Accoring to today's Daily star no new gas connections are to be given to industries in Chittagong. This torpedoes any new investments into Chittagong which is the countries industrial hub. The Korean EPZ was established about ten years ago but failed to become operational due to licensing problems with the government (see under bribes). Now the KEPZ has a legal frame work but no new industries will be established there due to this new gas problem.
The country has a lot of natural gas but due to mismanagement, system loss through inefficiency and thieft, and lack of new fields coming online. Successive governments have failed to open gas fields to exploration and when they have there have been terrible irregularities in awarding contracts.
Tuesday, 6 May 2008
Tuesday, 11 March 2008
Vast improvements in Chittagong port operations
Before the caretaker government took power exporters faced terrible problems in Chittagong port. Clearing agents, Customs officers, dock workers et al. took large bribes which increased the cost of shipment to make Chittagong one of the most expensive ports in the world to use. Unions often took dock workers on strike and their influence on cargo handling made the port painfully slow and inefficient.
The caretaker government broke up the unions and regularised operations in the ports. Projects for port improvement which had been on standby for years due to interference from unions, the mayor (who is awaiting trial in prison), and other bodies, have been implemented.
I've managed to deal with the Chittagong Port Authority efficiently and without paying bribes. When Bangladesh comes out of its present economic difficulties Chittagong will be in a good position for and expansion of trade and industry.
The caretaker government broke up the unions and regularised operations in the ports. Projects for port improvement which had been on standby for years due to interference from unions, the mayor (who is awaiting trial in prison), and other bodies, have been implemented.
I've managed to deal with the Chittagong Port Authority efficiently and without paying bribes. When Bangladesh comes out of its present economic difficulties Chittagong will be in a good position for and expansion of trade and industry.
Thursday, 6 March 2008
Power cuts
We had a two hour power cut yesterday. A couple of days before that we had an outage of an hour and a quater. The government are doing their best to supply the Export Processing Zone with electricity and gas but the country has a deficit in generated electricity. The problem is far worse outside the EPZ and in some areas people only have power for a few hours a day.
The problem will be worse in the future. We face a gas shortage in the country and Chittagong already has low gas pressure which is bad news for people who have purchased expensive gas generators.
The power development board spent enough money on repairing old power plants to build many new power stations in Bangladesh. Mysteriously the money spent 'repairing' these old giants never seemed to do any good except to the contractors who serviced them.
In the past Bangladesh has seen a number of energy scandals with concessions for gas and coal being sold to foreign companies at fire sale prices. For example, the law stipulates that Bangladesh should get 20% of revenue from foreign coal mining concessions whereas a Chinese company was awarded a concession paying Bangladesh a royalty of only 3%. Obviously the official involved in that transaction got a fat kick back.
Nico, a Canadian gas exploration company, was responsible for a huge blowout in a gas field which lost the country a large percentage of gas in that field. Nico previously had no experience of gas exploration before it was awarded the exploration contract.
The problem will be worse in the future. We face a gas shortage in the country and Chittagong already has low gas pressure which is bad news for people who have purchased expensive gas generators.
The power development board spent enough money on repairing old power plants to build many new power stations in Bangladesh. Mysteriously the money spent 'repairing' these old giants never seemed to do any good except to the contractors who serviced them.
In the past Bangladesh has seen a number of energy scandals with concessions for gas and coal being sold to foreign companies at fire sale prices. For example, the law stipulates that Bangladesh should get 20% of revenue from foreign coal mining concessions whereas a Chinese company was awarded a concession paying Bangladesh a royalty of only 3%. Obviously the official involved in that transaction got a fat kick back.
Nico, a Canadian gas exploration company, was responsible for a huge blowout in a gas field which lost the country a large percentage of gas in that field. Nico previously had no experience of gas exploration before it was awarded the exploration contract.
Sunday, 2 March 2008
BEPZA cheat investors over lease agreements
The Bangladesh Export Processing Zone Authority (BEPZA) have sent letters to lease holders for rented buildings within the Chittagong Export Processing Zone (CEPZ) demanding that they begin paying for land around their buildings. In some cases this could double the rental charge compared to useable factory space.
The original lease agreements mention nothing about paying for surrounding land or access roads. BEPZA already charge far above the market rate for rented buildings and include a large amount of 'dead space' in their rent calculations. The current rental charges cripple small and medium sized enterprises and leech funds which could otherwise be used to expand business and hire manpower. This increase in rental charges could put some enterprises out of business.
Since we have seen no new investment in Bangladesh due to political crises in the past couple of years this would be a retrograde step for the country.
This step by BEPZA comes shortly after they introduced a retrospective charge for writing a letter to Bangladesh Telecom on behalf of enterprises requesting that they be given a telephone connection. Again this charge was introduced with no prior agreement, authorisation or knowledge of investors. The fact that there is no legal basis for these charges does not seem to deter BEPZA from introducing them.
The original lease agreements mention nothing about paying for surrounding land or access roads. BEPZA already charge far above the market rate for rented buildings and include a large amount of 'dead space' in their rent calculations. The current rental charges cripple small and medium sized enterprises and leech funds which could otherwise be used to expand business and hire manpower. This increase in rental charges could put some enterprises out of business.
Since we have seen no new investment in Bangladesh due to political crises in the past couple of years this would be a retrograde step for the country.
This step by BEPZA comes shortly after they introduced a retrospective charge for writing a letter to Bangladesh Telecom on behalf of enterprises requesting that they be given a telephone connection. Again this charge was introduced with no prior agreement, authorisation or knowledge of investors. The fact that there is no legal basis for these charges does not seem to deter BEPZA from introducing them.
Monday, 25 February 2008
More licensing requirements for EPZ companies
I received a letter this morning from the Export Processing Zone Authority which enclosed a notice from the Bangladesh Energy Commission. All companies will have to take a license by 28th April 2008 from the Energy Commission if they consume power; electricity, gas, petrol or other fuel. EPZ companies were previously exempted from registering with the many government bodies and this was attractive to investors as government bodies typically want bribes for registration and are a waste of time since there is no genuine regulation.
The application form for applying for a license costs just 500 taka ($10) but the form must be collected, and then submitted, in the capital Dhaka which is hundreds of miles away from my location in Chittagong. When I called the Secretary of the Energy Commission he explained that an act of Parliament had determined that the Energy Commission should only open an office in the capital. The secretary explained that there would be 'other fees' depending on the industry and other factors.
Increasingly EPZ companies have to register with government bodies and churn out tons of paper work which are a great burden on entrepreneurs. For the first time last year EPZ companies had to submit an income tax return even during their tax free period. This was an inconvenience as it delivered companies into the hands of accountants and auditors who frequently form a cartel to extract huge fees from companies.
The application form for applying for a license costs just 500 taka ($10) but the form must be collected, and then submitted, in the capital Dhaka which is hundreds of miles away from my location in Chittagong. When I called the Secretary of the Energy Commission he explained that an act of Parliament had determined that the Energy Commission should only open an office in the capital. The secretary explained that there would be 'other fees' depending on the industry and other factors.
Increasingly EPZ companies have to register with government bodies and churn out tons of paper work which are a great burden on entrepreneurs. For the first time last year EPZ companies had to submit an income tax return even during their tax free period. This was an inconvenience as it delivered companies into the hands of accountants and auditors who frequently form a cartel to extract huge fees from companies.
Thursday, 14 February 2008
Power restored
The GM of the CEPZ has sent around a circular stating that regular power cuts to the CEPZ have stopped. Apparently the power development board have found some more power for us. For the past 18 months we had power cuts of about 90 minutes a day. The power cuts mostly took place on a schedule which was given in advance which was some help.
According to information given to investors there are never power cuts in the Export Processing Zones. I suppose we should call them "Power challenges" instead
According to information given to investors there are never power cuts in the Export Processing Zones. I suppose we should call them "Power challenges" instead
Tuesday, 12 February 2008
Bangladesh post office unable to pay airfreight
Once again the post office is having trouble with sending international post. They have long outstanding bills with airlines for the carriage of post and packages. This time only USA and France are affected. The problem first occurred at Christmas when post to twenty countries was stopped. The director of international mail tells me that they hope to have a government allocation to pay their bills in about fifteen days.
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