Business
Bangladesh Govt mulls FTAs with China, India to face post-LDC challenges
Published
3 years agoon
The government is considering free trade agreements (FTAs) with China and India as part of its endeavour to strengthen ties with major trading partners to face post-LDC graduation challenges.
According to sources at the commerce ministry, China has already expressed its interest to sign a FTA with Bangladesh. On the other hand, the government has moved forward on a feasibility study for a Comprehensive Economic Partnership Agreement (Cepa) with neighbouring India.
The Bangladesh Foreign Trade Institute (BFTI) is conducting the feasibility study.
Given the large disproportionality in trade, signing FTAs with these two top import sources, however, will cause the government to lose a huge amount of tariff revenue and may affect the growth of local industries by exposing them to stiff competition with foreign companies. – which is also being considered by the government.
According to the National Board of Revenue (NBR), the country’s tariff revenue from imported goods was Tk77,150 crore in the 2020-21 fiscal year and the lion’s share of it came from goods imported from China and India. If Bangladesh goes into FTAs with these two countries, it will have to lose a huge amount of revenue.
In view of this, a section of economists recommend that the government first sign FTAs with countries with which Bangladesh has a positive trade balance.
Nonetheless, the government is considering FTAs as a tool to maintain the competitiveness in the export market in the long run.
According to sources, the Ministry of Commerce has prepared a list of countries and trade blocs – with which Bangladesh may sign FTAs – based on its own analysis and opinions of various departments concerned.
On 9 September this year, a meeting of the Sub-Committee on Preferential Market Access and Trade Agreement – one of the several sub-committees formed by the Prime Minister’s Office to prepare for the possible post-LDC graduation challenges – discussed the list, that include Nepal, Indonesia, Sri Lanka, Malaysia, Singapore, Asean, Canada, the United States, the Eurasian Economic Union, and Mercosur, a South American trade bloc – apart from India and China.
Russia has also proposed to Bangladesh to sign a protocol on trade cooperation, which is currently being reviewed by the commerce ministry.
Md Hafizur Rahman, director general (DG) of the WTO Cell of the commerce ministry, told The Business Standard that Bangladesh has to sign FTAs with its trading partners in the interest of retaining market access after its graduation from the LDC status.
Mentioning that feasibility studies are being done on Cepa with India and FTA with China, he said whether the agreements will benefit Bangladesh will be understood once the studies are over.
Thrust on FTAs for future market access
Bangladesh will lose duty-free access to various export destinations, including Europe, once it comes out of the LDC status. Besides, obtaining tariff benefits under the GSP Plus scheme in the European market is also uncertain as the country is required to comply with 27 international conventions to qualify for the facility.
To face this challenge, the government has been showing an urgency to sign FTAs with its major trading partners for the last few years. Businesses also have been demanding such agreements for a long time. Besides, economists have long been advocating FTAs.
Apart from considering FTAs, the government is making efforts to make sure preferential market access can be availed for extended times, sources at the commerce ministry said, adding the Ministry of Labor is in the process of amending labour laws in accordance with the guidelines of the European Union and the International Labour Organisation to this end.
This issue also came up for discussion at the meeting of the Sub-Committee on Preferential Market Access and Trade Agreement, the sources added.
The need for policy reform
In order to protect local industries or discourage the import of certain goods, Bangladesh levies supplementary duties, regulatory duties and other duties in addition to import duties.
WTO guidelines, however, urge gradual reduction in the tariff rates.
But, the last few years have not seen significant progress in this respect. As a result, no specific plan is evident as to how the NBR will cope with the revenue losses, if FTAs are signed with countries like China and India abruptly.
Syed Golam Kibria, member of the NBR, told TBS, “We have to move for FTAs in the long run but this requires preparation. In order to avoid the shock of a sudden drop in revenue, tariff rates will have to be reduced gradually within 2026. The revenue loss will have to be met by increasing the collection of income tax and VAT.”
On the other hand, economists are emphasising policy reform before signing FTAs.
International trade analyst Dr Mostafa Abid Khan told TBS that once Bangladesh becomes a developing country, it will no longer get unilateral benefits.
After its LDC-graduation, Bangladesh will have to offer some benefit to a country if it wants some benefit from that country, he mentioned, adding, “But the kind of trade- or investment-friendly policy needed for overall success of FTAs has not yet been framed.”
Stressing the need for enriching the country’s export basket, he said whether signing FTAs hurriedly will be beneficial for Bangladesh is questionable as it has a limited number of export items.
Expressing similar views, Abul Kasem Khan, former president of the Dhaka Chamber of Commerce and Industry and incumbent chairman of the Business Initiative Leading Development (BUILD), said, “We need to reform existing policies. It is necessary to make sure policies framed to implement FTAs do not hamper trade and commerce.
According to the Bangladesh Bank and the Export Promotion Bureau (EPB), Bangladesh exported $38.75 billion worth of goods to the world market in FY21, which was 15.10% higher compared to a year ago. On the other hand the country’s imports in FY21 stood at $65.59 billion, marking a 19.93% year-on-year growth.
Bangladesh imported $11.53 billion worth of goods from China in FY20, while its exports to the Chinese market that year amounted to merely $600 million.
At the same time, the country’s imports from India stood at $8.2 billion and exports to the country amounted to $1.26 billion in FY20.
The most influential and award-winning tech journalist based in Dhaka, Bangladesh. President of Bangladesh Tech Journalists umbrella association name Bangladesh ICT Journalist Forum(BIJF).He works for The Daily Ittefaq and is responsible for covering news, editing posts, reviewing devices, producing video reviews, and communicating with the reader base. Journalist, editor, technology, personal technology, reviews, features, analysis, media.
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Business
IT parks Corruption Undercover in 15 Projects Worth Tk8,500 Crore
Published
2 days agoon
December 3, 2024
The former ICT state minister, Zunaid Ahmed Palak, had boasted in 2016 that sprawling IT park in Kaliakoir would employ up to a million people over 10 years
But eight years on and having spent about Tk 600 crore of public funds, the 355-acre Bangabandhu Hi-Tech City has managed to create employment for just 1,500 people. The industrial park remains largely desolate despite incentives like a seven-year tax holiday and duty-free facilities for raw material import.
This is not an isolated case. The Bangabandhu Hi-Tech Park in Sylhet was taken up in 2016 for Tk 324 crore with the ambitious goal of generating 50,000 jobs. Less than 100 people work there. Although long past the deadline, the park is yet to be fully operational.
Out of the 18 companies allotted spaces in the hi-tech park, less than five have started operations and several pulled out even before initiating their business activities.
Till date, Tk 1,473 crore was spent on three hi-tech parks, three software parks and four incubation centres by the Awami League government, which envisioned these establishments as ICT and business innovation hubs that would employ tens of thousands, generate billions of dollars and position Bangladesh as a leading digital nation.
But their returns have been negligible thanks to faulty planning, corruption, poor execution and a lack of supportive ecosystem, found an investigation by The Daily Star involving interviews with over a dozen individuals connected to these parks and an analysis of hundreds of pages of documents.
“Such projects in the name of development in general and with the rhetoric of Digital Bangladesh in particular under long years of authoritarian regime were converted as a licence for partisan political mileage, illicit income and unaccountable wastage of public money,” said Iftekharuzzaman, executive director of Transparency International Bangladesh.
Take the case of the Bangabandhu Hi-Tech Park in Rajshahi, which was constructed between July 2016 and June 2024 for Tk 335.5 crore.
At best 500 people are employed across seven investor entities accounting for an investment of Tk 3 crore, said park officials.
Due to petty issues such as rainwater seeping into the buildings, a lack of generator services and other infrastructural challenges, the largest company, Fleet Bangladesh, recently left the park’s incubation centre, said its founder Khairul Alam.
“They also promised tax breaks that have yet to be fulfilled,” he said.
Over in Jashore, the Tk 253 crore Sheikh Hasina Software Technology Park managed to attract negligible investment.
Despite the abysmally low returns, Palak continued to tout the ventures as successful initiatives, creating the ground for authorising more than 80 such parks all over the country.
He named all the projects after the deposed prime minister Hasina and her family members to expedite approval and shield them from criticism and scrutiny, according to Bangladesh Hi-Tech Park Authority (BHTPA) officials involved with the proceedings.
“Tagging such projects with the names of family members of the fallen head of the government provided added impunity to the multidimensional wastage of mainly borrowed funds, which has also left a huge burden on the people,” said TIB chief Iftekharuzzaman, who also heads the interim government’s Anti-Corruption Reform Commission.
The parks have been renamed after the district concerned following the fall of the Hasina government on August 5.
At present, another dozen establishments are on the way that would cost about Tk 7,000 crore of public money.
The projects were often undertaken on a whim and almost always without concerted planning.
In similar areas, multiple overlapping projects were approved, including training centres and incubation centres established within hi-tech parks themselves.
For instance, a Tk 66 crore IT training and incubation centre project was initiated in 2019 in Singra, Natore—Palak’s constituency.
And yet, less than 30 kilometres away, or a half hour’s drive away in Natore Sadar is a similar project, which is now operational.
Still, another project worth over Tk 150 crore was approved in Singra. The project includes infrastructure such as a mini-stadium and a cineplex, reportedly intended for Palak’s political events, according to people aware of the proceedings.
Less than 50 miles from Natore Sadar, a Tk 355 crore hi-tech park is already under construction in Rajshahi.
In addition, there is a plan for another IT incubation centre within the Rajshahi Hi-Tech Park, and a separate project is under consideration in Charghat, Rajshahi.
Additional projects have been approved in Natore and Rajshahi’s surrounding districts, including Sirajganj, Chapainawabganj, Naogaon, Pabna and Bogura.
In Sylhet, where Tk 336 crore was spent on a hi-tech park, an additional IT park project was approved for over Tk 65 crore. In the same hi-tech park, another Tk 150 crore has been allocated for an IT park.
In Chattogram district, four overlapping establishments have been proposed — an IT park costing Tk 65 crore, another park for Tk 150 crore, a software technology park within the city and the Sheikh Kamal IT Business Incubator Centre at the Chittagong University of Engineering and Technology for Tk 117 crore.
The lack of transparency in the tender evaluation process led to significant corruption within the projects, according to BHTPA officials who spoke on the condition of anonymity.
For instance, an audit into BHTPA by the Office of the Comptroller and Auditor General highlighted six significant irregularities detailing a financial loss of Tk 50.58 crore in fiscals 2019-20 and 2020-21.
Those involved in project design, planning, budgeting, approval and implementation including relevant officials as well as political masterminds must be brought to justice to set examples for the future, Iftekharuzzaman said.
“Officials involved in these projects would face action if found guilty — we are proceeding slowly but surely, and no one will be spared,” Shish Haider Chowdhury, secretary to the ICT Division, told The Daily Frontline.
A committee has been formed to review these procurements.
He acknowledged that most of the projects were undertaken without proper planning.
The projects included large infrastructure in remote areas where there is no business case, he said.
“We are reducing several components of ongoing projects. For instance, if a building was initially planned for seven stories, but four stories are already completed, we are stopping it there. Even then, we remain uncertain if there will be a viable business case after trimming the projects,” Chowdhury added.
To lessen further loss, such projects should be frozen until objectively reassessed and appropriately redesigned to ensure value for money, Iftekharuzzaman said.
GSM Jafarullah, the managing director of BHTPA from August 1 last year, had his contractual appointment scrapped on September 3 by the interim government. His successor AKM Amirul Islam could not be reached for comment.
The Chinese company has had business transactions worth $500 million with different entities in the country over the last few years
The National Board of Revenue (NBR) has launched an investigation into ZTE Bangladesh – a subsidiary of the Chinese ZTE Corporation that has many business operations in different sectors of the country – to see if the company is involved in tax evasion.
As part of the investigation, the revenue board has already sent separate letters to different entities with whom it has its business deals.
With the aim of protecting the property safety of Bangladesh and upholding local laws and regulations, the revenue authority has launched the probe as the company’s operation is deemed to have an intention of tax evasion, a revenue official said.
The senior official of the NBR, who wished not to be named, confirmed to daily Frontline about the news of sending several letters to entities that are doing business with the ZTE. “We will check bank transactions of all related parties,” he said.
The ZTE Corporation is a Chinese major international provider of advanced telecommunications systems, mobile devices and enterprise technology solutions to consumers, operators, companies and public sector customers.
Listed on the stock exchanges of Hong Kong and Shenzhen, ZTE sells its products and services in more than 160 countries.
According to the Shenzhen Stock Exchange, the total revenue of the ZTE Corporation in 2019 was 9,073 crore Chinese Yuan.
Currently, it has both equipment and service contracts with the public and private ICT and Telecom and the power sector in Bangladesh.
According to the office of the Deputy Commissioner of Taxes, the company has had business transactions worth $500 million with different entities in the country over the last few years.
A senior NBR official told The Business Standard, obviously, the proportion of onshore service is high and is signed and delivered by the local Bangladeshi company, and the revenue and taxes should be attributed to the registered local company.
If the turnkey contract is actually signed by a Chinese incorporated company, the contractor will definitely arrange personal and technical teams to support the service implementation, he added.
The Chinese ZTE Corporation is operating businesses in Bangladesh through its subsidiary, he mentioned, adding that in this case the company can evade tax in two ways — transfer pricing and making transactions with related parties from China.
The NBR is investigating whether the company is involved with such practices.
The country’s first national data centre (NDC), which is located in the Kaliakoir hi-tech park, about 60 kilometres away from the centre of Dhaka, also has been constructed by this Chinese Tech Company.
Among private sector ZTE has a large business operation with Robi, is the second largest mobile operator of Bangladesh. Robi takes network expansion equipment and telecom services from ZTE.
However, Robi did not disclose the information on how many projects it has engaged the Chinese tech company and the volume of the projects’ cost and whether it incorporates the TAX in the bills.
Approached for its statement on this issue, Robi told The Business Standard, “Our relationship with our partner organisations form the core of our business strength. Just like any sensible company, we are not comfortable to divulge such information that will undermine our competitive edge in the market.”
The National Board of Revenue also issued a letter to the state-owned Teletalk Company Limited.
When contacted, Targhibul Islam, deputy general manager at Teletalk could not say in how many projects currently it has engaged the ZTE Corporation and whether it is incorporating tax in the bills or not.
The Bangladesh Telecommunications Company Ltd (BTCL) and Power Grid Company of Bangladesh (PGCB) are the major service receivers of the ZTE Corporation.
The NBR also sent separate letters to both the organisations to send related information concerning ZTE.
The revenue authority said it has decided to investigate the value of transactions between foreign firms and their associated enterprises and find out trade-based money laundering through misuse of the transfer pricing system.
In this regard, NBR has formed an investigation team for the ZTE and other multinational companies (MNCs) operating in Bangladesh.
An official said MNCs may engage in under-invoicing or over-invoicing practices while transferring prices to its associated companies located in other countries for purchasing goods and services to either reduce the level of payable duties and other taxes or siphon off money from the importing country.
The Business Standard contacted ZTE Bangladesh for its statement on the issue. However, the company has sought time to make an official statement.
Nonetheless, officials of the company unofficially told TBS that the company is filing tax returns to the NBR on a regular basis and doing business following the laws of the country.
Terming the serving of letters by the NBR a regular activity of the revenue board, they also said that they are cooperating with the NBR in the investigation process.
Business
Smart Technologies syndicate sips millions of dollars from IDRA automation
Published
3 months agoon
September 20, 2024
A syndicate led by Smart Technologies, backed by former finance minister AHM Mustafa Kamal’s daughter Nafisa Kamal, has allegedly siphoned off millions of dollars from a foreign-funded project of the Insurance Development and Regulatory Authority (IDRA).
Despite the $67 million project aimed at developing Bangladesh’s insurance sector, no tangible improvement in financial security has been observed, according to a media investigation.
A few companies, including Smart Technologies and eGeneration, have reportedly misappropriated project funds, with Nafisa Kamal positioned as the frontwoman, sources confirmed.
The World Bank-funded IDRA project was designed to enhance the administrative and documentation capacities of insurance institutions by increasing the use of technology.
A source revealed that the Implementation Monitoring and Evaluation Department (IMED) of the planning ministry could not take any action on the project due to Smart Technologies’ association with Nafisa Kamal. Consequently, most of the funds from the insurance development project were smuggled abroad in a ‘very systematic way’.
The Smart Technologies-led syndicate in the insurance sector development project included Nafisa Kamal’s NK Solutions, China-based Sinosoft, CNS, and Shameem Ahsan’s eGeneration. Project sources revealed that project management specialist Nazrul Islam Bhuiyan coordinated the entire process from IDRA to extract dollars.
Project Director Md Kamruzzaman reportedly refrained from opposing the syndicate, allegedly due to his ambition for a promotion in government service. He seemingly operated as a close ally of Nafisa Kamal. Project documents reveal that Nafisa Kamal got the IDRA project approved by showing joint ownership with almost every participating institution.
On 22 May 2023, project officials approved a contract for $1.21 million for a joint venture between NK Solutions and eGeneration, led by BASIS’s former president Shameem Ahsan.
In addition to this, Shameem and Nafisa’s syndicate received a further Tk17.7 million in local currency. Despite this substantial withdrawal, there has been no visible improvement in the research facilities at the Bangladesh Insurance Academy in Mohakhali.
On 30 March 2022, Project Director Kamruzzaman approved Smart Technologies as the second-lowest bidder (L-2) for the supply of IT and supporting network infrastructure, servers, and storage for the first phase of $10.3 million. In this phase, an additional Tk 26.3 million was allocated to Smart Technologies, which has flourished over the past decade with backing from the Awami League.
In February 2023, a further $9.68 million was awarded to Smart Technologies for IT infrastructure support for IDRA, general insurance, and life insurance. Again, Smart Technologies was the second-lowest bidder (L-2). According to project sources, Smart Technologies secured the entire sum despite completing less than 20% of the technical support required.
At the end of the last fiscal year, on 20 June, Smart Technologies signed a joint venture agreement with NK Solutions and Sinosoft, valued at $76 million. An additional Tk 23.1 million was allocated to the project in local currency.
On 21 August 2022, Chinese company Sinosoft received $11.1 million for developing the project’s website, customer relationship management system, and call centre. On the same day, Sinosoft was awarded an additional $9.17 million for insurance management software known as RegTech.
On 31 May 2022, another technology company, Computer Network System (CNS), was awarded Tk230.4 million for enterprise resource planning (ERP) software and email management. However, CNS failed to provide the original software licenses, contributing to the misappropriation of project funds.
On 24 May 2022, a joint venture between India’s Xerox India and Bangladesh’s IOE was approved for a $54 million contract to supply a ‘Document Management System’. In this phase, the syndicate received an additional Tk173.6 million.
It has been discovered that this money from the insurance project was invested by Shameem Ahsan, who is favoured by Salman F Rahman, in capital market generation. Gaining proximity to Hasina as the president of BASIS, he eventually became a director of the state-owned Agrani Bank.
According to project documents, on 21 December 2023, Project Director Kamruzzaman approved a $1.71 million contract for the supply of cybersecurity, ransomware, and endpoint protection products to Nafisa Kamal’s joint venture company NK Solutions, Express Systems, and Aspire Tech Services, with a 28-day deadline. In this phase, the syndicate received an additional Tk5.8 million.
Although official figures indicate lower amounts, investigations suggest that Tk8 billion from this project was diverted to Smart Technologies and Nafisa Kamal’s NK Solutions. Despite the three-year duration of the insurance development project, officials from IDRA confirm that the state of the financial security sector remains unchanged.
Following the fall of the Awami League government on 5 August 2024, Mustafa Kamal, also known as Lotus Kamal, and his daughter Nafisa Kamal moved to Singapore with their family.
“The World Bank project for insurance development has not progressed, but the funds are being withdrawn. Additionally, foreign software firms are involved, meaning money is being siphoned out of the country,” said a former president of the Bangladesh Association of Software and Information Services (BASIS), on condition of anonymity.
This former BASIS president suggested that if domestic firms were responsible for the technical support and software development for the insurance sector, the equivalent of $30 million could have been saved.
Nafisa Kamal and Smart Technologies Chairman Mazharul Islam, Managing Director Zahirul Islam did not respond to phone calls regarding the irregularities in the project.
Source:Daily Sun
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