis is to provide
participants in making informed decisions. information about a business unit for
decision making purpose. According to
This paper aims to examine the extent to which them, the key objective of financial
Bangladeshi individual investors use corporate analysis is to determine the company’s
annual reports for their investment decisions and earning performance and the soundness
how they perceive different sections of such & liquidity of its financial position.
Some authors attempts to assess the

degree of importance of different
The main objective of the study is contents of annual report. Al-Ajmi( 2009)
to find out to what extent states that the income statement and the
balance sheet are perceived as the two
Bangladeshi individual investors most important sections of the annual
use annual report and how it adds report. Other sections of the report such
as the auditor’s reports and board of
value to their investment decision. directors’ reports are perceived to be
Moreover, the study focuses on the relatively less important. The income
statement seems to provide the most
significance of different contents important information to investors, i.e
of annual report to investors in profitability and dividends, that may be
used to decide whether to buy, to hold, or
making their investment decision. to sell the company’s share.
According to Sharma and Shaha (2015),

theoretically it is observed that the cash
reports. More specifically, this study will attempt flow report plays a very important role by
to identify the factors investors consider before providing information about the cash
investing, the usage of annual report by investors generation capacity of the entity.
before investment and the significance of However, in practice, investors may be
different contents of annual report to investors. oblivious to the impact of cash flow
reported in their investment decision.
Literature Review They observed that educational
qualification of the shareholders do not
The usefulness of annual report analysis in have any impact on the use of the
investment decision has been addressed by a reported cash flow in their investment
series of authors. According to Pandey (2010), decision.
investors who have invested their money in the
share are most concerned about the business’s Another important issue is
earnings. Accordingly, they concentrate on the understandability, credibility and
analysis of the specific contents of the annual timeliness of information provided by
report including financial statements. According company’s’ annual report. According to
to Meigns et al. (2001), financial Statement Grace (2013), the investor’s perception of

ARTICLE
brokerage house for meeting

investors. Total sample size of
the study is 179.
The questionnaire was designed

for individual investors.
Different methods were
adopted in the distribution and
collection of the questionnaire.
The first method was delivery
and collection of the
questionnaire by the
researchers. Respondents were
briefed adequately about the
objective and the nature of the
questionnaire. The second
method was distribution of the
questionnaire among investors
in different brokerage houses in
Mirpur, Uttara and Motijheel
area and collection of
completed questionnaires from
those who voluntarily
financial report in terms of year’s review. They provide 3-5 participated. The list of Stock
completeness, comparability year’s review instead. Broker houses includes Mona
and consistency was regarded securities ltd., Sinha securities,
as good, while in terms of Beside annual report, there are Lanka Bangla securities (Uttara
understandability, relevance, other factors that investors branch), Modern securities ltd.,
faithful representation, consider before investment, e.g. Jamal Ahmed & Co., Rapid
neutrality, predictive ability and DSE statistics, media report, Securities Ltd., Harpoon
timeliness, it was regarded as own analysis, broker’s advice Securities Ltd., Sadid Securities
fair. and market rumor. Benston Ltd. and Fokrul Securities Ltd.
(1976) reported that financial One-third of the questionnaires
The balance sheet was press and newspaper reports were distributed online.
acknowledged to be the second were considered to be the most
most important section for important source of information The format of the survey
investment decision making in apart from the annual report. questionnaire is given in
all studies except for Lee and Appendix 1. The questionnaire
Tweedie (1975), who found the Methodology consisted of two sections. The
Chairman’s report to be more first section dealt with the
important than the balance As the study intended to find questions on the respondents’
sheet in the UK. According to out the percentage of investors profile, while the second section
Chang et al. (1983), for buying using annual report before dealt with the significance of
decisions, individual investors investment, the chosen sample different factors considered by
considered the company’s consisted of investors from investors, the usage pattern of
review for the last 5-10 years to different locations of Dhaka. annual report & its different
be more useful than the income This study uses Non- probability sections and the evaluation of
statement and the balance sampling method. Judgmental annual report by investors.
sheet. In our country, sampling has been used as the
companies do not provide 5-10 study required visits to

Study Results and shows that among the respondents chose “use idle
Findings respondents, 45.8% were job money” and 11.6% of the
holders, 37.9% businessmen,. 9% respondents chose “safety of
Respondents’ Background students and 7.3% had other capital” as their reason/goal of
occupations. This data indicates investment. Most of the
that job holders and respondents invested in the
In the first part of the
businessmen are more share market either for steady
questionnaire, the respondents
prominently involved in stock income or to use their idle
were asked to provide
market. money.
information about their age,
gender, occupation, educational
qualification, years of Educational qualification Factors that an Investor
experience in stock trading and Considers Before Investing
investment goal. Present study also found that
45.5% of the respondents were Before investing in any
Age Graduate, 39.9% of the company, an investor has to
respondents were post consider a lot of factors which
graduate, 11.2% of the are closely related to their
From the study, it was observed
respondents were HSC qualified investment decision. These
that 27.9% of the respondents
and the remaining 3.4% of the factors are not just confined to
were in the 45-55 years age
respondents were SSC qualified. the company itself and its
range, 27.4% of the respondents
This data shows that most of current share prices levels. The
were in the 25-35 years age
the respondents were either current study attempts to find
range, 26.8% of the respondents
Graduates or had higher out what factors (other than the
were over 55 years old, 15.1% of
degress. company’s information) are
the respondents were in the
deemed necessary by investors
35-35 years of age category and
Involvement in share market and to what extend an investor
only 2.8% of the respondents
uses such factors in informed
were aged below 25 years. So,
Concerning the duration of decision making.
the percentage of respondents
of 45-55 years, 25-35 years and experience in stock trading,
above 55 years age category 43.5% of the respondents had According to table 1, it is
comprised the highest more than 7 years, 23.2% of the observed that on average, an
proportions. On the other hand, respondents had 5-7 years, investors’ own analysis occupies
respondents below 25 years age 14.7% of the respondents had the highest weight towards
category formed the lowest 4-5 years, 12.4% of the making investment decision,
percentage proportion. respondents had 2-3 years and and it ranked as top on the basis
6.2% of the respondents had of mean. DSE market statistics
less than 1 year of experience. plays the second most
Gender
This also indicates that most of important role in making such
the respondents had more than decisions. As we know, the
The current study also shows current share market trading
7 years of experience and 93.8%
that almost 86% of the flow is shown on DSE website
of the respondents had spent at
respondents were male and 14% and generally guides an
least a year trading in the
of the respondents were female investors investment decision
market.
which indicates a low making. The advice of
participation of female investors stockbroker appeared to play
in Bangladesh stock market. Investment goal
minimum role in investment
The study found that 46.8% of decision.
Occupation
the respondents chose “steady
income”, 41.6% of the
Findings of the study also

ARTICLE
Table 1: Significance of Factors an Investor Consider Before Investing
Not Less Most

Neutral Significant
significant significant significant
Contents 1 2 3 4 5 Mean Ranking
% of % of % of % of % of
No. No. No. No. No.
Total Total Total Total Total
DSE market
25 0.14 42 0.24 26 0.15 50 0.29 32 0.18 3.13 2
statistics
Advice of
89 0.50 19 0.11 36 0.20 20 0.11 14 0.08 2.16 8
stockbrokers
Financial report 70 0.40 44 0.25 7 0.04 14 0.08 42 0.24 2.51 6
Market rumors
63 0.36 52 0.29 10 0.06 39 0.22 13 0.07 2.36 7
adages
Own analysis 8 0.05 7 0.04 26 0.15 47 0.27 88 0.50 4.14 1
Media report 49 0.28 21 0.12 31 0.18 45 0.25 31 0.18 2.93 5
Technical analysis 57 0.32 10 0.06 14 0.08 62 0.35 36 0.20 3.06 3
Company
61 0.34 17 0.10 5 0.03 40 0.23 54 0.31 3.05 4
management
Usage of Annual Report: annual report before respondents give the corporate
investment, 29.2% of the annual report highest
Readership of annual report respondents sometimes (but significance.
not always) use the information
Individual investors were asked provided in financial report Usage of different components
to indicate how frequently they before investment , and 18.5% of of annual report
read corporate annual report. the respondents do not use the
The result shows that 35.2% information provided in financial Companies make and present
investors do not read corporate report before investment at all. the annual report periodically.
annual reports, 33.5% investors The result shows that the This report generally includes
do read corporate annual respondents who read the Chairman’s Review, Income
reports and 31.3% investors annual report usually use the Statement (Statement of
sometimes read corporate information provided in financial Comprehensive Income),
annual reports. The result report before investment. Balance Sheet (Statement of
suggests that most of the Financial Position), Cash Flow
Bangladeshi individual investors Respondents who read the Statement and others. The
are not regular readers of corporate annual report were elements of annual report not
corporate annual reports. asked about the importance of only represent the company
the information provided in the itself, but also helps the
Usage of annual report: reports to them. 54.3% of the potential investors by providing
respondents said it is important, all the necessary information
Respondents were asked to 34.1% of the respondents said it about the company. By using
indicate the usage of corporate is less important and 11.6% of the these elements of annual report,
annual reports before investing. respondents said it is most potential investors can decide
52.3% of the respondents use important. The results show that better whether to invest or not.
the information provided in a nominal percentage of the The current study finds out to

what extent Bangladeshi Table 2 shows that on an review, cash flow statement,
investors use these elements of average, most of the investors statement of changes in equity,
an annual report while taking an use the Income Statement of auditor’s report, accounting
investment decision. For this the company in informed policy notes, corporate
purpose, current study listed 12 investment decision making. governance report,
different elements of an annual This table also shows that a environmental report, value
report with their individual mean of 3.00 (ranked on the added statement, Directors
degree of significance. The basis of mean) stands for the report and Chairmans review.
study used Likert Scale method highest consideration that an
to find out an investors’ degree investor looks and uses from the The study shows that
of use of these elements, annual report (before accounting policy notes and
ranking from ‘not significant’ to investment). corporate governance report
‘most significant’. are considered of equal
In regards to investment significance by the Bangladeshi
Mostly, an investor considers decision making, Balance Sheet investors. They are both ranked
Income Statement before appeared to be the second 7th in the table, where the mean
making any investment most important element of the is 2.70. Directors report and
decision. One of the reasons annual report. In this study, it Chairmans review appear to be
behind is that it shows the net occupies 2.98, the second the lowest used components.
income, which indicates the highest mean. In order of They are ranked 10th& 11th
ability of the company to significance, the Balance Sheet respectively.
generate return for investors. is followed by 3-5 or 10 years
Table 2: Investors’ View on the Significance of Different Components of Annual Report
Not Less Most

Neutral Significant
Contents 1 2 3 4 5 Mean Ranking
No. No. No. No. No.
Chairman’s review 55 0.45 20 0.17 19 0.16 15 0.12 12 0.10 2.25 11
Director's report 50 0.41 19 0.16 20 0.17 24 0.20 8 0.07 2.35 10
Income statement 32 0.26 21 0.17 20 0.16 15 0.12 34 0.28 3.00 1
Balance sheet 32 0.26 22 0.18 17 0.14 17 0.14 33 0.27 2.98 2
Cash flow statement 35 0.29 24 0.20 15 0.12 19 0.16 28 0.23 2.84 4
Auditor's report to
42 0.35 16 0.13 22 0.18 15 0.13 25 0.21 2.71 6
shareholder
Statement of
39 0.33 15 0.13 15 0.13 38 0.32 11 0.09 2.72 5
changes in equity
Accounting policy
36 0.30 14 0.12 28 0.23 36 0.30 7 0.06 2.70 7
notes
Corporate Gov. report 41 0.34 16 0.13 19 0.16 28 0.23 17 0.14 2.70 7
3-5 or 10 years review 27 0.22 22 0.18 19 0.16 42 0.35 11 0.09 2.90 3
Value added
40 0.33 18 0.15 22 0.18 37 0.31 4 0.03 2.56 9
statement
Environmental report 33 0.28 20 0.17 30 0.25 26 0.22 11 0.09 2.68 8

ARTICLE
Effectiveness and Evaluation 32% of the share investors feel Conclusion

of Annual Report that the data provided in the
annual report is not credible. The findings of the study may
Investors treat annual report as These investors appear to be a bit contradictory to the
a reliable source of information believe that companies with theoretical knowledge. This
containing all relevant facts and malicious intentions may be at type of study has already been
figures of the company. This liberty to manipulate data. performed in other countries.
enables an investor to conduct However, the result is dissimilar
a quick performance review of Reasons behind Lack of for investors in Bangladesh.
the company. So, an annual Readership of Annual Report Before investing in any share
report should contain specific market, an investor has to
as well as credible information. This study asked the consider a lot of factors which
The study tried to assess to respondents the reason why can be directly related to the
what extent such annual report they do not read annual reports. intended company itself or to
provides specific and credible 47.5% of the respondents said some other pertinent issues. An
information in accessible & “lack of interest”, 22.8% of the annual report is an excellent
timely manner. respondents said “lack of time”, source of getting those desired
17.8% of the respondents said information, aiding users to
This study listed 5 different “do not have any knowledge make informed investment
criteria to evaluate the about it”, 7.9% of the decision. In addition to the
effectiveness of an annual respondents said “unavailable at annual report, an investor also
report. The study result shows the right time” and 4% of the considers some other factors,
that around 34% of the respondents said “do not like DSE statistics, own analysis,
respondents think that all the understand the usefulness of it” media report etc. before
specific and necessary data are as their reason for not reading investing in any company’s
provided in the annual reports corporate annual reports. As share. This paper showed
and in the right time (32.80%) as such, most of the investors who specific factors considered by
well. 42% think that the data of do not read annual reports do Bangladeshi investors and to
the report is easily accessible so out of lack interest. what extent such factors are
and 37% think these are used in decision making.
understandable Surprisingly, Findings indicate that
Table 3: Individual Investor’s View on the Effectiveness of Annual Report
Lowest Low Neutral High Highest

1 2 3 4 5
Contents
No. No. No. No. No.
Availability of specific
18 14.90 25 20.70 13 10.70 41 33.90 24 19.80
information
Timeliness 28 23.00 9 7.40 16 13.10 40 32.80 29 23.80
Accessibility 23 19.10 13 10.70 13 10.70 51 42.10 21 17.40
Credibility 38 31.90 23 19.30 14 11.80 31 26.10 13 10.90
Understandability 16 13.20 18 14.90 22 18.20 21 17.40 44 36.40

Bangladeshi investors prefer accounting Information in (All data will be used only for
their own analysis before Baghdad's Financial Market: An research purpose)
purchasing the share of any empirical study. Jarash Journal for
Research and Studies. 4(2) 1. Age
company. In addition, among • Below 25
the elements of annual report, Baker. K. B. H.. &Haslem. J.A. (1973). • 25 – 35
Income Statement is highly Information needs of individual • 35 – 45
preferred by share investors to investors. Journal of Accountancy.
• 45 – 55
assess the company. However, November. 64-69.
• Above 55
there remains a high degree of
Benston. G. (1976). Corporate
confusion regarding the 2. Gender
Financial Disclosure in the UK and
credibility of information the USA. Westmead: Saxon • Male
provided in the annual report. House/Lexington Books • Female
As such, companies should be
Creswell. J. W. (2008). Educational 3. Occupation
extra cautious in making
Research: Planning, conducting, and • Student
disclosures & presentation and
evaluating quantitative and • Job holder
financial statements in annual
qualitative research. (3rd ed.). New • Businessman
report should contain accurate Jersey: Pearson. • Other
accounting numbers that reflect
the real picture of the business. Financial Accounting Standard 4. Educational qualification
Board (2008). Statement of • SSC
Financial Accounting Concepts No.
References 1: Qualitative Characteristics of
• HSC
• Graduate
Abu-Nassar. M.. & Rutherford. B. A. Accounting Information. Retrieved
May 21. 2016. from
• Post Graduate
(1995). Preparers' attitudes to • Other
financial reporting in less developed www.fasb.org/pdf/ aop_CON1.pdf
countries with moderately
Pandey, I.M. (2010). Financial 5. You are involved with Share
sophisticated capital markets: The market for-
Management, 10th edition, New
case of Jordan. The International • Less than 1 year
Delhi. Vikas.
Journal of Accounting. 30(2).
• 2-3 years
129-138.
APPENDIX 1 • 4-5 years
Al-Ajmi. J. (2009). Investors' use of • 5-7 years
corporate reports in Bahrain. The Usefulness of Annual • More than 7 years
Managerial Auditing Journal. 24(3). Report to Evaluate the
266-289. 6. Your Investment goal
Performance of Companies:
• Steady income
Atif. M.. & Al-Zubaidi. F. (2000). • Use idle capital
Investors Perspective
Individual investors' level of • Safety of capital
understanding and using of
Questionnaire • Other
7. Significance of the factors you consider before investing in a company-

1= not 2= less 4=significant 5=most
Factor significant significant 3= neutral significant
DSE Market statistics
Advice of stockbrokers
Financial report
Market rumors and adages
own analysis
Media report
Technical analysis
Company management

ARTICLE
8. Do you read financial report of the company before investing?

• Yes
• Sometimes ( ans Q. 13)
• No (if no go to Q. 13)
9. Do you use information provided in financial report before investing?

• Yes
• No
• May be
10. Information provided in financial report is _ for your investment decision?

• Less important
• Important
• Very important
11. Degree of significance of different components of annual report according to you for investing-
Component 1= not 2= less 3=neutral 4=significant 5=most

Chairman’s review
Director’s report
Income statement
Balance sheet
Cashflow statement
Auditor’s report to shareholder
Statement of changes in equity
Accounting policy notes
Corporate Gov. report
3-5 or 10 years review
Value added statement
Environmental report
12. Evaluate company’s annual report based on following factors-
Factor 1=lowest 2=low 3=neutral 4=high 5=highest

Availability of specific
information
Timeliness
Accessibility
Credibility
Understandability
13. Why don’t you read annual report?

• Lack of time
• Lack of interest
• Do not have any knowledge about it.
• Do not understand the usefulness of it
• Unavailable at the right time.

Role of Blue Economy for Achieving
Sustainable Development Goals in Bangladesh
Sara Tasneem1 | Shanjida Chowdhury2
A
bstract population of Bangladesh
The Authors are: entails the shield of country’s
Sustainability of resources which can be
development is a crucial issue achieved through smooth
same as socio economic relations between people,
development of Bangladesh. economic activities and
Sustainability of development protection of natural
itself is a goal. Bangladesh environment. Reservation of
commits to achieve sustainable natural resources and long term
development goals by 2030. economic growth necessitates
The newly opened possibility environmental accounting
named blue economy can be of implicating sustainable
a great help. The present study development. UN Sustainable
focuses on the role of blue Development Summit (2015)
economy in this regard. identifies the three dimensions
Employing focus group of sustainable development:
1
Assistant Professor, Department discussion methodology, the economic, social and
of Business Administration study gets mixed results. The environmental. To achieve the
Daffodil International University blue economy can provide full SDGs, the Blue Economy is a
support when the potentials of new skyline for Bangladesh and
Bay of Bengal are fully utilized. an integral sector for economic
The study recommends new growth. Integrated planning on
integrated policies to achieve Blue Economy facilitates more
sustainable development goals economic activities, generating
(SDGs). employment opportunities,
strengthening tourism sector
Key Words development, extraction of gas
and oil, minimizing food deficit,
Blue Economy, Sustainable generating tax revenue for
Development Goals, Focus government and escalation of
Group, Millennium Development standard of living of coastal
Goals. people of Bangladesh. The
cautious use of maritime
potentials endowed by the Bay
Introduction of Bengal will be constructive
2
Senior Lecturer, Department of and answerable to touch the
General Educational Development Recently, sustainability goals by 2030. The Blue
Daffodil International University becomes more imperative in the Economy concept is a
economic development sustainable development
process. The UN finally granted framework which looks at
17 Sustainable Development oceans as “Development
Goals (SDGs) in September, Spaces” which provide benefits
2015. Since SDGs pave the way for current and future
of upward trend for economic generations, while also ensuring
growth, the collaboration of that the integrity and
sustainability and economic functioning of coastal and
growth preserves the survival of ocean systems are maintained.
future generation while It is based on principles of
maintaining the need of present equity, low carbon
generation. The growing human development, resource

ARTICLE
Post 2015 Development Agenda or

efficiency and social inclusion, and recognizes successor to the Millennium
that the oceans have a major role to play in Development Goals (SDGs, Wikipedia).
humanity’s future (Meetings minutes of IUCN, 23,
Nov, 2015). The present study tries to focus on The theme of sustainable development
the role of Blue Economy for achieving the goals. originated from the UN conference on
Specifically, the study sheds light on goal 1, goal the Human Environment, 1972. In that
2, goal 8, and goal 9. Bangladesh as a Bay of conference, the global environmental
Bengal shoreline country, should concentrate on issues and politics were discussed for the
sea-centric economic activities for the first time. The conference focused on the
achievement of SDGs. rights of human to a sustainable natural
environment. After twenty years, in the
conference on Environment and
Development (1992), The United Nations
The Blue Economy concept is a suggested
development
to rethink
process,
economic
preventing
sustainable development framework pollution and depletion of natural
which looks at oceans as resources. At the end of the summit,
Agenda 21 was adopted to create global
“Development Spaces” which awareness on development and
provide benefits for current and environmental cooperation. In Rio+20
conference, UNs emphasized the theme
future generations, while also of green economy for ensuring
ensuring that the integrity and sustainable development. In the
conference, the participant countries also
functioning of coastal and ocean discussed about poverty alleviation,
systems are maintained. It is based improvement of developing countries
and international coordination for
on principles of equity, low carbon sustainable development.
development, resource efficiency Finally, world leaders granted the
and social inclusion, and recognizes proposed new sustainable agenda with a
that the oceans have a major role to view to transform the world at the UN
Sustainable Development Summit 2015.
play in humanity’s future In the summit, 193 member states of the
UN agreed the 17 SDGs with 169 targets.
The summit focused on the new path of
development, the way to keep up the
Literature Review standard of living of the world people,
bringing prosperity and welfare.
The Sustainable Development Goals (SDGs),
officially known as transforming our world: the Bangladesh along with other countries,
2030 Agenda for Sustainable Development is a accepted the 2030 agenda for Global
set of 17 "Global Goals" with 169 targets between Goals or 17 sustainable development
them. Spearheaded by the United Nations goals. The success of Millennium
through a deliberative process involving its 193 Development Goals (MDGs) paved the
Member States, as well as global civil society, the way of adopting SDGs. The SDGs
goals are contained in paragraph 54 United officially came into force on 1 January,
Nations Resolution A/RES/70/1 of 25 September 2016. Bangladesh can utilize resources of
2015. The Resolution is a broader Bay of Bengal (Blue economy) to achieve
intergovernmental agreement that acts as the the goals.

Shahneaz and Salma (2015), possibilities of Bay of Bengal for for local and international trade
consider blue economy as a sea food generation, fisheries, and transportation from very
new horizon for economic marine tourism, and energy past. But there are many more
development of the coastal from waves. potential to be explored. Blue
countries like Bangladesh. By Economy should be prioritized
using resources of Bay of To assess the existing situation as it contains the opportunities
Bengal, Bangladesh can ensure of Blue Economy in Bangladesh, of obtaining natural gas,
economic growth, poverty Jafrin et al. (2016) focuses on minerals, foreign currency and
eradication, creating the relevance of the Blue employment creation. So, it is
employment opportunities, economy in context of the not only a source of resources
enhancement of human welfare maritime area and its but also a path for socio
and self-sufficiency in food etc. connection with the people. economic development of
They identify the limitless Bangladesh is utilizing the sea coastal people of Bangladesh.
Sustainable
Development Goals
The Sustainable Development
Goals (SDGs) is a set of 17
Global Goals with 169 targets
among them (Wikipedia). Those
goals are-
Goal 1 No Poverty
Goal 2 Zero Hunger
Goal 3 Good Health and
Well-being
Goal 4 Quality Education
Goal 5 Gender Equality
Goal 6 Clean Water and
Sanitation
Goal 7 Affordable and Clean
Energy
Goal 8 Decent Work and
Economic Growth
Goal 9 Industry, Innovation
and Infrastructure
Goal 10 Reduced Inequalities
BANGLADESH
Goal 11 Sustainable Cities and
Communities
GOES THROUGH
Goal 12 R e s p o n s i b l e
Consumption and
Production

ARTICLE
Goal 13 Climate Action Zero Hunger (Goal-2) waters in the eastern part of
Bay of Bengal including the
Goal 14 Life Below Water Decent work and economic continental shelf beyond
Goal 15 Life on Land Growth (Goal-8) 200NM.
Goal 16 Peace, Justice and Industry, Innovation and ITLOS awarded Bangladesh
Strong Institutions Infrastructure (Goal-9) more than 1, 18,813 sq. km of
waters comprising territorial
Goal 17 Partnerships for the
Goals
Exclusive Economic sea, EEZ and also undeniable
sovereign rights in the seabed
Zone and Bangladesh
extending as far as 354NM from
Out of above 17 goals, the the Chittagong coast in the Bay.
present study focuses on goal 1, An exclusive economic zone
ITLOS awarded Bangladesh
goal 2, goal 8 and goal 9. (EEZ) is a sea zone prescribed
70,000 sq. km area out of the
by the United Nations
total disputed area of 80,000
Convention on the Law of the
Objective of the Study sq. km with Myanmar. The
Sea over which a state has
majority of 28 oil blocks came in
special rights regarding the
To assess the role of blue the water territory of
exploration and use of marine
economy to achieve the Bangladesh. Bangladesh got 12
resources, including energy
following Sustainable of the 17 claimed by Myanmar
production from water and
Development Goals (SDGs): and all the 10 that India claimed,
wind (UN, 2011). International
save some small portions of
Tribunal for the Law of the Sea
No Poverty (Goal-1) block 5, 9, 14, 19 and 24.
(ITLOS) awarded Bangladesh a
sizable share of the disputed

Figure-1: Maritime boundary according to UNICLOS Map-1: Territorial Sea and EEZ of Bangladesh

ARTICLE
Design
As small group allows better
contribution from participants,
the present study arranges
groups consisting eight
members in each. There are five
groups with 40 members. The
members are selected both on
random and expedient basis.
The members are of
heterogeneous background. In
each group, there are
economists, statisticians,
geographers, teachers of
business studies, engineers,
businessmen, researchers of
development issues and
"Part V – Exclusive Economic makers, government officials, students of business studies &
Zone, Article 56". Law of the different professionals, social economics. A distinguishing
Sea. United Nations. Retrieved groups and civil society. New feature is that, each group
2011-08-28 course of economic activities contains a member who was
should be started based on born in any coastal district of
Methodology of the thinking, working experience, Bangladesh (but now lives in
subjective judgment, Dhaka).The reason behind the
Study perception and forecasting of selection of this type of member
concerned people. The is that they are more familiar
This study is qualitative and correlation between blue with the sea borne economic
exploratory in nature. So it economy and SDGs should be activities and known to some
employs Focus Group discussed first. FGD allows the unknown opportunities of Bay
Discussion (FGD). The rationale participants to make comments, of Bengal. Face book as a social
behind the selection of focus provide valuable insights and media helps to find them out. In
group discussion to generate interact with others and rethink five groups, there are six
data should be cleared first. The the issues. The present study members who are physically
achievement of SDGs is a new constricts the topic on some absent but they joined through
challenge for Bangladesh as it specific goals such as – goal 1, Viber. These five focus group
comes into action from January goal 2, goal 8 and goal 9 and discussions took place from
1, 2016. On the other hand, blue blue economy as a tool to April to July of 2017. Apart from
economy has become a achieve the goals. The study is the discussions, some informal
potential sector after the of immense national interest to conversations were carried out
delimitation of territorial sea Bangladesh. The authors and and advices were taken from
and exclusive economic zone the participants are the some teachers of public and
with India and Myanmar in 2014 stakeholders of the economy. private universities. After the
and 2012 respectively. In the As the topic is amenable to all, introductory session,
circular flow of macroeconomic the discussants are free to discussants were provided the
activities of Bangladesh, Bay of participate. The discussion may topic, objectives of the study
Bengal used to contribute. But pave the way to assess the role and some questions for
due to delimitation, new areas of blue economy to achieve discussion in a written form. The
of contributions from Bay of some specific goals. number of male participants
Bengal came into the thinking
was greater than that of female.
process of businessmen, policy

Content Analysis and 31.5% in 2010 from 56.7% in 1991 To alleviate poverty,
Findings of the Study (Economic Review, 2017). Government of Bangladesh
(GoB) is working along with
No Poverty The table-1 reveals the findings different Non-Government
of Household Income and Organizations (NGOs). Social
Poverty is the scarcity or the Expenditure Survey (HIES) on safety nets (Cash Transfer,
lack of a certain (variant) the trend of income poverty. Food Transfer and
amount of material possessions The HIES results reveal Miscellaneous Programs) are
or money. Poverty is a one-fourth of total population being implemented by the
multifaceted concept, which (31.5%) lives below the national government. Major NGOs like
may include social, economic, poverty line. The poverty rate is ASA, PROSHIKA and BRAC, etc.
and political elements. Absolute higher in rural area than that of are providing support for socio
poverty, extreme poverty, or urban area. At the same time, economic development and
destitution refers to the the poverty reduction rate in poverty alleviation. Now GoB
complete lack of the means urban areas is higher (5.59%) has emphasized the
necessary to meet basic than that of rural areas achievement of SDGs and taken
personal needs such as food, (4.28%).The national poverty measures in 7th five year plan.
clothing and shelter (UNESCO, gap is 6.5% (indicating depth of Palli Karma Sahayak Foundation
2015). poverty). The gap is decreasing. (PKSF), Social Development
The severity of poverty at Foundation (SDF), private
Since pre-independence period, national level (estimated by banks and NGOs are taking
Bangladesh economy faces the squared poverty gap) is measures to reach ‘No Poverty’.
problem named poverty. So declining. The poverty is
poverty alleviation is an measured by conducting HIES. The Blue Economy is a new
indicator of socio economic In fiscal year 1973-74, the survey prospect to achieve the goal
development of the society and was first conducted in the title 'No Poverty’. As new resources
country. Bangladesh has made of Household Expenditure can be extracted, more fishes
significant progress in poverty Survey (HES). Now the survey is can be collected, infrastructural
alleviation. Income poverty rate conducted in the title projects can be undertaken,
(estimated by ‘Costs of Basic Household Income and more businesses can be started,
Needs (CBN)’ considering Expenditure Survey (HIES). The so the national income will
upper poverty line) reduced to result of lastly conducted HIES boost up and poverty reduction
(2016) is not published. will foster. In this regard, the
groups are asked how this goal
Table 1: Trend of Income Poverty (No Poverty) can be achieved
by 2030 using resources of Bay
Annual Change (%) Annual Change (%) of Bengal. The opinions are
Year 2010 2005 2000
(2005 to 2010) (2000 to 2005) summarized in Table-2 which
Head Count Index depicts the recommendations
National 31.5 40.0 -4.67 48.9 -3.9 and tentative results made by
Urban 21.3 28.4 -5.59 35.2 -4.2
the groups. The discussants
Rural 35.2 43.8 -4.28 52.3 -3.5
suggest creation of
Poverty Gap
National 6.5 9.0 -6.30 12.8 -6.80 employment opportunities for
Urban 4.3 6.5 -7.93 9.1 -6.51 poor families at a fair wage rate.
Rural 7.4 9.8 -5.46 13.7 -6.48 The Blue Economy can assist to
Squared Poverty Gap reduce poverty at regional level
National 2.0 2.9 -7.16 4.6 -8.81 mainly in the southern part and
Urban 1.3 2.1 -9.15 3.3 -8.64 coastal areas of Bangladesh. As
Rural 2.2 3.1 -6.63 4.9 -8.75 the poverty rate is high in rural
Source: BBS, HIES 2010 areas, the suggestions are

ARTICLE
Table-2: Opinions on Goal 1 Zero Hunger

Group
Opinions Tentative Results Hunger is the uneasy or painful
No.
Engage at least one member of sensation caused by a lack of
a poor family (from southern Creating assets and food, the recurrent and
1 part and coastal area of economic empowerment involuntary lack of food
Bangladesh) as worker in port of poor families. (Anderson, 1990). The Zero
areas and commercial ships. Hunger Challenge was launched
Duties, tariffs and tax should be Boosting up of tax
in 2012 by United Nations
properly collected from revenue and more
2 businesses in sea beach and programs can be taken at Secretary-General Ban Ki-moon.
ports. government level for The Zero Hunger vision reflects
poverty alleviation. five elements from within the
Wage rate in ports and sea SDGs, which taken together,
beach areas should be ceiled at Poverty alleviation will can end hunger, eliminate all
3 a level that enables poor take place in southern forms of malnutrition, and build
families to maintain minimum Bangladesh.
standard of living. inclusive and sustainable food
Costal poor people should be systems (UN, 2012).
engaged in infrastructural Poverty alleviation in
4
development and marine coastal area. Although there are remarkable
tourism sector achievements to accomplish the
More social safety nets should targets of Millennium
Poverty alleviation at
5 be provided to all areas of the
national level. Development Goals (MDGs),
country.
extreme hunger and
Source: FGD, 2017
malnutrition impede the
Table-3: Opinions on Goal 2 development in many countries.
So the Sustainable
Group Development Goals intend to
No Hunger by 2030 Recommendations
No. come to an end of different
1 Yes Making change in food habit types of hunger and
2 No Mari culture malnutrition by 2030. The SDGs
Equitable distribution of
3 Can be achievable by 2035 want to assure healthy food
marine fisheries
4 Can be achievable by 2030 Oyster farming security for all with special focus
5 Yes No specific recommendation to children and people at risk. It
requires sustainable agricultural
Source: FGD, 2017 development, better standard
of living of farmers, equal
helpful for rural areas of the urbanization, increasing rate of distribution of land, access to
southern and coastal part. But road accident and poor work technology and markets. It also
to reduce poverty at national safety in some industries are necessitates global cooperation
level, tax and tariffs should be putting threats to poverty to make sure the investment in
properly collected and lion condition. As inequality of infrastructure and technology
share of tax revenue should be opportunities exists between to advance productivity in
distributed to operate poverty urban and rural areas, rural agriculture sector (UNDP, 2015).
alleviation programs. The people are migrating to urban
discussants also emphasize the areas. So urban poverty may So, it is transparent that in
efficient monitoring of the increase. In these agriculture sector development
programs. Again there are circumstances, Blue economy is necessary for food security in
challenges faced by newer class alone cannot play the role to Bangladesh. To make hunger
of poor people. Natural achieve the goal 'No Poverty'. zero, agriculture sector needs to
calamities, unplanned be mechanized and

Table-4: Share of Employed Labor Force above 15 Years by Sector Mari culture and distribution in
equity are required to make
Sector LFS 2013 hunger zero. But the
Agriculture, forestry and fishery 45.10 discussants are not too
Mining & quarrying 1.40 optimistic to reach the goal by
Manufacturing 16.40 2030 (Table-3). Discussants are
Power, gas & water 0.20 predicting that it will take more
Construction 3.70 time for Bangladeshi people to
Trade, hotel & restaurant 14.50 take sea food as staple food. In
Transport, maintenance & communication 6.40
addition, sea food alone cannot
Finance, business & services 1.30
Commodities & personal services 6.20 meet the nutrition balance. So, a
combination of agricultural,
Public administration and defense 5.80
Total 100.00 industrial and sea food is
required.
Source: BBS Labor Force Survey (LFS) 2013
Decent Work and Economic
Table-5: Opinions on Goal 8 Growth
Group Economic Growth
Decent Work Decent work sums up the
No. (8.5 to 9%)
1 Possible Not possible at all aspirations of people in their
2 Possible Marine tourism can create some working lives. It involves
opportunities opportunities for work that is
3 Possible Possible at no satisfactory level productive and delivers a fair
4 Possible Only male labor force are interested income, security in the
In white collar jobs, foreign work forces workplace and social protection
5 Possible are taking the opportunities than that of
domestic labor force.
for families, better prospects for
personal development and
Source: FGD, 2017 social integration, freedom for
people to express their
concerns, organize and
modernized. Bangladesh agriculture development and participate in the decisions that
government has provided the food security for approximately affect their lives and equality of
supports to develop the 160 million Bangladeshi people. opportunity and treatment for
agriculture sector. But the Now it is a matter of hope that all women and men (ILO,2015).
development of the sector is the taste and preference to
impeding for low productivity. food is changing. In this In Bangladesh economy, new
The share of the sector to Gross connection, sea food can be an employment opportunities are
Domestic Product (GDP) in alternative or substitute to being created. But
comparison to other sectors is traditional staple food. The Bay unemployment remains a
decreasing. According to of Bengal is offering diversity of problem at macro level.
provisional estimate, the growth food. In the discussion of ‘Zero According to Labor Force
rate of the agriculture sector is Hunger’ all the five groups are of Survey (LFS) 2013 conducted
3.40% and contribution to GDP similar opinion. As consuming by Bangladesh Bureau of
is 14.79% in fiscal year 2016-17 sea food and marine fisheries Statistics (BBS), the number of
(Economic Review, 2017). are getting popular, food economically active population
Climate change, recurrent sufficiency can be achievable. is 6.07 crore (above 15
natural calamities (flood, But to make hunger at zero years).Out of this 5.80 crore
tropical cyclones, drought, river level, can be possible beyond people are employed. The
erosion, soil degradation, etc.) 2030. In this regard Mari culture unemployment scenario seems
are imposing threats to is recommended by the groups. less severe.

ARTICLE
education of oceanography.
Again female labor force can
show reluctance to engage in
Bay of Bengal related economic
activities. At the same time, the
un-denying fact that a segment
of labor force are well educated,
trained, skilled and
communicable to others. But
this segment is already
employed at home and abroad.
Another alarming trend is that
people are seeking employment
opportunities at Dhaka city. So,
Blue economic activities alone
cannot absorb sufficient labor
force. Economic growth is
possible but it will take time for
The table-4 shows the pattern the prosperity of marine tourism decent work.
of employment. The discussants and economic growth. They are
argue that as employment in optimistically viewing that Industry, Innovation and
mining and quarrying and investment from both public Infrastructure
power, gas & water are the and private sector in marine
lowest (1.40 & 0.20 tourism can enhance the The discussants were asked to
respectively), Blue economy economic activities. The what extent, generated
can generate employment uninterrupted longest sea electricity, oil, and gas from Bay
opportunities as there are gas beach belongs to Bangladesh. of Bengal can accelerate
fields in the Bay of Bengal and With increasing per capita industrialization. The
power can be generated from income ($1466 annually), participants are pessimistic as
waves and water. But decent people are now in a better existing supply of oil, gas and
work cannot be assured at all. standard of living. They are electricity cannot meet the
They argue that the present spending money for Tourism. In national commercial and
work place in all sectors is not this connection, Cox's bazar and residential demand. And
free of hazards. Again, child other coastal areas deserve generation of electricity from
labor is a chronic problem to investment in infrastructural waves is under global research.
child development. Low wage development, hotel and The progress of oil & gas
rate, disguised unemployment restaurant business and extraction from shallow and
in agriculture sector, poor transports. The mentioned deep water blocks is not
working condition, gender investment will pull more satisfactory. So, reliance on this
discrimination, etc are the foreign currency and boost up source of energy is not a
bottlenecks to make the work the contribution of tourism feasible support for
decent. sector to GDP implicating industrialization.
higher economic growth. But in
Discussants of the five groups the discussion of decent work, Again, the participants are
anticipate growth rate of Gross the five groups differ talking about the mining and
Domestic Product (GDP) will be significantly. Bangladeshi labor quarrying as a sub sector of
8.5% to 9% by 2030 (Table-5). force still needs more training, industry. Mining and quarrying
Since the tourism sector is workshops, technological grows at 8% and contributes
emerging in Bangladesh, the knowledge, advanced 1.78% to GDP in fiscal year
discussants were asked about educational support specifically 2016-17 according to provisional

estimate (Bangladesh economic References Development, Vol.7, No.21, 2016, the

review, 2017). After the dispute International Institute for Science,
with Myanmar and India being Anderson, S.A. (1990). Core Technology and Education (IISTE).
resolved, Government is indicators of nutritional state for
Shahneaz M. A, Salma U, (2015).
emphasizing exploration and difficult-to-sample populations.
Prospects and challenges of Blue
extraction of gas, oil and Journal of Nutrition 120:1557–1600.
Economy in Bangladesh. The Daily
minerals of shallow and deep Observer, Bangladesh Wednesday,
Bangladesh Economic Review, 2017
water blocks. Some (Bangla version) Economic 28 January, 2015.
international companies such as Adviser’s Wing, Finance Division,
ConocoPhillips along with Petro https://en.wikipedia.org/wiki/Sustai
Ministry of Finance.
nable_Development_Goals
Bangla are working. So,
industrialization (broadly Bangladesh Economic Review, 2016
United Nations Conference on the
defined) will increase. (English version) Economic
Human Environment, June 5-13,
Adviser’s Wing, Finance Division,
1972, Stockholm, Sweden.
Ministry of Finance.
Conclusion
United Nations Conference on
Bangladesh Bureau of Statistics.
Environment and Development
Achieving the goal of SDGs is Bangladesh Household Income and
(Earth Summit), 3-14 June, 1992, Rio
indispensable for Bangladesh Expenditure Survey. Statistics
de Jeneiro, Brazil.
Division, Ministry of Planning.
economy. As a developing
Government of Bangladesh; 2011.
country Bangladesh is making Available at:
United Nations Sustainable
success in achieving millennium Development Summit 2015, 25-27
http://www.bbs.gov.bd/WebTestA
development goals. However, September, UN HQ, New York City,
pplication/userfiles/Image/LatestR
United of America.
for the new goals, blue eports/HIES-10.pdf. Accessed 20
economy alone cannot be a Jan 2014.
United Nations (2011). "Part V –
sufficient support. To protect Exclusive Economic Zone, Article
and develop the resources of Bangladesh Bureau of Statistics,
56". Law of the Sea. United Nations.
2013, Labor Force Survey (LFS).
Bay of Bengal, national, regional Retrieved 2011-08-28.
and international cooperation is IUCN (2015). “A Thematic
required. Policy should be UN. 2012:
Consultation on Blue Economy for
www.un.org/en/zerohunger/challe
focused for all sectors namely Climate Change Resilience: Towards
nge.shtml
agriculture, industry and Partnerships and Collaboration”,
service. Education and research Nov 23, Bangkok.
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should be prioritized. Nations Educational, Scientific and
ILO. (2015): "Decent work". Ilo.org.
Integration of policies and Cultural Organization".
Retrieved 2015-09-27.
coordination among www.unesco.org. Retrieved
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Jafrin, N., Saif, A.N.M., Hossain, M. I.,
essential where private sector (2016), "Blue Economy in
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can efficiently invest to boost Bangladesh: Proposed Model and
http://www.bd.undp.org
up the contribution of blue Policy Recommendations", Journal
economy to achieve the SDGs. of Economics and Sustainable

ARTICLE
Economic Growth and Macroeconomic Variables

the Case of Bangladesh
Kumar Debasis Dutta1 | Mallika Saha2
A
bstract reached 7.24 percent lastely. It
is a breakthrough from all the
The Authors are:
This research attempts to previous records in the
analyze the causal relationship economic history of the country
among interest rate, exchange as per the provisional estimate
rate, inflation, export, by BBS.
remittance and foreign direct
investment (FDI) with gross Economic growth can be
domestic product (GDP) as the expressed as the change of
growth indicator of Bangladesh production of goods and
for a period of 1981 to 2016. The services in one period
main objective of the paper is to compared with another.
investigate existence and Traditionally, gross national
nature of the effects of these product (GNP) or gross
factors on GDP of Bangladesh domestic product (GDP) can be
from a developing country considered as the indicator of
perspective. Multivariate measuring economic growth.
1
Chairman & Assistant Professor
regression model is used to There are however many
Department of Finance & Banking,
analyze relationship among factors to accelerate GDP. Any
Patuakhali Science and
variables. Findings show that developing country’s economy
Technology University
there is significant effect of can manifest improvement by
exchange rate, inflation, and its performance in exports. This
export on GDP, and insignificant would indicate its strength in
effect of FDI and remittance on industries and international
GDP. Therefore, decision competitiveness as well. On the
makers may take these findings other hand, exchange rate
into consideration in would indicate the value of our
formulating policies to increase currency in terms of US dollars.
the GDP growth of the country. Therefore the value of our
currency would indicate the
Keywords purchasing power of imports,
but also the value of its
exported items. Foreign
Bangladesh, Developing
remittance and FDI inflows are
Countries, Economic Growth,
very important for any
GDP and Macroeconomic
developing or underdeveloped
2
Assistant Professor variables.
economy’s growth. GDP is a
Department of Accounting & very strong indicator to gauge
Information Systems, Introduction the economic health of a
University of Barisal country. It is used as measure
Bangladesh is said to be a by almost all the governments
country with enormous and economic decision-makers
potentials. Many consider it over for planning and policy
burdened with huge population formulation. However, there has
while many more consider this been minimal works with
population as asset in the form empirical evidences that could
of human resources. However, specifically look into
Bangladesh is experiencing a macroeconomic factors
GDP growth rate of 5 percent accelerating the growth of
plus from the last decade which developing economies in recent

years. This study has attempted to find the negative effect of FDI inflows on
macroeconomic factors that determine economic growth.
economic growth in developing countries. And it
will also help to motivate more research and case However, all the researches mentioned
studies on developing countries depicting above considered only the effect of FDI
modalities for other countries to learn and inflows on economic growth of countries
extract benefits. Accordingly this study has also and there is few studies which considered
policy implications. the effect of other macro economic
variables e.g. export, exchange rate,
Literature Review inflation rate and interest rate on
economic growth.
Till date a considerable number of researches
have been carried out to find out the casual Jung Wan Lee, Gulzada S,
relationship between FDI inflows and economic Baimukhamedova, Sharzada &
Akhmetova (2009) analyzed the
correlation between FDI inflows,
exchange rate, and economic growth of
Economic growth can be expressed Kazakhstan by a multivariate regression
model with weighted least squares
as the change of production of estimates. The results revealed the
goods and services in one period minimum significant impact of FDI on
GDP growth of Kazakhstan. Muhammad
compared with another. Traditionally, Azam (2010) examined the impacts of
gross national product (GNP) or exports and FDI on economic growth of
gross domestic product (GDP) South Asian countries namely
Bangladesh, India, Pakistan and Sri Lanka
can be considered as the indicator with simple log linear regression model
of measuring economic growth. using secondary data ranging from 1980
to 2009 and found that due to promotion
There are however many factors to of exports, economic growth of each
accelerate GDP. country would increase. He also found
FDI as positively significant at 1% level of
significance for Bangladesh and Pakistan,
while for India it is insignificant and in
case of Srilanka though it is significant
growth. The empirically findings of such but with unexpected negative sign. Suva
researches are mixed. Manuchehr and Ericsson and Fiji (2004) states that inflation and
(2001a), Nair-Reichert and Weinhold (2001), GDP has a negative outcome. At a certain
Choe (2003), Chowdhury and Mavrotas (2006), level of inflation there will be positive
Shaikh (2010), Griffiths and Sapsford (2004), outcome towards GDP. However, a low
Chakraborty and Nunnenkamp (2006), Al-Iriani level of inflation will not have a significant
(2007), Shaikh (2010), Faras and Ghali (2009) effect on GDP; in fact FDI might even
and Umoh, Jacob andChuku (2012) found bring a negative impact as well. On the
significant Positive relationship between other hand, a too high level of inflation,
economic growth and foreign direct investment however, will have a negative impact on
inflows. Whereas, De Mello (1999) in his study of GDP (Li et. al, 2003). An increase in
32 developed and developing countries during inflation will decrease the GDP per capita
the period of 1970- 1990 found weak evidence and investors (Barro, 1995). Looking from
for FDI effects on economic growth. Again, the GDP's point of view, Udoka and
Shaikh (2010) and Khaliq and Noy (2007) found Roland (2012) agree that interest rates

ARTICLE
Independent Variables
To analyze impact on economic

growth (GDP), following
macroeconomic variables were
selected: Interest rate,
exchange rate, inflation, export,
remittance and foreign direct
investment (FDI).
Regression Model
Y= a + ß1X1 + ß2X2 + ß3X3+

ß4X4+ ß5X5+ ß6X6
Here,
Y = Gross Domestic Product
are one of the factors indicating growth of Bangladesh. (GDP) in million USD,
economic growth of a Country; Following such a context this
an increase in interest rates also research is conducted to a = constant term,
shows a shrinking GDP. examine the impact of interest X1 = Interest rate
However, their research shows rate, exchange rate, inflation, X2 = Exchange rate
that interest rates do not have a export, remittance and FDI on
significant impact on economic GDP X3 = Inflation
growth. An increase in interest X4 = Export
rates will cause a decrease in Data and Methods X5 = Remittance
real growth rates, this research
is done in Europe (Giovanni et X6 = Foreign direct investment
To accomplish the above
al., 2009). Rodrik (2008) found (FDI) and
mentioned objectives, data has
that there is a positive relation been collected for a period of ß = Regression co-efficient for
between exchange rates 1981 to 2016 from secondary the independent variable.
economic growth. Ito, Isard and source -the website of
Symasnsky (1999) found that Bangladesh Bank, World Bank This test has been used to find
high economic growth rates and Bangladesh Bureau of out whether there is a
supported by adequate export Statistics. Multivariate relationship between
growth, thus increase the value regression model is used to dependent variable and the
of exchange rates due to analyze relationship among independent variable.
increased demand for the dependent and independent
national currency. Strong variables. Hypothesis of the Study
exchange rate will increase the
liquidity of capital markets so Hypothesis 1
that investment will increase, Formulation of Model
H01: There is no significant
which in turn will help achieve
Dependent Variable relationship between
the desired economic growth
Interest rate and GDP
(Wong et.al, 2005).
To measure the economic
Hypothesis 2
growth of the country Gross
Objectives of the Study Domestic Product (GDP) is H02: There is no significant
used. relationship between
This study is aimed to explore
exchange rate and GDP
the factors that are affecting

Hypothesis 3 Hypothesis 5 Result and Discussion

H03: There is no significant H05: There is no significant Descriptive Analysis
relationship between relationship between
Inflation and GDP Remittance and GDP
Maximum, minimum, mean, and
Hypothesis 4 Hypothesis 6 standard deviation of variables
are shown in the table 1:
H04: There is no significant H06: There is no significant
relationship between relationship between FDI The Minimum and the maximum
Export and GDP and GDP GDP were 17159.30 and
197554.92 respectively. Because
Table 1: Descriptive Statistics of this wide dispersion of the
GDP, the standard deviation is
51879.44748 from the mean
Std.
Variables Mean Minimum Maximum value of GDP 65376 which is
Deviation
very high. Such high dispersion
GDP 65376 51879.45 17159.30 197554.92 of the data gives only weak
FDI 630.31 446.12 223.57 1800.56 correlation and regression
Interest rate 7.7097 1.98 4.50 10.60 coefficients. In case of interest
Inflation 7.6150 3.04 2.00 14.5 rate the data is less scattered.
The minimum and maximum
Remittance 4368.7 5042.15 325.67 15316.91
interest rate is 4.50 and 10.60
Export 9897.2 10854.30 626.00 36878.00 respectively. However, the
Exchange rate 51.3006 19.04 20.07 79.93 mean was 7.7097 and the
standard deviation was 1.98
Table 2: Model Summary and ANOVA which is lower than other
independent variable. In case of
Std. Error exchange rate the data is also
Adjusted R
Model R R Square of the F Sig. less scattered. The minimum
Square
Estimate exchange rate was and 20.07
1 .994a .988 .985 6277.93883 393.524 .000a the maximum exchange rate
a. Predictors: (Constant), ER, INF, IR, REM, FDI, EXP was 79.93, mean was 51.3009
b. Dependent Variable: GDP and standard deviation was
19.04. The Minimum and the
Table 3: Regression Co-efficient maximum rate of inflation is
2.00 and 14.5 respectively and
Unstandardized Standardized the mean was 7.6150 and the
Model Coefficients Coefficients t Sig. standard deviation was only
B Std. Error Beta 3.04198, which is consistent. In
1 (Constant) 37889.794 12679.584 2.988 .006 the case of export the data is
the highest scattered. The
FDI 10.024 9.920 .086 1.011 .321
minimum and maximum export
IR 616.330 907.193 .024 .679 .502 value is 626.00 and 36878.00
INF -1579.294 485.938 -.093 -3.250 .003 respectively. The mean value is
REM .106 .469 .010 .225 .823 9897.02 which is more than
EXP 4.915 .497 1.028 9.886 .000 other independent variables
values and the standard
ER -402.889 183.126 -.148 -2.200 .036
deviation is 10854.30 which is
a. Dependent Variable: GDP the highest among independent
variables. In the case of

ARTICLE
remittance the data is also independent variables in this domestic product (GDP) plus
scattered. The minimum and model. factor incomes earned by
maximum remittance value is foreign residents minus income
325.67 and 15316.91. The mean Standard Error of Estimate earned in the domestic
was 4368.7 and standard shows how much error or economy by non-residents.
deviation was 5042.15. In the variability stands between the Comparing the GNI and GDP
case of FDI the data is also estimated result and actual shows whether a nation’s
scattered. The minimum FDI forecasted result. Here the value resources are put to capital
value is 223.57 and maximum is 6277.93883 that shows the creation or declining toward
FDI value is 1800.56. The mean amount of variability of our abroad. The significance value
was 630.31 and the standard estimated result and the actual of exchange rate is 0.036 which
deviation was 446.12. result of the observation. Here, is less than 5% level of
the value of F (393.524) is significance and it is negative
In table 2, the value of R = 99.4% greater than the significant value. It indicates that exchange
expresses that there is a high value (.000). So the model is rate has a significant negative
degree of positive relationship accepted. The model is much impact on GDP. If exchange rate
between the dependent sufficient to describe the increases by 1 taka, GDP will
variable i.e. GDP and the relationship we are going to decrease by 402.889 taka
independent variables. If the justify. because of negative value. It is
independent variables increase, said that the higher the
dependent variable will also Table 3 presents regression exchange rate, the poorer will
increase accordingly. coefficients that are obtained be the condition of the
from the regression Model. This importing country and vice
The term R Square is the is observed that the significance versa. In such a case, there is no
multiple coefficient of level of foreign direct doubt to say that exchange rate
determination interpreted as investment (FDI) is 0.321 which has a direct impact on the
the proportion of variability in is greater than 0.05 (5%), so we economic growth of any
the dependent variable that can can accept our null hypothesis country. The significance value
be explained by the estimated that the impact of foreign direct of inflation is 0.003 which is less
multiple regression equation. investment (FDI) on GDP is not than 5% level of significance and
Hence, when multiplied by the significant. Like foreign direct it is negative value. It indicates
100, it can be interpreted as the investment (FDI), the that inflation has a significant
percentage of the variability in significance level of the interest negative impact on GDP. If
total that can be explained by rate (0.502) and the remittance inflation increases by 1 taka,
the estimated regression (.823) are also greater than our GDP will decrease by 4579.294
equation. Here R2 is equal to significance level. taka. The significance value of
.988 (98.8% expressed in export is 0.000 which is less
percentage) indicates 98.8% of Foreign direct investment (FDI) than 5% level of significance and
the variability in obtained GDP and remittance may have is positive. It indicates that
can be explained by the significant relationship. export has a significant positive
independent variables interest However, here the study shows impact on GDP. If export
rate, exchange rate, inflation, it is insignificant. Theoretically, increases by 1 taka, GDP will
export, remittance and FDI. foreign direct investment (FDI) increase by 4.915 taka.
and remittance have great
If a variable is added to the impact on gross national Findings of the Study
model, R Square becomes income (GNI) because gross
larger even if the added variable national income (GNI) is the After analyzing all of the data
is not statistically significant. total domestic and foreign we have tested the hypothesis
The Adjusted R Square output claimed by residents of a formulated before. Considering
compensates for the number of country, consisting of gross 5% level of significance we

inflation rate changes for 1 taka,

GDP will decrease by certain
amount because of negative
value. Central Bank may
establish a strict control over
the foreign exchange business
of financial institutions and
money supply of the country.
Fake import, over invoicing and
under invoicing as well as hundi
business may be seriously
contained or checked. And,
export has a significant impact
in economic growth according
to study. However theoretically
we know lower exchange rate
and interest rate may have
positive impact on export;
Therefore, exchange rate and
interest rate may be monitored
accepted the null hypothesis in Conclusion
which significance value is to promote or boost up exports.
greater than 5% (0.05) and A decision maker may take
Though recent statistics
rejected the null hypothesis in these findings into
showed that Bangladesh GDP
which significance value is less consideration to make policies
growth rate is 6.5% and the
than 5% (0.05). to boost GDP of the country.
recent global recession did not
Though our study is confined to
have any negative impact on
The study found a significant only Bangladesh economy;
exports of Bangladesh.
effect of exchange rate, however, it may also in all
Bangladesh economy is
inflation, and export on GDP. likelihood be similarly applicable
currently at a critical juncture,
These variables may tag as the to countries with similar
where the policymakers will
components of economic have to tackle the ongoing and economic conditions.
growth. But a significant effect emerging macroeconomic
of interest rate on GDP could pressures head-on. GDP is used The results are the outcome of
not be established. And it was as an indicator by almost all the Study & hence the Questions
also found that there was governments and economic about all Conclusions or
insignificant effect of FDI and decision-makers for planning Findings are the Author’s
remittance on GDP. Exchange and policy formulation. It responsibility. The EB does nor
rate and inflation have a enables one to assess bear any onus on the results of
negative relationship with GDP universally & uniformly whether the study.
but export affects GDP the economy is contracting or
positively. expanding, whether it needs a References
boost or restraint, and whether
Findings of this study suggest a threat such as a recession or Al-Iriani, M. (2007). Foreign direct
that regression model should inflation looms on the country’s investment and economic growth in
be- horizon. In our study we found the GCC countries: A causality
investigation using heterogeneous
that exchange rate and inflation
panel analysis. Topics in Middle
GDP = 37889.794 – 402.889 ER rate do have a significant
Eastern and North African
– 1579.294 INF + 4.915 EXP negative impact on GDP. This Economies, 9(1), 1–31.
means exchange rate and

ARTICLE
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133–151.

The Performance of Banking Industry
A forensic Analysis
Md. Shahidul Islam FCA
I
ntroduction Effective flow of investments
and savings culture is the
Banks, in Bangladesh, are precondition for the economic
facing an increasingly difficult development of any country.
situation with increased Bangladesh faces several
fraudulent incidents, huge obstacles such as bad loan
capital shortfall and low culture as well as
recoveries compounded leading underdeveloped capital market,
to increased non-performing excess liquidity of banks, NPLs
loans (NPLs) by a tidal wave of etc. The performance of the
compliance regulations, thereby financial sector of our country
directly affecting their depends on the performance of
bottom-line and increased cost commercial banks. NPLs shrink
of compliance. With increased the profitability as banks do not
regulatory scrutiny, banks are earn interest income from these
under greater pressure to classified loans. NPLs decrease
The Author is a implement best practices. the “loan able” fund of the banks
Chartered Accountant and Compliance is therefore not an and it stops the recycling of
a Fellow Member of the option but the essential need of banking business.1
Institute of Chartered Accountants the hour.
of Bangladesh-ICAB In Asia, states with strong
Banking business in Bangladesh banking sectors, such as
is largely known for having Singapore and Hong Kong, have
significant amount of consistently achieved high rates
concentrated loan, willful and of sustainable economic growth
deliberate non-payment, and development. The banking
continuous loan reschedule, sector in Bangladesh has been
interest rate reschedule and the plagued with a number of
use of loan money to disappointing trends and the
unproductive areas or banking industry is facing
investment. Using loan amount unusual fate due to rising NPLs,
for unintended and tendency to reschedule and
unproductive areas and restructure loans to show
intentional non-payment are the inflated profits ultimately cost
main reason for big and historic many banks significantly, this is
loan default in this country. In because of depositing
Bangladesh every group of unnecessary tax to Government
company aggressively wants to treasury without actually
have its strong footsteps in earning the same profit. The
ownership of any bank either investment in power sector
through influential directorship seems to be good and lucrative.
or being a board participant in But the banking sector may face
one or more banks. It is their a little liquidity crunch if the
perceived belief that banks are existing credit growth continues
only way to boost their income and the government takes Tk
and wealth both inside and 20,000 crore for the power
outside the country. sector. 2Occasionally, people
1
Bangladesh Bank, Study report.
2
Ministry of Finance (MoF), Government of the People’s Republic of Bangladesh.

ARTICLE
say that that banks help or motivate clients to Income Country (MIC) status by 2021, it is
make a writ to honorable high court against critical to focus on practical and realistic
classification of loan. The writ is also a matter of improvements in the banking sector.
concern for banks as clients continue to get loans
despite willful default taking advantage of their Concentrated Loan
legal loopholes.
Banks Fate is Dependent on some
The major contributor to the rise in bad loans is Businesses well-doing
state-owned commercial banks (SCBs). Even
though only about one fifth of total loans of the Currently the problem relating to bad
banking sector are disbursed by the SCBs, the loan is "alarming" as some banks are
share of SCBs' NPL in total classified loans was favouring a few large companies. In
45.57 percent as of September 2016.3 In order for February 2017, we found that 40% of
Bangladesh to achieve its goal of reaching Middle Janata Bank's total loans, for instance,
have gone to just nine big industrial
groups. Banks should not disburse
Banking business in Bangladesh is concentrated loan to some group or to
specific industry sectors rather should
largely known for having significant diversify loans to reduce the business
amount of concentrated loan, risk. Banks need to keep 100% provision
for bad loan so banks cannot convert
willful and deliberate non-payment, savings into loanable. As a result, banks'
cost of funds increases which in turn
continuous loan reschedule, interest results is higher lending rates. Many
rate reschedule and the use of loan banks are very much well known to have
given loans concentrating on few group
money to unproductive areas or of companies. Banks have good
investment. reputation to collect small loan given to
individual borrowers of small and
medium businesses. But when it comes to
large loan to large group of companies,
banks are proven to be and sometimes
appear to be hopeless to recover those
very loans. Now a theory is arguably
established that small loans must have to
be repaid since the borrower is general
public, and large loans are not supposed
to be repaid since borrower is large and
influential. For this long established
theory the banking business is seeing the
turmoil of increasing non-performing
loans, excessive cash balance at hand.
Big borrowers have been occupying the
lion share of defaulted loans as they failed
to repay their loan installment timely
either willfully or because they failed to
3
Bangladesh Bank, detailed review report.

A forensic Analysis
run their business smoothly for other businesses have Tk 21.04 total banking sector assets,
political unrest across the billion in defaulted loans in total. nearly 25% of total loans of the
country. banking sector, are disbursed
Corruption and by the SCBs. But SCBs can’t
In June 2017, total defaulted Politicization of Banking report the expected recovery of
loan of 4 state owned defaulted loans. In last June
commercial banks (SCBs) stood Business 2017, these SCBs have reported
at Tk 26,426,000 crore, out of total loan outstanding balance
which Tk 9,103,000 crore is In Bangladesh, from even a of Tk 112,418 crore and defaulted
stuck up with only twenty (20) printing shop, stationery shop, loan amount Taka Tk 26,426
loan defaulters which is 34.45 CNG driver, bus, truck and crore which is 23.51 percent of
percent of total defaulted loan. almost every sector complains the total loans, more in
In this connection, Sonali bank to pay bribe silently to powerful comparison with last year’s
reported its outstanding and influential person in each 22.98 percent.5 Officials of state
defaulted loan Tk 3,484,000 and every region of this country. owned banks are proven to
crore from these top 20 loan For example in the root area of have been found with
defaulters, where Janata bank any district when a CNG, approving loans to bad sectors,
reported Tk 2,218,000 crore, carrying passenger passes a bus helping clients meeting undue
Agrani bank has Tk 1,169,000 stand or CNG stand, he has to demands after getting small
crore and Rupali bank has Tk pay minimum Tk 10. Suppose a amount of bribe. In this country
2,232,000 crore.4 single CNG touches 10 time that people usually want to
type of stand so imagine how transform their power, either
Only three families, of highly much CNG is there in the political or nepotism, into
regarded persons are top country and how much bigger “money making tools” to boost
defaulter of bank . In addition to the collection can be. up their earning capacity and
this, some 11 clients have on an wealth maximization.
average Tk 1 billion individually Though six state-owned Individuals or group of
defaulted loans and other 30 commercial banks (SCBs) companies having political
account for about a quarter of linkage are changing their
economic state by earning huge
money. Almost all of the group
companies want to have their
strong footstep in the
ownerships of any bank in the
country. As they are backed by
powerful political party either
ruling or opposition party they
are more prone to become
willful defaulter. Willful
defaulters take the advantage
of legal loopholes, hence writ
culture has become very
popular to loan defaulters.
Some Banks were pressing a
borrower to pay back around Tk
500 crore. In response, the
4
The Daily Prothom Alo.
5

ARTICLE
borrower went to the court that country’s foreign currency credibility in both the financial
gave him 12 years' time with reserves held with the Federal and the technology sectors of
three years' moratorium.6 Reserve Bank of New York, has Bangladesh. An external US
been a vocal critic of the based cyber security firm
Influential personnel of this country’s less financially consulted by the bank found
country are compelling banks to virtuous lenders.7 The malware on Bangladesh Bank's
sanction loans outside consequences could have been computers. Bangladesh Bank's
Bangladesh in their company’s even worse. Instructions were own internal investigation later
name through offshore banking issued via the SWIFT network to found that the malware was
units (OBU), majority of which remove USD 951 million from installed in January 2016.
have turned to defaulted loans Bangladesh Bank's account. The Bangladesh Bank has yet to
leading to extra burden for remaining amount was only confirm fully whether or not this
banking sector. This culture of saved because the Federal malware was installed
investing outside Bangladesh Reserve Bank of NY blocked the intentionally with malicious
indicates that wealthy remaining transactions, at intent by its own employees, or
personnel have made their Bangladesh Bank's request. whether it was employee
second home abroad for negligence that allowed the
fulfilling exit plan, in any case, if Bangladesh Bank failed to even attackers access to the bank's
they need to move out of detect and acknowledge that its systems.
country either for changes of system had been compromised,
political wave or for other and attempted to shift blame A Russian-based IT security firm
compelling reasons. elsewhere which affected reported that banks interrupted
In addition to this, huge amount

of written off loans has
negatively affected financial
health of banks. Between
January 2003 and March 2017,
banks had written off a total of
Tk 44,412 crore. Of the written
off loan amount, Tk 34,922
crore, or 79 percent, remained
outstanding. Out of total
balance, state-owned banks and
private banks had written off Tk
17,732 crore and Tk 16,079 crore
respectively, the reason for this
is open secret to all.
Cyber Hacking Incidents

in Banks
In March 2016, following an
audacious heist that involved
cyber-thieves successfully
stealing $101 million of the
6
The Daily Star
7

A forensic Analysis
that encourages more

irresponsible lending and
borrowing.
The market has been gripped by

excess liquidity. Excess liquidity
and NPLs are posing threats to
the improvement of banking
sector. The total outstanding
amount of loans and advances
of the banking and non-banking
financial institutions is Tk.
685,264 crore. The NPL ratio
issue turned out to be a serious
concern as it jumped to 10.1% at
the end of June, 2016, which is
higher than 8.8% in 2015.8
The state-owned commercial

and specialised banks suffer
from problems relating to high
levels of NPLs, low profitability,
by cyber hacking also have to causes rise of NPLs. The large capital shortfalls and
deal with data loss, damage to government's recent balance sheet weaknesses. For
brand reputation and leakage of programme to restructure large decades, state-owned banks
confidential information, that’s NPLs is the latest attempt to have lent large amounts to big,
why banks should consider the solve this issue, though prior influential borrowers, who have
cost implications of attempts have successfully been known to be willful
cybersecurity threats and put failed to do so. Besides, allowing defaulter. Defaulters are rarely
appropriate measures in place restructuring only for larger penalised; instead, loans are
to protect themselves and their loans creates a culture of routinely restructured to permit
customers from incidents impunity for major loan further lending to the same
involving online banking. In defaulters, who are allowed to borrowers. According to a
addition to that, in 2013, hackers restructure and postpone study by the Bangladesh
successfully stole USD 250,000 payment indefinitely, while Institute of Bank Management,
from Sonali Bank. continuing to borrow further on average banks rescheduled
from banks and increase their bad loans of Tk 109.1bn annually
Excess Liquidity and NPL levels of debt even further. This during 2010–2014.9 Central bank
lack of consequences for major
Affecting Banking Sector loan defaulters and the bank
inspections have found that
several state-run and other
management allows them to commercial banks have
Often wealthy business owners keep borrowing is one of the
with strong connections to one under-reported bad loans and
major causes for the high inflated profits.
of the country’s two main non-performing loans in
political parties, and with little or state-owned banks, and in the
no intention of meeting their Banks have given large loans to
banking sector in general. It
loan repayments generally Offshore banking units (OBU),
creates a culture of impunity
8
Dhaka Tribune
9
The Economist Intelligence Unit, Research and Analysis Division, The Economist.

ARTICLE
government has provided large

amounts to recapitalize banks.
Between fiscal year 2011/12
(July–June) and 2016/17, the
government has provided
state-owned banks with a total
of Tk116.6bn in recapitalization
funds. In the budget for 2017/18
the government has again
earmarked Tk20bn to
recapitalize state-owned banks,
against the March 2017 capital
shortfall of Tk147bn, with the
highest amount going to BASIC
Bank (Tk10bn) and the funds
will have conditions attached,
such as not investing in risky
ventures. Meanwhile, in March
2017 three state-owned lenders
were given preliminary approval
to raise up to US$510m to
majority of which has turned to Tk147bn, compared with only improve their financial health.
defaulted loans. For instances, two private banks with BASIC Bank is considering
AB bank has distributed USD shortfalls. The highest capital issuing government-guaranteed
5.51 crore out of which USD 2.31 shortage was at Bangladesh cashless bonds worth
crore was collected and Krishi Bank (Tk72.5bn), followed US$325m, while Janata Bank
balancing amount of USD 3.20 by BASIC Bank (Tk29.6bn) and and Rupali Bank will sell
crore remained outstanding. Sonali Bank (Tk25.6bn). subordinated bonds. BB has
repeatedly warned banks to
The high NPLs have hit The overall capital to risk improve their practices in
profitability hard. In 2016 the weighted assets ratio (CRAR), a several meetings.
operating profits of the SCBs key measure of bank strength
dropped by 37% annually, to and stability, has also been Mobile Banking and its
Tk20.1bn, while net losses affected. The CRAR for all banks
surged by 309%, to Tk5.1bn. in Bangladesh by end-March was Prospect
Meanwhile, losses at the two 10.7%, meeting the regulatory
state-owned specialised banks requirement of 10.6%. The CRAR The banking sector has also
(Krishi Bank and Rajshahi Krishi at private banks was 12.2%, while taken steps in its adoption and
Unnayan Bank) rose by 150% to that at the nine foreign banks use of new technology to
Tk4.2bn. By contrast, the net was a healthy 23.9%. However, increase efficiency and provide
profits of the banking sector as the CRAR of the six SCBs was convenient customer service. In
a whole rose by 4.9% in 2016, only 5.9%.Bangladesh Bank gave September 2011, Bangladesh
while those of private banks banks a roadmap to implement Bank introduced guidelines on
rose by 17.2%.The higher the Basel III framework from Mobile Financial Services for
provisioning necessary against January 2016, under which their Banks. Since then, Bangladesh
these NPLs has also weakened CRAR will rise to 12.5% by 2019, Bank has authorized 28 banks
banks' capital. By the end of the which will put further pressure to offer full mobile financial
first quarter of 2017, seven of on bank capital. services. 19 banks have already
the eight state-owned banks developed and adopted a
had capital shortfalls, totaling Over the past few years the mobile banking strategy and

A forensic Analysis
started providing services to

their customers (the largest of
these services being bKash,
BRAC Bank, DBBL Mobile
Banking or Rocket service of
Dutch-Bangla Bank Limited).
Adoption of mobile banking

technology makes banking
more convenient and accessible
for customers, and particularly
improves accessibility for
customers in rural or remote
areas who do not have easy
access to a local bank branch.
Thus, the adoption of mobile
financial services is also a
positive development in
Bangladesh's banking sector. In bank employees should be (HR) capacity buildup. The
order for the banking sector to trained on basic cyber-security Bangladesh banking sector has
perform to its full potential, precautions to thwart made big strides in capacity
provide services to more cyber-attacks like the one of buildup through prior reforms,
customers and help Bangladesh 2016 heist, and the Sonali Bank but is still lagging behind
move towards middle-income hacking. In addition to regular comparable countries' financial
country status, the banking training, there should be strict sectors. An increased
sector should continue to oversight and accountability for investment in capacity building
develop and invest in better employees and their use of bank in this area will improve the
technology for mobile financial technology. The use of medium and long term
services. technology rather than manual prospects of the banking sector.
interventions by employees can
Recommendations also reduce opportunities for Underperforming Banks
corruption and
mismanagement, and an
Should Merge
The effective and efficient
implementation of following electronic paper trail of financial
activities will result in better The bank markets in Asia have
recommendation may achieve seen a spate of mergers,
optimum goal to improve accountability and
transparency. acquisitions and major
banking business in this investment. Banks in Asia are, in
country: many cases, not as profitable as
The banking sector should also
they used to be. As a result,
Training, strict oversight and invest in further training for
many are considering (or being
accountability of employees be internal control and compliance.
compelled to consider) mergers
ensured This will assist in holding
as a solution.
employees accountable, both
The banking sector should when it comes to security
breaches, and when it comes to European banks are shoring up
accelerate the rate of their capital levels amid
technology adoption, along credit risk mismanagement. In
addition to this, the banking prospects of stricter regulatory
with investing in training bank oversight. In the coming days,
employees in appropriate use of sector needs to make further
investment for human resources many banks and non-bank
technology. In particular, all financial institutions will face the

ARTICLE
sector reforms in the past.

REDUCED LOANS Though, prior reforms have
been unsuccessful in reducing
the NPLs to satisfactory levels,
Government should take
effective and efficient measures
to right their wrong in order to
reduce the percentage of NPLs.
The banking best practice
should be documented and
applied in every banks to
Strict Regulatory Actions

to Minimize Future NPLs
In June 2017 the government of
Bangladesh has allocated Tk
20bn to recapitalise state-
owned banks. Now the banking
sector is facing mounting
greatest challenge even to banks which is not a justifiable problems such as significant or
declare good dividends to figure. In addition to this Police almost all of the legacy of loans
shareholders when they are Bank is awaiting approval from to large borrowers, who lack
engaged in fierce competition authority. This will increase the incentives to repay, and there
and customers are moving to probability of bad loans in the are some legal limitations that
cheap funds. Merger and long run. The banks, in hamper recoveries. Beside this,
acquisition (M&A) will be the Bangladesh, that cannot run regulators' efforts seem to be
final solution for the survival of smoothly and are failing to keep insufficient to tackle the issue.
some banks and non-bank pace with the fast-growing Only limited action has been
financial institution as the financial sector should merge taken to penalise defaulters,
economy is not ready to absorb with each other. improve risk management and
too many banks and non-bank strengthen bank management.
financial institutions in The Percentage of Regulators will need to make
Bangladesh. It is learnt that the further efforts to tackle the
Non-performing Loans
shareholder value of a bank sector's deep-rooted problems
after merger would be greater (NPLs) must be Reduced of corruption, poor risk
than the sum of the shareholder practices and collusion with
values of the parent banks. NPLs are causing significant industry. Banks should be held
Mergers generally succeed in havoc to the banking industry of strictly accountable to
generating cost efficiency Bangladesh. Besides, many numerical targets agreed upon
through the implementation of banks are badly managed and with the authorities and that
economies of scale. The governed. One of Bangladesh reforms should focus on
government should consider Bank's biggest challenges will improving supervision,
and take bold initiative to start be to reduce the percentage of containing risks from loan
the merger and acquisition of NPLs from the banking sector. concentration and improving
non-performing bank for The percentage of NPLs, the legal and financial
sustainable economy. especially in SCBs, has been framework for loan recovery.
exceedingly high, and has been However, ultimately, any real
In Bangladesh, there are 56 a primary focus of banking clean-up of Bangladesh's

A forensic Analysis
state-owned banks will have to good banking business in the

begin with political will which country and tolerable
appears to have been limited so percentages of NPLs. Besides,
far.10 accountability, transparency
and good governance should be
Conclusions improved in the banking
industry. Banks must reduce
It is a matter of pride that non-performing loans through
Dutch-Bangla Bank Limited and allocating loans to diverse
business sectors to ensure that
BRAC Bank Limited have been
awarded the annual Trade loans do not become The World
Finance Program (TFP) Award, concentrated to some group of Bank projects
by Asian Development Bank companies. Government should
(ADB). In addition to this Banks take effective and efficient Bangladesh's
are contributing to the society measures immediately to right
their wrong in order to reduce
GDP to grow
by making donation to flood
affected areas, government the percentage of NPLs. The by 6.4 percent
banking best practice should be
relief fund, distressed Rohiynga
properly documented and in FY 2017-18.
populating from Myanmar,
corporate social responsibility applied in every banks to It, however,
(CSR) and other priority areas.
A strong banking sector is If the concerned authorities take said inflation is
critical and essential for all the measures outlined above, expected to be
economic growth and Bangladesh's banking sector
development in Bangladesh. A can thrive in the years to come. high at 6
robust and well-functioning The country has already taken
great strides forward over the
percent
banking system facilitates the
efficient allocation of resources last 45 years since considering
independence, and must
to individuals, organizations,
continue to improve the the rise in food
and projects that can use those
resources effectively. Every financial infrastructure to prices.
bank should ensure that ensure financial stability,
borrower have invested the loan economic growth and
amount for intended income development in 2021 and
generating activities. If we could beyond. Banks must have learnt
ensure that the borrowers from their mistake, which will SOURCE
help them to right their wrong bdnews24.com
utilised the money in productive 27th September 2017
activities, they could have paid to improve banking industry in
their loans back, leading to this country.
10
International Monetary Fund (IMF)

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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)
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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July - September 2017

EDITORIAL BOARD CONTACT US

Harun Mahmud FCA 880 2 9125266

The Institute of Chartered Gopal Chandra Ghosh FCA

JULY - SEPTEMBER 2017 | The Bangladesh Accountant 1

In the quarterly journal articles of

The monthly news bulletin

In addition to these two regular

P16 Role of Professional

P21 The Minimum Tax

P28 Challenges and Opportunities

P35 Cost of Fund of

P43 Enforcement of Contract for

P47 A Comparative Study Between

2 JULY - SEPTEMBER 2017 | The Bangladesh Accountant

CQK Mustaq Ahmed, Chairman, Financial Reporting Council

P99 Sophistication of Pillar-2 of

P107 Effect of Income Tax Provisions

JULY - SEPTEMBER 2017 | The Bangladesh Accountant 3

4 JULY - SEPTEMBER 2017 | The Bangladesh Accountant

JULY - SEPTEMBER 2017 | The Bangladesh Accountant 5

Mr. Mustaq Ahmed obtained In a recent interview with The

6 JULY - SEPTEMBER 2017 | The Bangladesh Accountant

The Bangladesh Accountant: for which ICAB and individual

JULY - SEPTEMBER 2017 | The Bangladesh Accountant 7

The Bangladesh Accountant:

Mr. Mustaq Ahmed: Chartered

8 JULY - SEPTEMBER 2017 | The Bangladesh Accountant

JULY - SEPTEMBER 2017 | The Bangladesh Accountant 9

The Bangladesh Accountant | July-September 2017

Determinants of Foreign Direct Investment

M Jalal Hussain FCA

JULY - SEPTEMBER 2017 | The Bangladesh Accountant 11

Investment policy appraisals by 11 Singapore 1,041,000,000,000

UNCTAD provide indicia of benefits 20 India 351,800,000,000

of FDI in terms of employment 32 South Korea 179,600,000,000

generation, wages, and linkages with 35 Malaysia 154,700,000,000

local firms, increases in technology, 65 Pakistan 33,820,000,000

intensive exports, range of new 90 Bangladesh 13,240,000,000

Source: BB Statistic Department Quarterly Report (July-Sept 2016)

12 JULY - SEPTEMBER 2017 | The Bangladesh Accountant

The overall benefits of FDI for

JULY - SEPTEMBER 2017 | The Bangladesh Accountant 13

14 JULY - SEPTEMBER 2017 | The Bangladesh Accountant

much job for the state-policy

JULY - SEPTEMBER 2017 | The Bangladesh Accountant 15

Md. Shahadat Hossain FCA

This article is based on speech Product (GDP) of a country.

16 JULY - SEPTEMBER 2017 | The Bangladesh Accountant

very much connected with the growing

JULY - SEPTEMBER 2017 | The Bangladesh Accountant 17

Contributions of Banks and

18 JULY - SEPTEMBER 2017 | The Bangladesh Accountant

development of a country. amount of nonperforming loans. growth of economy and meets

JULY - SEPTEMBER 2017 | The Bangladesh Accountant 19

In a typical capital market A properly functioning

20 JULY - SEPTEMBER 2017 | The Bangladesh Accountant

The Minimum Tax

3) Income from sources for 6) Besides, the minimum tax

JULY - SEPTEMBER 2017 | The Bangladesh Accountant 21

under different sections mentioned 10) Where any surcharge, additional

22 JULY - SEPTEMBER 2017 | The Bangladesh Accountant

b) An oil marketing company Under Section 53 the sources mentioned in clause

Sl. Amount that will be taken