Export Import and Remittance Performance of AB Bank Limited

INTRODUCTION:

For partial fulfillment of the requirement of MBA Evening program, Professor M. Muzahidul Islam, Department of Banking, University of Dhaka assigns me to prepare a internship report on “Export, Import & Remittance Performance of AB Bank Limited” with reference to country performance over the last five years to match practical knowledge with that of theoretical which was acquired throughout the study of the program.

AB Bank Limited (hereinafter referred to as AB), the first private sector bank under Joint Venture with Dubai Bank Limited, UAE was incorporated in Bangladesh on 31st December 1981 as Arab Bangladesh Bank Limited under the Companies Act, 1913 and started its operation with effect from April 12, 1982 and listed in the Dhaka Stock Exchange Ltd and Chittagong Stock Exchange Ltd. The Head Office is located at BCIC Bhaban, 30-31 Dilkusha C/A, Dhaka, Bangladesh.

Dubai Bank Limited (name subsequently changed to Union Bank of the Middleast Limited) off-loaded their investment in AB Bank Limited in 1987 and the shares held by them in the Bank were sold and transferred to Bangladeshi Sponsor Shareholders.

AB Bank is known as one of the leading banks of the country since its commencement 29 years ago. It continues to remain updated with the latest products and services, considering consumer and client perspectives. AB Bank has thus been able to keep their consumer’s and client’s trust while upholding their reliability, across time. AB has 82 branches in the country and one full fledged branch at Mumbai, India and a fully owned subsidiary called AB International Hong Kong Ltd at Hong Kong and also has representative office at UK and Myanmar to facilitate its trade business. AB has been maintaining very strong correspondent relationship with world leading banks, exchange houses and money transfer agencies to boost up its trade business. From the inception, AB has been contributing in international trade business of the country.

 OBJECTIVES OF THE STUDY:

The prime objective of this practical orientation to take a real life
exposure and at the same time clarifies our knowledge with practical situation. Other objectives are;

• To fulfill the course requirement of MBA Evening Program
• To relate our banking knowledge with real banking activities
• To gather knowledge about the subject matter

The study is also aimed to have a good understanding on what AB Bank’s contribution towards Export, Import & Remittance performance of the country over the last couple of years.

 METHODOLOGY:

This study is characterized by flexibility with respect to the methods because formal research protocol and procedures are not applied. The data and information has been collected both from primary and secondary sources like bank’s monthly statements, annual reports, websites, books of accounts, internal circulars, manuals and guide lines as well as Bangladesh Bank’s websites, Journals, Newspapers and so on. The Daily Star & The Daily Ittefaq reports & Bangladesh Bank’s Monthly Economic Trend and other related Journals were also studied.

 RATIONALE OF THE STUDY:

The internship report has been assigned me for partial fulfillment of MBA Evening program with a view to provide with modern theoretical and practical knowledge in real life environment. So, the report is the partial requirement of the program. The rationale also lies due to the boosting up of Export, Import & Remittance business of the country over the years resulting a remarkable reserve of country’s foreign exchange position wherein private sector banks are playing a pivotal role and continuously doing product differentiation and innovative works to add more customer value and building and maintaining strong customer relationship.

So, the study has helped me to find out the AB’s contribution in light of the country’s performance in respect of Export, Import and Remittance business over the last couple of years.

SCOPE AND LIMITATION:

The study tried to cover AB Bank’s contribution in respect to the overall country performance in terms of export, Import & Remittance business. So, the subject matter is very much wide and interesting. But there was time constraint in preparing the report. It would more fruitful if it would have been possible to cover all the public and private sector banks’ performance individually. To capture all the banks’ individual contribution requires long time and resources which was not possible to invest. Furthermore, all the data / information not found complied and edited rather they were raw as the same are not normally incorporated in the annual reports of individual bank. Besides, some information as per expectation was also not found available. The scope of the report is limited as it only covered AB Bank’s performance and contribution.

COMPANY INFORMATION: AB’S PROFILE:

a. BACKGROUND:

AB Bank Limited (hereinafter referred to as AB), the first private sector bank under Joint Venture with Dubai Bank Limited, UAE was incorporated in Bangladesh on 31st December 1981 as Arab Bangladesh Bank Limited under the Companies Act, 1913 and started its operation with effect from April 12, 1982 and listed in the Dhaka Stock Exchange Ltd and Chittagong Stock Exchange Ltd. The Head Office is located at BCIC Bhaban, 30-31 Dilkusha C/A, Dhaka, Bangladesh.

Dubai Bank Limited (name subsequently changed to Union Bank of the Middleast Limited) off-loaded their investment in AB Bank Limited in 1987 and the shares held by them in the Bank were sold and transferred to Bangladeshi Sponsor Shareholders.

AB Bank is known as one of the leading banks of the country since its commencement 29 years ago. It continues to remain updated with the latest products and services, considering consumer and client perspectives. AB Bank has thus been able to keep their consumer’s and client’s trust while upholding their reliability, across time.

During the last 29 years, AB Bank Limited has opened 82 Branches in different Business Centers of the country, one foreign Branch in Mumbai, India and also established a wholly owned Subsidiary Finance Company in Hong Kong in the name of AB International Finance Limited. To facilitate cross border trade and payment related services, the Bank has correspondent relationship with over 220 international banks of repute across 58 countries of the World.

AB Bank believes in modernization. The bank took a conscious decision to rejuvenate its past identity – an identity that the bank carried as Arab Bangladesh Bank Limited for twenty five long years. As a result of this decision, the bank chose to rename itself as AB Bank Limited and the Bangladesh Bank put its affirmative stamp on November 14, 2007.

The Bank decided to change its traditional color and logo to bring about a fresh approach in the financial world; an approach, which like its new logo is based on bonding, and trust. The bank has developed its logo considering the contemporary time. The new logo represents our cultural “Sheetal Pati” as it reflects the bonding with its clientele and fulfilling their every need. Thus the new spirit of AB is “Bonding”. The Logo of the bank is primarily “red”, as red represents velocity of speed and purity. Our new logo innovates, bonding of affiliates that generate changes considering its customer demand. AB Bank launched the new Logo on its 25th Anniversary year.

In spite of adverse market conditions, AB Bank Limited which turned 27 this year, concluded the 2008 financial year with good results. The Bank’s consolidated profit after tax amounted to Taka 230 crore which is 21% higher than that of 2007. The asset base of AB grew by 325 from 2007 to stand at over Tk.8400 crore as at the end of 2008.

The Bank showed growth in loans and deposits. Deposit of the bank rose by Tk.1518 crore, i.e. 28.45% while the diversified loan portfolio grew by over 30% during the year and recorded a Tk.1579 crore increase. Foreign trade business handled was Tk.9898 crore indicating a growth of over 40% in 2008.

The Bank maintained its sound credit rating in 2008 to that of the previous year. The credit rating Agency of Bangladesh Limited (CRAB) awarded the Bank an A1 rating in the long term and ST-2 rating in the short term.

The Bank has been released from Bangladesh Bank watch list called Early Warning System on November 30, 2009 and Bangladesh Bank has also withdrawn the observer from the board.

AB Bank commits to the nation to take a lead in the banking sector through not only its strong financial position but also through innovation of products and services. It also ensures creating higher value for its respected customers and shareholders. The bank has focuses to bring services at the doorstep of its customers and to bring millions into banking channels those who are outside the main stream banking arena. The bank since its inception has emphasized on international trade and also for boost up of remittance business through official channel and as such it has established relationship with a number of exchange houses and money transfer agents like Western Union Money Transfer, Money Gram etc. The bank has successfully completed its full automation project in mid 2008. It envisages enabling customers to get banking services within the comfort of their homes and offices.

AB Bank has continuously invests into its biggest assets, the human resource to drive forward with its mission “to be the best performing bank in the country”.

AB is recognized as the people’s choice, catering to the satisfaction of its cliental. Their satisfaction is AB’s success.

Over the years, the Bank has contributed in many ways towards development of the private sector banking in the country. Many of the big industries in different fields of the economy has AB’s name attached and the Bank remains a proud development partner of these industrial houses over the years. AB thrived on customer service and relationship banking which brought new dimensions to this particular service sector and many more new entrants to banking sector followed AB.

b. BANK’S VISION & MISSION:

BANK’S VISION

Every company has their own vision. By fixing vision they can set their future growth. Vision statement of AB Bank limited is

“To be the trend setter for innovative banking with excellence & perfection”

 BANK’S MISSION

“To be the best performing bank in the country”

c. ETHICAL CODES:

AB Bank recognizes that its first duty is towards the customers and tries to act in all matters in a manner that merits public trust and confidence.

AB bank has an informal code of ethics that more or less deals with confidentiality, relation with customers, accounting, auditing and record keeping, transparency, commitment and general business conduct and so on.

d. CORPORATE SOCIAL RESPONSIBILITY:                 

AB is aware of its responsibility to the society to which it belongs. AB Bank has recognized the expectations of its valued customers and shareholders towards its commitment for the welfare of poorer sections of the society. Against this backdrop, AB Bank Foundation was created in the later part of 2001. Its activities were further reorganized and efforts intensified in welfare related initiatives.

The foundation and employees of the bank took part in diverse charitable and voluntary programs. The main objective of the Foundation was to invest part of the bank’s profit in poverty alleviation and community welfare.

To add the above, AB bank has also participated in major sponsorship programs in the area of sports such as Football, Official Partner of BCB, hokey to popularize the same among the public. The bank on its own organized friendly cricket matches between a few private banks to promote fellow feelings within the banking community.

In all its business decisions, AB bank strictly adheres to environmental and safety regulations and no way did the bank compromise on ecological imbalance.

 INDUSTRY INFORMATION:

GLOBAL ECONOMIC TREND:

Global economy or the world economy is largely centered around a few large or developed economies of the world, namely the USA, UK, France, Germany and Japan, some newly emerging economies of the world such as India, China and some South East Asian economies and certain pockets of Latin America like Brazil, Mexico and Argentina. The economic recession in the US economy in 2001 was downplayed and a surge in inventories has not proven sufficient to lead the economy on a sustained path of investment recovery.

More so, growth in the US economy seems to be driven by increased consumer spending on consumer goods such as cars and electronic appliances. Although tax cuts and other measures have provided a temporary stimulus for higher disposable incomes, employment levels have actually been falling and with decline in equity rates and a general rise in international oil prices, the USA is perceived by many to be heading to a second plunge for recession in the new millennium.

As with the case of Europe, Germany’s private consumption and demand are failing to take-off and, with the appreciation of the Euro, their exports have also been hit hard. Labour market inflexibility and lack of sound demand management policies have created growth in domestic demand of only 3.9% in UK, 1.5% in Germany and 2.3% in France between 1996 and 2000. Japan, the only developed economy of Asia, has experienced a rapid growth in its industrial production and that has also been reflected in the positive growth of its exports. But domestic demand being low remains its problem growing only at 1.2% in the period between 1996 and 2000. Japan suffers from a problem of deflation and although there has been no real fall in real income levels, consumers live in uncertainty and postpone purchases which bring about further deflation.

In terms of investment flows and movement of capital, Asian exporters have benefited from the stability in US markets whereas restrictive fiscal policies for the Latin American economies have resulted in reduced investment flows to the country as also a decline in earnings from the countries’ exports. African economies have by and large been uninfluenced by world capital markets. But the net private capital inflows are said to reduce for the developing economies as whole, falling by 11.3% between 2001 and 2002.

Latin American countries as described above are going through a recession with prices of the country’s exports falling by 10 to 30 percent. Coupled with reduced investment flows, South America is at present reeling under severe depression.

BANGLADESH ECONOMY:

Country’s foreign exchange reserve crossed the US $ 4.0 billion mark for the first time in the history at the beginning of the year 2007. Present level of reserves covers for over three months of imports of the country. Exports and remittances from the Non-resident Bangladeshis (NRBs) continued to achieve strong growth in the year 2006 while import growth slowed down to a sustainable level. Exports grew 21.6 percent to US$ 10,422 million over the previous year. At the same time, remittances by the NRBs grew by 24.8 percent at US$ 4,802 million. While, total import was registered at US$ 13,301 million showing a growth of 12.1 percent during the year.

Export earnings achieved more than expected growth in the post MFA situation due to higher export demand in the US and the European markets. Impressive growth of 35.4 percent was achieved in the knitwear sector driven by a volume growth of 37.4 percent. Country’s export of raw Jute also experienced significant growth of 54 percent over the year 2005. More significantly, country is gradually shifting towards a diversified export base. Bangladesh has been included in the “next eleven” a group of nations having economic growth potential by Goldman Sachs.

Relative slowdown of total import was mainly attributable to the reduced import of food grains, milk products, spices and most other edible products. However, import of industrial raw materials and capital machineries increased signifying the dynamism in investment activities in the country. The commodities whose import payments, however, increased significantly include crude petroleum and POL reflecting the volatile international market for those.

The overall balance of payments recorded a significant surplus of US$ 365 million (US$67 million in 2005) at the end of the year 2006 reflecting a notable improvement in the current account balance and a larger surplus in the capital account.

Despite noteworthy performance of the external sector, the foreign exchange market experienced substantial pressure in the year 2006. Pressures on Taka-US Dollar exchange rate generated by continued price hike for import of petroleum and many other major commodities coupled with higher growth of lending to the private sector (18.3 percent) created all such pressure situation. In 2006, the nominal Taka-US Dollar exchange rate depreciated by 8.6 percent in the overall. However, the real effective exchange rate of Taka depreciated by 5.3 percent providing a boost to the country’s external competitiveness.

Inflation in the economy showed upward trend in 2006. Pressures on consumer prices emerged mainly through rising import prices of fuel, food items, other consumer items and production inputs feeding into domestic prices. Depreciation of Taka further contributed to rising consumer prices. The annual average inflation increased to 7.2 percent in June, 2006. The export, import and remittance business of the country has increase over the years but the growth of remittance performance is decreasing trend in the current fiscal year.

The economy of Bangladesh is a rapidly developing market-based economy. Its per capita income in 2010 was est. US$1,700 (adjusted by purchasing power parity). According to the International Monetary Fund, Bangladesh ranked as the 47th largest economy in the world in 2010, among the Next Eleven or N-11 of Goldman Sachs and D-8 economies, with a gross domestic product of US$269.3 billion. The economy has grown at the rate of 6-7% p.a. over the past few years. More than half of the GDP belongs to the service sector; a major number of nearly half of Bangladeshis are employed in the agriculture sector, with RMG, textiles, leather, jute, fish, vegetables, leather and leather goods, ceramics, fruits as other important produce.

Remittances from Bangladeshis working overseas, mainly in the Middle East are the major source of foreign exchange earnings; exports of garments and textiles are the other main sources of foreign exchange earning. Ship building and cane cultivation have become a major force of growth. GDP’s rapid growth due to sound financial control and regulations has also contributed to its growth. However, foreign direct investment is yet to rise significantly.

Following is a chart of trend of gross domestic product of Bangladesh at market prices estimated by the International Monetary Fund with figures in millions of Bangladeshi Taka. However, this reflects only the formal sector of the economy.

Source: website

The global financial crisis has not had a major impact on the economy. The World Bank predicted economic growth of 6.5% for current year. Foreign aid has seen a decline of 10% over the last few months but economists see this as a good sign for self-reliance. There has been 18% growth in exports over the last 9 months and remittance inflow has increased at a remarkable 25% rate. The recent trend can be shown through following table;

Source: website

OVERALL BANKING SECTOR:

Financial sector reforms to strengthen the regulatory and supervisory framework for banks made headway in 2006 although at a slower than expected pace. Overall health of the banking system showed improvement since 2002 as the gross Non-performing Loans (NPL) declined from 28 percent to 14 percent while net NPL (less Provision) reduced to 8 percent from 21 percent. This led significant improvement in the profitability ratios. Although the Private Commercial Banks (PCB) NPL ratio registered a record low of 6 percent, the four Nationalized Commercial Banks (NCB) position are still weak and showed very high NPL at 25 percent. The NCBs have large capital shortfalls with a risk-weighted capital asset ratio of just 0.5 percent (June 2006) as against the required 9 percent. For the PCBs risk-weighted capital asset ratio stood at 10 percent.

Bangladesh Bank issued a good number of prudential guidelines during the year 2006 and the first quarter of 2007 which among others relate to (i) rationalization of prudential norms for loan classification and provisioning, (ii) policy for rescheduling of loans, (iii) designing and enforcing an “integrated credit risk grading manual”, (iv) credit rating of the banks, and (v) revisions to the make-up of Tier-2 capital.

Besides, recent decision of the Government to corporatize the remaining three NCBs along with the initiative to sale the Rupali Bank are bound to usher in changes in the banking sector competitiveness aspect. Bangladesh Bank has also taken up the task of implementing the Basel II capital accord. Further, the recent enactment of the Micro-credit Regulatory Authority Act (MRAA) for the regulation of the Micro Finance Institutions (MFI) has been a major development in the year 2006.

Since 1998 CAMEL rating of banks gradually improved and in 2006 Bangladesh Bank updated this rating model by incorporating the market risk and the new model is known as CAMELS.

The commercial banking sector dominates Bangladesh’s financial sector. Bangladesh Bank is the Central Bank of Bangladesh and the chief regulatory authority in the sector. The banking system is comprised of four state-owned commercial banks, five specialized development banks, thirty private commercial Banks and nine foreign commercial banks. The Nobel-prize winning Grameen Bank is a specialized micro-finance institution, which revolutionized the concept of micro-credit and contributed greatly towards poverty reduction and the empowerment of women in Bangladesh.

In our country, the banking sector today is undergoing significant changes with respect to regulations, business risks, modus operandi and level of services.  The Banking sector is also runing with hiper competitve environment as a number of private and commercial banks in the economy. Above all, the Bank Management is faced with the most important goal to ensure an acceptable level of return on shareholders’ investment.

Industry’s growth is moving upward and an upsurge in long-term demand attracts new entrants to the market and encourages competition. There have been changes in who buys the product and how they use it. Customers are using the same banking services in a new way, for example-now they can do their banking transaction without moving to bank and using new digital products like ATM, access card, credit card etc. and this shift is forcing banks to cope their customers service offerings, opening new ways to market their product.

As far as the banking industry is concerned the industry has reached to a stage between growth and maturity face. As the banking sector has improved its service quality and struggling for new features to add as it has passed the growth stage. However this industry is vigorously searching out the new market segment to enter. Banking industry is still searching for new opportunities to gain additional sustainability. Moreover, an enormous number of companies are focusing this industry as a very potential and profitable sector to invest. But since last December, the banking sector is facing tremendous liquidity crisis commence from central bank’s tightening policy resulting the rise of lending and deposit rates.

The banks are putting extra effort in recovering of loans rather disbursing of new ones. Most of the private banks stumbled to match with their LD-Deposit ratio as per central bank’s guidelines. So, the trend of steady growth of banking sector in the current calendar year may be slowdown though the public sectors and foreign banks are comparatively in better situation due to strategic reason.

 FINDINGS & ANALYSIS:

AB Bank Limited emerged with a notion of private sector banking in Bangladesh. AB Bank commits to nation to take a lead in the Banking sector through not only its strong financial position, but also through innovation of products and services. It also ensures creating higher value for its respected customers and shareholders. The bank has focused to bring services at the doorstep of its customers, and to bring millions into banking channels those who are outside the mainstream banking arena. Innovative products and services were introduced in the field of Small and Medium Enterprise (SME) credit, Women’s Entrepreneur, Consumer Loans, Debit and Credit Cards (Local & International), ATMs, Internet and SMS Banking, Remittance Services, Treasury Products and Services, Structured Finance for Corporate, strengthening and expanding its Islamic Banking activities, Investment Banking, specialized products and services for NRBs, Priority Banking, International Trade i.e. export & import business, Foreign remittance and Customer Care. The Bank has successfully completed its automation project in mid 2008. It envisages enabling customers to get banking services within the comfort of their homes and offices. The study focused export, import and remittance performance of AB Bank with reference to country’s overall performance over the last couple of years. This report also tried to find out the AB’s contribution in overall country’s performance and also tried to point out the major aspects of import, export and remittance business of AB. The following pages highlight the major findings on the subject matter followed by necessary analysis with required tables and graph;

 EXPORT: COUNTREY PERSPECTIVE:

One of the major achievements of Bangladesh economy over the last three decades is the robust growth of exports, which has put the country in a sound condition. At the same time, Bangladesh was in the process of graduating from a predominantly aid-dependent economy to a trading economy. Bangladesh’s export sector registered an average growth rate of 14.53 per cent per annum throughout the 1990s which was also remained steady afterwards.

The total export receipts of Bangladesh (including exports of EPZ) during the years, 2009-2010 and 2008-2009 amounted to Tk. 102148.2 crore and Tk.97498.1 crore or US$ 14763.8 million and US$ 14170.7 million respectively.

The overall position of export receipts in Taka and US dollar for the years 2009-2010, 2008-2009 and 2007-2008 are shown in the following tables along with Export Receipts by category;

Source: Statistics Department, Bangladesh Bank.

The table shows that the export performance increased over the years both from EPZ and other than EPZ.

1. COMMODITY WISE EXPORT RECEIPTS:

Source: www.bangladeshbank.org

The above table shows that the main export item of the country is ready made garments with 77% of total country’s export and other major export items are jute items (total 5.7%), fish items 3.7%, leather items 5.5% and it is revealed that the number of exportable items that have good contribution are very limited and the contribution of other items are negligible. The following graph shows item-wise export in the year 2009-10;

The following table shows last two years country’s merchandise wise export with detailed break up;

            Sources: www.bangladeshbank.org

From the above table it is revealed that export of RMG, Jute goods & Leather items increased in the fiscal year 2009-10 but export of tea, frozen fish & other items decreased in the said period. It also shows that the growth of jute goods, home and engineering products are highly remarkable.

b. COUNTRY-WISE EXPORT RECEIPTS OF BANGLADESH:

                                                                                                            Fig: Tk. in Million

Source: Statistics Department, Bangladesh Bank.

It is revealed from the above table that the USA is the single one destination of Bangladeshi goods, Canada and European countries are also major importing countries of Bangladeshi products.

EXPORT: AB BANK PERFORMANCE:

a. YEAR-WISE EXPORT:                                                               Fig: in M$

 The above table shows that AB Bank’s export position increased over the years. It is also notable that the ready made garments items export increased remarkably which is not seen in case of other items. So, the export business concentration was in the area of frozen fish, readymade garments, knitwear and other indigenous products. The export performance of AB can be shown in following graph; the graph shows steady growth of export performance over the last couple of years. The graph also indicates that the total export business was increased dramatically in the fiscal year 2009-2010.

b. COMMODITY-WISE EXPORT BY AB BANK:        

The following graph shows that AB’s export business is concentrated on ready made garments items and it is 86.47% in the fiscal year 2009-2010. The others are only 13.53% which includes frozen fish and dry food etc. So, it is very much risky as there is no product diversification.

AB Bank’s foreign correspondence relationship is spread across the world covering important financial centers including important financial houses. This network of over 300 correspondents has helped the bank in expanding its international trade.

c. AB’s CONTRIBUTION:

The following table reveals year-wise AB’s contribution in total export of the country;

                                                                                                            Fig in M$

 Sources: Compiled from monthly statements of AB Bank & Bangladesh Bank  

                 website

It reveals that AB’s contribution in overall export performance of the country is very poor. The performance decreased in the fiscal year 2008-09 which was 2.34% but increased in the fiscal year that is 2.95% but could not reach in 3% though the growth is increasing.        d. FINDINGS RELATED TO EXPORT:

1. AB’s contribution in overall export performance of the country is very poor i.e. around 3% only
2. The Export Business of AB increased over the years both from EPZ and other than EPZ
3. The main export items of the country is ready made garments with 77% of total country’s export and other major export items are jute items (total 5.7%), fish items 3.7%, leather items 5.5% but AB’s concentration is only ready made garments
4. It is revealed that there is lack of diversity in export items
5. USA is the single one destination of Bangladeshi goods, Canada and European countries are also major export destination of Bangladeshi products
6. There is lack of diversification of market of export items
7. AB’s export list does not include tea which is one of the major export item of the country
8. It is notable that the ready made garments export increased remarkably over the years which is not seen in case of other items
9. The study reveals that export business was increased dramatically in the fiscal year 2009-2010
10. AB’s export business is concentrated on ready made garments items and it is 86.47% in the fiscal year 2009-2010. The others are only 13.53% which includes frozen fish and dry food etc. So, it is very much risky as there is no product diversification
11. AB Bank’s foreign correspondence relationship is spread across the world covering important financial centers including important financial houses. This network of over 300 correspondents has helped the bank in expanding its international trade

IMPORT: COUNTRY PERSPECTIVE:      

Bangladesh is an import based country and its import is always been higher than its export. The country’s hard earned foreign currency is expensed mainly for import purpose. If we look back and import trend we would see that the dependency of country’s import has been decreasing year by year though the majority items are to import. The major import items of Bangladesh are food and food grains, machineries, spare parts, petroleum and raw materials etc. most of the imports of the country are made in the form of cash mode and some imports are made in the form of grants, loans and others.

a. IMPORT BY MODE OF FINANCING:

The import payments by mode of Financing are shown through following table for the last two fiscal years;

 Source: www.bangladeshbank.org

The above table shows that most of the import payments are in the form of cash which is 90.4% and the import under loans and grants are negligible. The import under IDB short term loan is only 3.1% and the percentage of import payment under EPZ is 5.8%. From the above table it is also notable that the import was increased remarkably in the year 2009 -2010 than the previous year.

The country’s import payments as per mode of financing for the last fiscal year i.e. 2009-10 can be shown in following graph;

                                                             The above graphs, facts and figure reveals that the country’s hard earned foreign currency is spent for import payments in the form of cash.

b. CATEGORY-WISE IMPORTS:

                                                                                                                                                (In million US dollars):

 Sources: Bangladesh Bank website

It is revealed that import of the most of the items increased marginally it is a good sign in the context of the country as a whole as the import dependency is decreasing trend

The major import items are food and food grains, machineries and accessories items etc.

The major import items can be shown in percentage for the fiscal year 2009-10 through the following graph;

 c. YEAR-WISE IMPORT:

The following table shows that the total import increased only 5.47% in the fiscal year 2009-10 than the previous year which was 4.06%. The table shows that the import growth increased in the last fiscal year but the trend is much lower than the fiscal year 2006-07 and fiscal year 2007-2008 which was 16.35% and 26.07% respectively. The statistics reveals the lowering dependency on trend of country’s total import.

 d. IMPORT PAYMENTS WITH TOP TWENTY COUNTRIES:

Source: www.bangladeshbank.org

The foregoing table depicts that major import comes to Bangladesh from China that is 17.7% in the fiscal year in 2009-2010. The other major countries are India 15%, Singapore 7.5%, Japan and Malaysia 4.9% and Republic of Korea is 3.9%. It is interesting to notice that Bangladesh imports mainly from Asian Countries whereas Bangladesh export destination is USA, Canada and European countries.

e. CONTINENT WISE IMPORT:

The major import sources for Bangladesh for the fiscal year 2009-10 can be shown through following diagram;

 The above table shows that chunk of the import comes from Asian countries that are 71.20% and followed by EU countries with 5.30% and 4.30% from North American countries.

 IMPORT: AB BANK PERFORMANCE:

International trade is one of the important components of the AB Banks total business exposure. The growth of AB’s import business over the last couple of years is encouraging.

a. YEAR WISE IMPORT:

The following table shows 16.70% growth in the fiscal year 2009-10. Imports at the end of the last fiscal year stood at US$865.82. Major Import items were Raw materials, Food & Food Grains Capital Machinery, Textile & Accessories and Ship Breaking etc. The import performance of AB Bank with year and commodity wise are as under; 

                                                                                                Fig: in M$

Sources: AB’s Monthly Commodity Statement

AB’s year wise import performance can be shown in the following graph which shows a steady growth of import business over the last couple of years;

b. COMMODITY-WISE IMPORT OF AB BANK:

 The commodity wise import of AB Bank Limited for the year 2009-10 can be shown in following graph;

 AB’s major import items are raw materials 17.47%, food and food grains 12.33%, machinery 10.81%, textile & accessories 6.34% and ship breaking 5.88% that indicates concentration on limited items.

c. AB’s CONTRIBUTION:     

The following table reveals year-wise AB’s contribution in total import of the country;

                                                                                                            Fig. in M$

 The above table shows that AB’s contribution in overall country’s import performance is on an average 3.42% over the last four years. AB’s import performance declined in the fiscal year 2008-09 compared to country’s performance.

The following graph shows the AB Bank’s contribution in over all country’s import performance in terms of total import;

d. FINDINGS RELATED TO IMPORT:

Foregoing analysis and interpretation reveals the following major findings related to import business of AB Bank;

1. AB’s import payments are mainly in the form of cash not in the form of loans, grants whereas in case of total country’s import payment 90.4% is in the form of cash and others are IDB short term loan is only 3.1%, EPZ is 5.8%
2. It is notable that the import was increased remarkably over the years and it was highest in the fiscal year 2009 -2010
3. It is revealed that import of the most of the items increased marginally it is a good sign in the context of the country as a whole as the import dependency is decreasing trend
4. The major import items are food and food grains, machineries and accessories items etc.
5. Imports at the end of the last fiscal year stood at US$865.82 and it was 16.70% higher than the previous year but the total country’s growth was increased only 5.47% in the fiscal year 2009-10 than the previous year.
6. The country’s import increased gradually but the growth trend is decreasing whereas AB’s growth was increasing except fiscal year 2008-09
7. Major import comes to Bangladesh from China that is 17.7% in the fiscal year in 2009-2010. The other major countries are India 15%, Singapore 7.5%, Japan and Malaysia 4.9% and Republic of Korea is 3.9%
8. It is interesting to notice that Bangladesh imports mainly from Asian Countries whereas Bangladesh major export destination is USA, Canada and European countries.
9. AB’s major import items are raw materials 17.47%, food and food grains 12.33%, machinery 10.81%, textile & accessories 6.34% and ship breaking 5.88% that indicates concentration on limited items
10. AB’s contribution in overall country’s import performance is on an average 3.42% over the last four years and it was 3.65% in the last fiscal year.
11. AB’s import performance declined in the fiscal year 2008-09 compared to country’s performance

REMITTANCE: COUNTRY PERSPECTIVE

Remittances are inflows of foreign exchange into the country from our workers overseas. ‘Foreign remittance’ means purchase and sale of freely convertible foreign currencies as admissible under Exchange Control Regulations of the country. Purchase of foreign currencies constitutes inward foreign remittance and sale of foreign currencies constitutes outward foreign remittance.

Remittance is a catalyst in Bangladesh’s poverty alleviation and economic growth. It recorded a 22.32 percent growth in last fiscal year compared to FY2007-08 despite downbeat projections by several donor agencies amid the ongoing global recession.

However remittance figures stood at $10 billion in fiscal 2008-09 and continued in steady growth taking the foreign currency reserve to cross $10 billion.

Usually remittance growth in Bangladesh hovers around 12-16 percent in a fiscal year, although the growth hit a record high at 32 percent in fiscal 2007-08.

In fiscal 2008-09 remittance inflow was $9,681.78 million, while it was $7,914.78 million in fiscal 2007-08.

According to the Bangladesh Economic Review, more than 55 lakh Bangladeshis were working abroad till April 2009. In the first five months of 2009, the number of expatriate workers fell to 2,12,332. The number was 3,77,894 in the January-May period last year.

Even though the number of workers fell, a positive impact was seen in the overall remittance flow as the export of skilled manpower increased. The recession also prompted workers to remit more.

The Economic Review said export of skilled manpower increased by 70 percent to 2,81,444 in 2008 from 1,65,344 in 2007.

The export of semi-skilled manpower decreased by 27 percent, while low-skilled manpower export dropped by 8 percent in 2008.

a. TREND OF MANPOWER EXPORT:

The recent trend of manpower export is decreasing as shown in the following graph;

Sources: The Daily Ittefaq, May 17, 2011

The following graph shows declining trend of manpower export of Bangladesh over the years;

b. YEAR WISE REMITTANCE:

The following table shows the year wise remittance inflows into Bangladesh;

Source: www.bangladeshbank.org

The above table shows the steady growth of inward remittance over the years despite of economic meltdown and hindrance in the way of manpower export. The study reveals that the remittance inflow increases remarkably through official channels as the private sector banks maintaining correspondence relationship with the world leading banks, money transfer agents and exchange houses. The promotional activities of the banks also facilitated to increase foreign currency inflow through official channel. The government has also encouraging to boost up remittance inflow through official channel.

c. TREND IN THE CURRENT FISCAL YEAR:

The following table shows the trend of month wise remittance inflow in the country in the current fiscal year i.e. for the year 2010 -2011;

  Source: Monthly Economic Trends, Statistics Department, Bangladesh Bank,

The trend of remittance inflow in the country in the current fiscal year i.e. 2010-2011 can be shown in month wise in the following graph which reveals that the trend went down in September but afterwards it increased and went steady for the month of November through February and a sharp rise in the month of March.

d. ANNUAL GROWTH OF REMITTANCE:

The above facts and figures show the remittance inflow is increasing but its growth is losing momentum which is shown by following graph as the exchange rate of the dollar against taka has gone up in the informal market and due to low interest rates in case of expatriates investing their money in various savings instruments like Wage Earners’ Development Bonds and US Dollar Premium & Investment Bonds. Slow down of manpower export also played role in slower remittance growth. In fiscal year 2008-09 the remittance growth was about 22%, which came down to 13% last year.

 Source: The Daily Star, April 17, 2011, page B1

e. COUNTRY WISE REMITTANCE:

We can also see the countrywise remittance of some major source of remittance sending countries over the years in the following table;                                                                                                                                                     Fig: Taka in crore

 Source: Monthly Economic Trends, Statistics Department, Bangladesh Bank

The above table shows that the most of the country’s foreign remittance come from the Saudi Arabia, UAE, UK, Kuwait and USA but the growth trend is decreasing and in case of Malaysia the remittance inflow is not remarkable.

REMITTANCE: AB BANK PERFORMANCE:

Inward remittance covers purchase of foreign currency in the form of
foreign T.T, DD, and bills etc. received from abroad favoring a
beneficiary in Bangladesh. AB maintains correspondence relationship with the world leading banks and exchange houses to gear up its remittance business. It also has relationship with a number of electronic fund transfer agents.

AB reached an agreement with the world electronic fund transfer giant Western Union Financial Services Inc. U.S.A, the number one and reliable money transfer company in the world and opened the horizon of electronically remittance received in Bangladesh which tremendously contributed to enhance inward remittance through official channels.  Through Western Union Money Transfer Service, Bangladeshi Wage Earners can send and receive money quickly from over 280,000 Western Union Agent Locations in over 200 countries and territories world wide- the world’s largest network of its kind, This modern Electronic Technology based money transfer company has earned world wide reputation in transferring money from one country to another country within the shortest possible time.

AB discontinued its relationship with Western Union at the later half of 2009 and established new relationship with the following money transfer agencies and a number of Exchange Houses (Annexure 1);

• Ria Fund Transfer
• Remitmaster
• Alfarden Exchange
• Xpress Money
• Cash Express
• Instant Cash

Through these agents money come from abroad to Bangladesh and the beneficiary can collect the money by submitting specific documents such as pin number, ID or Passport’s photocopy.

a. YEAR-WISE REMITTANCE: 

                                                                                                                                Fig: M$

Source: compiled from monthly statement of AB Bank

The table shows that though the remittance inflow increased up to 2009 it has decreased remarkably in 2010 due to discontinuation of relationship with western union money transfer.

The year wise remittance performance of AB Bank can be shown in the following graph;

b. COUNTRY-WISE REMITTANCE:

The following table shows major remittance receiving countries year-wise wise inward remittance which reveals that Middle East countries provides the major portion of inward remittance of AB. This is because AB maintains relationship with a number of exchange houses of Middle East countries. AB also receives a handsome remittance from USA and UK. In the UK, AB has established relationship with a number of exchange houses. The western union money transfer helped a lot in receiving huge remittance from USA over the last couple of years;

Fig: M$

Source: complied from monthly statement of AB Bank Ltd.

c. AB’S ANNUAL INFLOW AND OUTFLOW OF FOREIGN EXCHANGE:

                                                                                                                        Fig: in M$

*the figure is up to March 2011, Source: monthly statement of AB Bank Ltd.

The above table shows that AB is always in deficit position of foreign currency that means AB’s import is higher than its export and remittance. The table reveals that only in the current calendar year the figure is positive.

The following graph shows AB’s inflow outflow and export import gap of foreign exchange for the year 2010 which reveals that AB is always in deficit position of foreign exchange.

d. AB’S CONTRIBUTION:

The following table reveals year-wise AB’s contribution in total inflow of remittance in the country;

The above table and graph shows that AB’s contribution in overall inflow of foreign remittance is very low. The contribution was 3.48% in the fiscal year 2008-09 which has decreased in the subsequent year.

e. FINDINGS RELATED TO REMITTANCE:

Foregoing figure and reports reveals the the followings findings;

1. There was steady growth of inward remittance over the years despite of economic meltdown and hindrance in the way of country’s manpower export
2. The study reveals that the remittance inflow increases remarkably through official channels as the private sector banks maintaining correspondence relationship with the world leading banks, money transfer agents and exchange houses.
3. The promotional activities of the banks also facilitated to increase foreign currency inflow through official channel. The government is also encouraging to boost up remittance inflow through official channel.
4. The remittance inflow is increasing but its growth is losing momentum as the exchange rate of the dollar against taka has gone up in the informal market and due to low interest rates in case of expatriates investing their money in various savings instruments like Wage Earners’ Development Bonds and US Dollar Premium & Investment Bonds.
5. Slow down of manpower export also played role in slower remittance growth. In the fiscal year 2008-09, the remittance growth was about 22%, which came down to 13% last year
6. Inward remittance covers purchase of foreign currency in the form of
   foreign T.T, DD, and bills etc. received from abroad favoring a
   beneficiary in Bangladesh.
7. AB maintains correspondence relationship with the world leading banks and exchange houses to gear up its remittance business. It also has relationship with a number of electronic fund transfer agents
8. AB discontinued its relationship with Western Union since 2009 and established new relationship with a number of new money transfer agencies and Exchange Houses but is had negative impact in remittance inflow in the fiscal year 2009-2010
9. Though the remittance inflow increased up to 2009 it has decreased remarkably in 2010 due to discontinuation of relationship with western union money transfer

10. The study shows that the middle east countries provides the major portion of inward remittance
11. AB’s contribution in overall inflow of foreign remittance is very low. The contribution was 3.48% in the fiscal year 2008-09 which has decreased in the subsequent year
12. AB’s inflow outflow and export import gap of foreign exchange for the year 2010 reveals that AB is always in deficit position of foreign exchange
13. Country’s foreign currency reserve has reached at the higest level due to the steady growth of foreign remittance
14. It is found that the key determinants of changes in the level of remittance inflow are the number of workers finding employment abroad every year, the oil price, the exchange rate
15. sending money using the formal banking channel instead of ‘hundi’ increased due to easy process of transfer of fund that boost up the country’s foreign exchange reserve
16. Bank is desperately trying to increase the flow of inward remittances from different parts of the world through establishing new contacts with overseas companies
17. The bank has been providing better rates and reliable services to clients by taking help of renowned global money transfer companies and exchange houses

 SOME GENERAL FINDINGS:

1. Both export and import seem to be increasing every year so was to country performance
2. This shows the rising effect of globalization and accelerating foreign trade in Bangladesh
3. Every year the banks seem to have increasing facilitating international trade
4. Import has always been greater than export for every year. This is also the cause of negative balance of trade of Bangladesh. Excess import over export during the years means increasing outflow than inflow of foreign currency for the country. Rising demand for foreign currency creates rising trend in their price or value hence making our local currency weaker than before
5. Foreign remittance inward has also increased over the years for each bank but it is much lower than the increase of import. Thus this low inflow of foreign currency into the country cannot cover up the balance of payment deficit
6. AB is performing with only 29 AD branches out of its 82 branches
7. AB has only one own remittance house located in UK

CONCLUSION & RECOMMENDATIONS:

AB Bank limited is a leading Private commercial bank in Bangladesh with superior customer bases that are loyal, faithful, worthy towards the bank. As a commercial bank ABBL has to follow the rules of Bangladesh Bank despite the fact that these rules sometime restrict the foreign business to some extent. As a proud member of this bank I have found its foreign exchange department to be very efficient; therefore this department plays a major role in the overall profitability of the bank and contributing ® lot in the growth of national economy.

AB’s trade services are performing well and its export and import business is increasing year by year but its contribution is only around 3% in country performance. The country’s export business is increasing which is encouraging but it needs to explore new market and to ensure product diversification. The growth of remittance inflow is decreasing which needs special attention to boost up the remittance business. AB is mainly dependent on ready made garments for its export business and imports are concentrated on raw materials. It is revealed that number of outbound migrant workers dropped in the recent years but a large number of poor expatriate Bangladeshis are still staying abroad and sending remittance home for which the trend is increasing. There is also huge scope of manpower export and increase of remittance if the recruitment problems can be solved. Despite of economic recession and low trend of outbound workers, foreign remittance inflow has increased for a number reasons like as Bangladesh earns major remittance from middle east countries which is not very much affected as yet, increase of export of skilled workers, depreciation of currency, increase of oil price and using of official channels for sending remittance.

Growing remittance is a life line to Bangladesh. The expatriates are playing a vital role in the economy. Our economy is largely benefited from semi skilled, ordinary inferior manpower (who fill up heavy duty job abroad) not that much from the majority of well educated, professional, sober Bangladeshis abroad. Human resource is the only resource which is in abundance in Bangladesh. If trained and used properly, it can bring Bangladesh out of poverty.

AB, as the first private sector bank in Bangladesh has not only opened the notion of private sector banking but also contributed a lot for the overall improvement of the banking sector in Bangladesh. Some of its innovation and contribution as private sector commercial bank has brought about a revolution in the banking arena in Bangladesh. It has also contributed to the human resources development that has led to set up of a number of Banks in the private sector in Bangladesh over the years that are relentlessly contributing in the process of international trade, industrialization and expansion of overall economy as lifeblood.

RECOMMENDATIONS FOR AB BANK:

In view of the above, we recommend to the followings to gear up the journey of the AB;

1. AB’s need to increase product diversification in both import and export items as the bank has concentration only a few items.
2. AB’s should emphasis on export and inflow of foreign remittance to bring balance between foreign currency inflow and outflow.
3. The bank need to reestablish relationship with western union money transfer to gear up its remittance business
4. The Bank should also establish new correspondence relationship with foreign money transfer agent and need to establish own exchange houses mainly in the middle east to expedite the remittance business
5. AB should get more AD branches to boost up its export, import and remittance business
6. To maximize the benefits and reduce the risks AB should concentrate on product and market diversification
7. Initiatives to be taken to reduce cost and one stop quality customers services to gear up remittance business
8. promotional activities to be increased to boos up export, import & remittance business
9. Extra financial benefit to be provided to the remittance sent by Bangladeshi expatriates
10. In the modern hyper competitive business world continuous innovation and improvement is necessary to keep the growth steady and as such, AB should have a research and Development Wing
11. The AB is yet to go into live in phone and internet banking despite all sorts of prepare for the purpose. As such, the Bank should go into live with the phone and internet banking services which is the need of the time to expedite its customer services
12. AB may design remittance desk in every branch with special attention to draw customers’ attention
13. There must be availability of brochures, leaflet etc highlighting export, import and remittance services
14. The prime customers should be offered with occasional gifts, discounts etc

RECOMMENDATIONS TO NATIONAL AUTHORITY:

1. New market for manpower export to be explored and deadlock in existing market to be resolved to boost up remittance business
2. Product & market diversification to be increased for export growth
3. import substitution of goods to be ensure
4. incentive for export items to be increased
5. initiative to be taken to bring back remittance through official channel
6. rate of interest of investment investment
7. initiative to be taken to improve knowledge among the migrant workers and their families about formal and semi-formal remittances and other financial and non-financial services
8. better investment opportunities to be provided including micro enterprise development with remittance incomes among the rural households
9. there must be initiatives for the welfare of the expatriates. There must be a strengthened banking network so that even village people can benefited from it
10. Govt. should introduce of pound and euro bonds alongside the dollar bonds as the foreign currency bond has achieved much popularity and is playing a role in creasing remittance
11. Manpower exports to some African countries like Algeria, Angola, Nigeria, Botswana and south Africa have started but the process needs to be expedited
12. alongside work, training on language should be given equal importance as Bangladeshi workers are lagging behind than other countries
13. the government should take necessary steps for keeping migration costs at logical level as sending workers abroad is costly now

     BIBLIOGRAPHY:

1. www.abbank.org
2. Monthly statements of Inflow & outflow of Foreign Exchange of AB Bank for the year 2006 to 2010
3. Monthly Commodity wise statements of AB Bank for the year 2006 to 2010
4. Annual Reports of AB Bank Limited for the years from 2002 to 2009
5. Annual Treasury records of AB Bank Limited for the years 2007-2010
6. www.bangladeeshbank.org
7. Monthly Economic Trends, Statistics Department, Bangladesh Bank, Vol XXXIV, No. 9, September 2009
8. Monthly Bangladesh Bank Parikrama, Issue – August 2009, Department of Printing & Publications, Bangladesh Bank
9. Ali, Syed Ashraf (1995) Foreign Exchange & Financing of Foreign Trade, LipaAcademy, Dhaka
10. Annual Reports of Bangladesh Bank: issue – 2007-2008, 2008-2009, 2009-2010 published by Department of Printing & Publications, Bangladesh Bank
11. The Daily Star Dated May 11, 2011, April 17, 2011 and May 19, 2011
12. The Daily Ittefaq dated May 17, 2011