Credit Rating \u0026 Industry Analysis of Bangladesh Part-1 Credit rating

$Page 1: Credit Rating \u0026 Industry Analysis of Bangladesh Part-1 Credit rating$
Credit Rating & Industry Analysis of Bangladesh Page 1

Part-1

Credit rating


1.1 What is Credit Rating?

A credit rating evaluates the credit worthiness of a debtor, especially a business (company)

or a government. It is an evaluation made by a credit rating agency of the debtor's ability to

pay back the debt and the likelihood of default.

Credit ratings are determined by credit ratings agencies. The credit rating represents the credit

rating agency's evaluation of qualitative and quantitative information for a company or

government; including non-public information obtained by the credit rating agencies analysts.

Credit ratings are not based on mathematical formulas. Instead, credit rating agencies use

their judgment and experience in determining what public and private information should be

considered in giving a rating to a particular company or government. The credit rating is used

by individuals and entities that purchase the bonds issued by companies and governments to

determine the likelihood that the government will pay its bond obligations.

A poor credit rating indicates a credit rating agency's opinion that the company or

government has a high risk of defaulting, based on the agency's analysis of the entity's history

and analysis of long term economic prospects.


1.2 History of Credit Rating

The three renowned rating companies of today‘s world are Fitch Ratings, Moody‘s and

Standard & Poor (S&P). The history of credit rating is similar to the history of forming and

adopting credit rating services by these companies.

John Knowles Fitch founded the Fitch Publishing Company in 1913. Fitch published

financial statistics for use in the investment industry via "The Fitch Stock and Bond Manual"

and "The Fitch Bond Book." In 1924, Fitch introduced the AAA through D rating system that

has become the basis for ratings throughout the industry. With plans to become a full-service

global rating agency, in the late 1990s Fitch merged with IBCA of London, subsidiary of

Fimalac, S.A., a French holding company. Fitch also acquired market competitors Thomson

BankWatch and Duff & Phelps Credit Ratings Co. Beginning in 2004, Fitch Ratings began to

develop operating subsidiaries specializing in enterprise risk management, data services and

finance industry training with the acquisition of Canadian company, Algorithmic, and the

creation of Fitch Solutions and Fitch Training. (For information bond ratings systems

see Bond Ratings Agencies: Can You Trust Them.)

John Moody and Company first published "Moody's Manual" in 1900. The manual published

basic statistics and general information about stocks and bonds of various industries. From

1903 until the stock market crash of 1907, "Moody's Manual" was a national publication. In

1909 Moody began publishing "Moody's Analyses of Railroad Investments", which added

analytical information about the value of securities. Expanding this idea led to the 1914

creation of Moody‘s Investors Service, which, in the following 10 years, would provide

ratings for nearly all of the government bond markets at the time. By the 1970s Moody's

began rating commercial paper and bank deposits, becoming the full-scale rating agency.

Moody's ratings represent the opinion of Moody's Investors Service as to the relative

creditworthiness of securities. As such, they should be used in conjunction with the

descriptions and statistics appearing in Moody's publications. Reference should be made to

these statements for information regarding the issuer. Moody's ratings are not commercial

credit ratings. In no case is default or receivership to be imputed unless expressly stated.

Henry Varnum Poor first published the "History of Railroads and Canals in the United

States" in 1860, the forerunner of securities analysis and reporting to be developed over the

next century. Standard Statistics formed in 1906, which published corporate bond, sovereign

http://www.investopedia.com/terms/f/fitch-ratings.asp

http://www.investopedia.com/terms/r/riskmanagement.asp

http://www.investopedia.com/articles/bonds/09/bond-rating-agencies.asp

http://www.investopedia.com/terms/c/commercialpaper.asp

http://www.investopedia.com/terms/c/corporatebond.asp

http://www.investopedia.com/terms/s/sovereignbond.asp


debt and municipal bond ratings. Standard Statistics merged with Poor's Publishing in 1941

to form Standard and Poor's Corporation, which was acquired by The McGraw-Hill

Companies, Inc. in 1966. Standard and Poor's has become best known by indexes such as the

S&P 500, a stock market index that is both a tool for investor analysis and decision making,

and a U.S. economic indicator. (See A Trip through Index History to learn more about

Standard & Poor's Indexes.

1.3 Credit Rating in Bangladesh

Bangladesh credit rating industry started its journey with the mandatory requirement of

having credit rating for all public debt instruments, right offer issues and shares issued at a

premium before the same were offered to the public. In the year of 2002, Credit Rating

Information & Service Limited (CRISL) started its operation as the first registered credit

rating agency of Bangladesh. The second rating agency, Credit Rating Agency of Bangladesh

Limited (CRAB) went to its operation on 2004, thus, making the sustainability more difficult

for two rating agencies.

Credit Risk Grading Manual of Bangladesh Bank was circulated by Bangladesh Bank vide

BRPD Circular No. 18 dated December 11, 2005 on Implementation of Credit Risk Grading

Manual which is primarily in use for assessing the credit risk grading before a bank lend to its

borrowing clients. By that time CRISL rating reports were appearing to be very useful for the

users; specially CRISL rating report on the then Al Baraka Bank convinced the Bangladesh

Bank of the need of credit rating and it took the initiative to make mandatory for all banks to

have credit rating before it goes for public offering. The banking regulator further decided to

make it mandatory for all banks to submit credit rating reports to the regulator within six

months after the finalization of accounts.

Following the example of the central bank, the insurance regulator also came up with the

requirement to make rating mandatory for all general insurance companies every year and for

the life insurance companies bi-annually. The Dhaka Stock Exchange, while issuing the

direct listing regulations, made the credit rating mandatory before a company apply for direct

listing. The above regulations created an enabling environment for credit rating in the

country‘s capital and financial markets.

http://www.investopedia.com/terms/s/sovereignbond.asp

http://www.investopedia.com/terms/m/municipalbond.asp

http://www.investopedia.com/terms/s/sp.asp

http://www.investopedia.com/articles/07/history-indexes.asp


The concept of client rating by the rating agencies to support capital adequacy of the banks

came up in view of the need for implementation of Basel II capital adequacy framework by

Bangladesh Bank. According to Basel II framework, BB adopted a standardized approach for

credit risk in which the services of rating agencies were required under certain strict terms

and conditions. Bank client rating is a very sensitive issue in view of the fact that most of the

private sector companies, enjoying banking facilities, are not maintaining standard financials

for appropriate evaluation. Unless and until all the above factors are properly evaluated

through sector wise studies, the ratings are bound to give wrong signals. Security and

Exchange Commission of Bangladesh (SECB) allows 2% default rate of the credit rating

agencies. There are certain penalties in case default rate of more than 2% including

cancellation of license of the defaulter rating agency as the highest penalty by SECB.

Other credit rating companies National Credit Ratings Ltd and Emerging Credit Rating Ltd

started their journey on 2010. ARGUS Credit Rating Services Ltd. is on operation since

2011. Lastly, new four credit rating companies have come to operation on 2012 which are

WASO Credit Rating Company (BD) Limited, Alpha Credit Rating Limited, The Bangladesh

Rating Agency Limited and WASO Credit Rating Company (BD) Limited. A list of credit

rating companies operating in Bangladesh is attached with the report as Appendix.

According to Association of Credit Rating Agencies of Asia, Bangladesh has the highest

number of credit rating companies. India; one of the largest economy of Asia has only two

credit rating companies. On the other hand China, another largest economy is continuing its

economic growth with a single credit rating company.

The rating industry In Bangladesh is now considered to be a parentless industry. The

behavior of the regulators towards nourishing this industry does not appear to be rational. The

rating agencies are still defined by the SEC rules as an investment advisory company. This

has not changed over a long time. The paid-up capital still remains at Tk. 5.0 million (50

lakh), to start a rating agency by any group of sponsors.

1.4 Sovereign credit ratings

A sovereign credit rating is the credit rating of a sovereign entity, i.e., a national

government. The sovereign credit rating indicates the risk level of the investing environment

of a country and is used by investors looking to invest abroad. It takes political risk into

account


Source: Euromoney country risk

Country risk rankings (January 2013)

Least risky countries, Score out of 100

Rank

Previous Country Overall score

1 1 Norway 89.87

2 3 Luxembourg 87.29

3 4 Singapore 86.81

4 5 Sweden 86.81

5 2 Switzerland 86.78

6 6 Finland 84.54

7 7 Denmark 82.64

8 9 Hong Kong 82.43

9 8 Netherlands 81.82

10 8 Canada 81.82

The table shows the ten least-risky countries for investment as of January 2013. Ratings are

further broken down into components including political risk, economic risk. Euromoney's

bi-annual country risk index monitors the political and economic stability of 185 sovereign

countries. Results focus foremost on economics, specifically sovereign default risk and/or

payment default risk for exporters (a.k.a. "trade credit" risk).

A. M. Best defines "country risk" as the risk that country-specific factors could adversely

affect an insurer's ability to meet its financial obligations.

1.5 Short-term rating

A short-term rating is a probability factor of an individual going into default within a year.

This is in contrast to long-term rating which is evaluated over a long timeframe. In the past

institutional investors preferred to consider long-term ratings. Nowadays, short-term ratings

are commonly used.

First, the Basel II agreement requires banks to report their one-year probability if they applied

internal-ratings-based approach for capital requirements. Second, many institutional investors

http://en.wikipedia.org/wiki/Norway

http://en.wikipedia.org/wiki/Luxembourg

http://en.wikipedia.org/wiki/Singapore

http://en.wikipedia.org/wiki/Sweden

http://en.wikipedia.org/wiki/Switzerland

http://en.wikipedia.org/wiki/Finland

http://en.wikipedia.org/wiki/Denmark

http://en.wikipedia.org/wiki/Hong_Kong

http://en.wikipedia.org/wiki/Netherlands

http://en.wikipedia.org/wiki/Canada


can easily manage their credit/bond portfolios with derivatives on monthly or quarterly basis.

Therefore, some rating agencies simply report short-term ratings.

1.6 Corporate credit ratings

Before you decide whether to invest into a debt security from a company or foreign country,

you must determine whether the prospective entity will be able to meet its obligations. A

ratings company can help you do this. Providing independent objective assessments of the

credit worthiness of companies and countries, a credit ratings company helps investors decide

how risky it is to invest money in a certain country and/or security.

1.7 Credit in the Investment World

As investment opportunities become more global and diverse, it is difficult to decide not only

which companies but also which countries are good investment opportunities. There are

advantages to investing in foreign markets, but the risks associated with sending money

abroad are considerably higher than those associated with investing in your own domestic

market. (For more insight, see Pros and Cons of Offshore Investing.)It is important to gain

insight into different investment environments but also to understand the risks and advantages

these environments pose. Measuring the ability and willingness of an entity - which could be

a person, a corporation, a security or a country - to keep its financial commitments or its debt,

credit ratings are essential tools for helping you make some investment decisions.

1.8 The Raters

There are three top agencies that deal in credit ratings for the investment world. These are:

Moody's, Standard and Poor's (S&P's) and Fitch IBCA. Each of these agencies aim to provide

a rating system to help investors determine the risk associated with investing in a specific

company, investing instrument or market.

Ratings can be assigned to short-term and long-term debt obligations as well as securities,

loans, preferred stock and insurance companies. Long-term credit ratings tend to be more

indicative of a country's investment surroundings and/or a company's ability to honor its debt

responsibilities.

For a government or company it is sometimes easier to pay back local-currency obligations

than it is to pay foreign-currency obligations. The ratings therefore assess an entity's ability to

pay debts in both foreign and local currencies. A lack of foreign reserves, for example, may

warrant a lower rating for those obligations a country made in foreign currency.


It is important to note that ratings are not equal to or the same as buy, sell or hold

recommendations. Ratings are rather a measure of an entity's ability and willingness to repay

debt.

The ratings lie on a spectrum ranging between highest credit quality on one end and default

or "junk" on the other. Long–term credit ratings are denoted with a letter: a triple A (AAA) is

the highest credit quality, and C or D (depending on the agency issuing the rating) is the

lowest or junk quality. Within this spectrum there are different degrees of each rating, which

are, depending on the agency, sometimes denoted by a plus or negative sign or a number.

Thus, for Fitch IBCA, a "AAA" rating signifies the highest investment grade and means that

there is very low credit risk. "AA" represents very high credit quality; "A" means high credit

quality, and "BBB" is good credit quality. These ratings are considered to be investment

grade, which means that the security or the entity being rated carries a level of quality that

many institutions require when considering overseas investments.

Ratings that fall under "BBB" are considered to be speculative or junk. Thus for Moody's a

Ba2 would be a speculative grade rating while for S&P's, a "D" denotes default of junk bond

status.

1.9 Credit Rating Agencies

I have just added, SR Ratings (Brazil), who are long established, but whom I've only recently

learned of.

At 76 credit rating agencies worldwide, this list is growing. As documentation of this growth,

see:

The historical list, which was frozen Feb-2006,

The names dropped from that historical list when this page's list was initiated, and

The dates of new additions noted below.

Credit Rating Agencies have received heavy criticism for their contributions to the economic

crisis that started in 2007 and continues currently. Indeed, the Dodd-Frank Act now mandates

tighter supervision of CRAs in the US. Separately, new efforts (such as Wikirating.com)

seek to bypass traditional CRAs altogether.


SL No Company Name Country

1. A.M. Best Company, Inc.

Insurance industry emphasis.

US – NRSRO

2. Agusto & Co. Ltd. Nigeria

3. Ahbor Rating Uzbekistan

4. Apoyo & Asociados Internacionales S.A.C. Peru -- Fitch Associate

5. Bank Watch Ratings S.A. Ecuador -- Fitch Affiliate

6. BRC Investor Services S.A. Colombia

7. Capital Standards Rating (CSR)

Added: Apr-2011

Kuwait

8. Calificadora de Riesgo, PCA Uruguay

9. Capital Intelligence, Ltd. Cyprus

10. Caribbean Information & Credit Rating Services

Ltd. (CariCRIS)

Caribbean

11. Central European Rating Agency (CERA)

a/k/a: Fitch Polska, S.A.

Poland

12. Chengxin International Credit Rating Co., Ltd. China -- Moody's Affiliate

13. China Lianhe Credit Rating, Co. Ltd. China

14. Clasificadora de Riesgo Humphreys, Ltda. Chile -- Moody's Affiliate

15. Class y Asociados S.A. Clasificadora de Riesgo Peru

16. CMC International, Ltd. Nigeria

17. Companhia Portuguesa de Rating, SA (CPR) Portugal

18. Credit Analysis & Research Ltd (CARE) India

19. "Credit-Rating": A Ukrainian rating agency

Added: Mar-2010

Ukraine

20. Credit Rating Agency of Bangladesh, Ltd.

(CRAB)

Bangladesh

21. Credit Rating Information and Services, Ltd.

(CRISL)

Bangladesh

22. CRISIL, Ltd.

f/k/a: Credit Rating Information Services of India

India -- S&P Affiliate

23. Dagong Global Credit Rating Co., Ltd. China

24. Demotech, Inc.

Insurance industry emphasis.

US -- Added: Apr-10

25. Dominion Bond Rating Service (DBRS) Canada – NRSRO

26. Duff & Phelps de Colombia, S.A., S.C.V Colombia -- Fitch Affiliate

27. Ecuability, SA Ecuador

28. Egan-Jones Rating Company US – NRSRO

29. Emerging Credit Rating Ltd (ECRL)

Added: Apr-2011

Bangladesh -- Collaboration

with MARC

30. Equilibrium Clasificadora de Riesgo Peru -- Moody's Affiliate

31. European Rating Agency (ERA) UK


32. Feller Rate Clasificadora de Riesgo Chile -- S&P Affiliate

33. Fitch Ratings, Ltd. US/UK – NRSRO

34. Global Credit Rating Co. S.Africa

35. HR Ratings de Mexico, S.A. de C.V.

Added: Jan-2009

Mexico

36. Interfax Rating Agency (IRA) Russia

37. Investment Information and Credit Rating Agency

(ICRA)

India

38. Islamic International Rating Agency, B.S.C. (IIRA) Bahrain

39. Istanbul International Rating Services, Inc.

a/k/a: TurkRating

Added: Oct-09

Turkey

40. Japan Credit Rating Agency, Ltd. (JCR) Japan – NRSRO

41. JCR Avrasya Derecelendime A.S.

a/k/a: JCR Eurasia Rating

Added: Oct-09

Turkey -- JCR Affiliate

42. JCR-VIS Credit Rating Co. Ltd. Pakistan -- JCR Affiliate

43. Kobirate Uluslararası Kredi Derecelendirme ve

Kurumsal Yönetim Hizmetleri A.Ş .

a/k/a/ Kobirate

Added Oct-09

Turkey

44. Korea Investors Service, Inc. (KIS) Korea -- Moody's Affiliate

45. Korea Ratings Corporation

f/k/a: Korea Management Consulting and Credit

Rating Corp. (KMCC)

Korea -- Fitch Affiliate

46. Kroll Bond Rating Agency, Inc.

Wholly acquiring LACE Financial Corp. in Aug-

2010

US – NRSRO

47. Lanka Rating Agency, Ltd. (LRA) Sri Lanka -- Subsidiary of

RAM

48. Malaysian Rating Corporation Berhad (MARC) Malaysia -- Fitch Affiliate

49. Mikuni & Co., Ltd. Japan

50. Moody's Investors Service US -- NRSRO

51. National Information & Credit Evaluation, Inc.

(NICE)

Korea

52. ONICRA Credit Rating Agency of India, Ltd. India

53. P.T. Kasnic Credit Rating Indonesia Indonesia -- Moody's

Affiliate

54. P.T. PEFINDO Credit Rating Indonesia

a/k/a: PT Pemeringkat Efek Indonesia

Indonesia

55. Pacific Credit Rating (PCR)

a/k/a: Clasificadora de Riesgo Pacific Credit Rating

S.A.C.

Peru


56. Pakistan Credit Rating Agency, Ltd. (PACRA) Pakistan -- Fitch former

affiliate

57. Philippine Rating Services, Corp. (PhilRatings) Philippines

58. RAM Rating Services Berhad (RAM)

f/k/a: Rating Agency Malaysia Berhad

Malaysia -- S&P Affiliate

59. Rapid Ratings International, Inc. Australia/NZ

60. Rating and Investment Information, Inc. (R&I) Japan -- NRSRO

61. Realpoint, LLC

Added: Jan-2009

US -- NRSRO

62. Rus Rating Russia

63. Saha Kurumsal Yönetim ve Kredi Derecelendirme

Hizmetleri A.Ş

Added: Oct-2009

Turkey

64. Seoul Credit Rating & Information, Inc. Korea -- JCR Affiliate

65. Shanghai Credit Information Services Co., Ltd. China

66. Shanghai Far East Credit Rating Co., Ltd.

a/k/a: Xinhua Far East Credit Ratings

China

67. Slovak Rating Agency, a.s. (SRA)

a/k/a: Slovenská ratingová agentúra, a.s.

Balkans -- ERA Affiliate

68. SME Rating Agency of India Limited (SMERA)

Added: Apr-2008

India

69. Sociedad Calificadora de Riesgo Centroamericana,

S.A. (SCRiesgo)

Costa Rica

70. SR Rating Prestação de Serviços Ltda.

Added: Oct-2011

Brazil

71. Standard and Poors (S&P) US -- NRSRO

72. Taiwan Ratings, Corp. (TCR) Taiwan -- S&P Affiliate

73. Thai Rating and Information Services Co., Ltd.

(TRIS)

Thailand

74. TheStreet.com Ratings, Inc.

f/k/a: Weiss Ratings, Inc.

US

75. TCR Kurumsal Yonetim ve Kredi Derecelendirme

Hizmetleri A.S.

a/k/a: Türk KrediRating (TCRating)

Turkey

76. Veribanc, Inc. US

Names dropped from historical list:

There were ten changes in Feb-2006:

These differences are listed below. Six were absorbed by the "big three" credit rating

agencies. Two were determined to distribute business information that might support a rating


decision, but did not actually include a rating analyst's opinion. Two were redundant (i.e.,

being the same entities known by different names).

1. Agence d'Évaluation Financière (ADEF)

France -- Absorbed by S&P

2. CRA Rating Agency

f/k/a: Czech Rating Agency

Czech Republic -- Absorbed by Moody's

3. Credit Information Bureau Ltd. (CIB)

India -- Determined to distribute information without a rating.

4. Duff & Phelps Credit Rating Co.

US -- Absorbed by Fitch

5. Humphreys Argentina Calificadora de Riesgo S.A.

f/k/a: Ratto-Humphreys, Calificadora de Riesgo S.A.

Argentina -- Absorbed by Moody's

6. Humphreys Clasificadora de Riesgo

a/k/a: Clasificadora de Riesgo Humphreys, Ltda.

Chile -- Redundant

7. SKATE

Russia -- Became an equity/info shop

8. Thompson BankWatch

US -- Absorbed by Fitch

9. VALUE Calificadora de Riesgo, S.A.

Argentina -- Absorbed by Moody's

10. Xinhua Far East China Ratings

a/k/a: Shanghai Far East Credit Rating Co., Ltd.

China -- Redundant


1.10 Top 10 Credit Rating Agencies of the world

Here is the list of Top 10 Credit Rating Agencies of the world. These agencies are Nationally

Recognized Statistical Rating Organizations by the U.S. Securities and Exchange

Commission.

A. MOODY’S

Moody‘s is the oldest credit rating agency. It is also the first rating agency to be recognized

by NRSRO in 1975. The company became public in 2000. It has been earning huge profits.

Average profit margin was 53% from 2000 to 2007. Structured finance products were its top

source of revenue by 2000.

B. Standard & Poor’s

The agency is owned by Mc Graw-Hill Inc. It has been published any stock indices of the

world, most famous being S&P 500 index which is the most watched index in the world.

McGraw-Hill reported a net profit margin of 12.6 percent for 2008.

C. Fitch

Fitch is smallest among the top three agencies. It is a part of Fitch Group, a subsidiary of

Fimalac S.A FIM.PA. Was the third agency to become an NRSRO in 1975. From 1975 to


1992, four other agencies were recognized as NRSROs and all subsequently merged with

Fitch.

D. DBRS

DBRS is privately owned Canadian ratings agency. Has been the top ratings agency in

Canada for 30 years. It became the fourth NRSRO in 2003. DBRS believes that it can

compete with the big three but is not favored by authorities.

E. Egan-Jones

Egan-Jones is a Philadelphia-based agency founded in 1995. It was granted NRSRO status in

December 2007 after a nine-year process. Although they are paid by investor-subscribers,

Egan-Jones will give out their ratings to anyone who asks.

F. A.M Best

A.M Best was founded in 1899 in New York City and became an NRSRO in 2005. It

specializes exclusively on the insurance marketplace and so not a competitor with the others

per se. But has recently begun issuing debt and financial-strange ratings for small and mid-

sized commercial banks.


G. Japan Credit Rating Agency Limited

Japan Credit rating Agency was established in 1985 and based in Tokyo and it became an

NRSRO in 2007. It is a small agency when compared to competitors. it has a staff of just 90.

H. Rating and Investment Information Inc

The second Japanese credit ratings agency to become an NRSRO in 2007. It was set up in

1975, now based in Nihonbashi. New York office was set up in 2005.

I. LACE Financial

It was founded in 1984, and became a NRSRO in 2008. The second NRSRO after Egan-

Jones to operate on investor-paid business model.

J. Realpoint LLC

Realpoint LLC became a NRSRO in 2008. It is one of the smallest NRSROs and is paid by

issuers. Obtained an exemption in 2008 from the SEC regulation that an NRSRO is

prohibited from rating an issuer that contributes 10 percent or more of its revenue.


1.11 Rating Companies in Bangladesh

List of Credit Rating Companies

SL.

No.

Name of the Company Date of Issuance of

Registration Certificate

01. Credit Rating Information and Services Ltd (CRISL) 21 August, 2002

02. Credit Rating Agency of Bangladesh Ltd (CRAB) 24 October, 2004

03 National Credit Ratings Ltd 22 June, 2010

04 Emerging Credit Rating Ltd 22 June, 2012

‘05. ARGUS Credit Rating Services Ltd. 21 July, 2011

06. WASO Credit Rating Company (BD) Limited 15 February, 2012

07. Alpha Credit Rating Limited 20 February, 2012

08. The Bangladesh Rating Agency Limited 7 March, 2012

1.12 Rating Grades

Each rating agency has developed its own system of rating sovereign and corporate

borrowers. Fitch Ratings developed a rating system in 1924 that was adopted by Standard &

Poor's. Moody's grading is slightly different. Moody's sometimes argues that their ratings

embed a conceptually superior approach that directly considers not only the likelihood of

default but also the severity of loss in the event of default.

1.13 Recent developments

Since the beginning of the credit crunch in early 2007 rating agencies have come under fire

for their high ratings of mortgage backed securities (MBS) that did not reflect the financial

stability of the borrowers. This has also reopened a discussion whether rating agencies, who

get paid by borrowers for their rating, are not in a conflict of interest.

http://www.wikinvest.com/concept/Credit_Ratings_Agencies?action=edit&section=2

http://www.wikinvest.com/concept/Credit_Ratings_Agencies?action=edit&section=4


Description Moody's S&P Fitch

Maximum Safety Aaa AAA AAA

High grade Aa1 AA+ AA+

High grade Aa2 AA AA

High grade Aa3 AA- AA-

Higher medium Grade A1 A+ A+

Higher medium Grade A2 A A

Higher medium Grade A3 A- A-

Lower medium Grade Baa1 BBB+ BBB+

Lower medium Grade Baa2 BBB BBB

Lower medium Grade Baa3 BBB- BBB-

Speculative Ba1 BB+ BB+

Speculative Ba2 BB BB

Speculative Ba3 BB- BB-

Highly Speculative B1

B+

Highly Speculative B2 B B

Highly Speculative B3

B-

Substantially risky

CCC+ CCC+

Substantially risky Caa CCC CCC

May be in default Ca CC CC

Extremely Speculative C C C


Income bonds - not paying interest

CI

Default

DDD

Default

DD

Default

D D

1.14 The Importance of Credit Rating Agencies

Credit rating agencies provide investors and debtors with important information regarding the

creditworthiness of an individual, corporation, agency or even a sovereign government. The

credit rating agencies help measure the quantitative and qualitative risks of these entities and

allow investors to make wiser decisions by benefiting from the skills of professional risk

assessment carried out by these agencies. The quantitative risk analysis carried out by credit

rating agencies include comparison of certain financial ratios with chosen benchmarks and

the qualitative analysis focuses on the management character, legal, political and economic

environment in a jurisdiction.

1.15 Development of Financial Markets

Credit rating agencies help provide risk measures for various entities and make it easier for

financial market participants to assess and understand the credit risk of the parties involved in

the investing process. Individuals can get a credit score in order to be eligible for easy access

to credit cards and other loans. Institutions can borrow money easily from banks without

having to go through lengthy evaluations from each individual lender separately. Also

corporations and governments can issue debt in the form of corporate bonds and treasuries to

attract investors based on the credit ratings.

1.16 Credit Rating Agencies Help Regulate Financial Markets

The credit ratings provided by popular rating agencies including Moody‘s, Standard & Poor‘s

and Fitch, have become a benchmark for regulation of financial markets. Legal policies

require certain institutions to hold investment graded bonds. Bonds are classified to be

investment graded based on their ratings by these agencies, any corporate bond with a rating

higher than BBB is considered to be investment graded bond.


1.17 Estimation of Risk Premiums

The credit ratings provided by these agencies are used by various banks and financial

institutions in determining the risk premium they will charge on loans and corporate bonds. A

poor credit rating implies a higher risk premium with an increase in the interest rate charged

to corporations and individuals with a poor credit rating. Issuers with a good credit rating are

able to raise funds at a lower interest rate.

1.18 Enhanced Transparency in the Credit Markets

The credit rating agencies provide improved efficiency in the credit markets and allow for

more transparency in dealings. The ratings help monitor the credit soundness of various

borrowers through a set of well-defined rules.

1.19 Standardization of the Evaluation Process

Most credit agencies use their own methodology for determining credit ratings, but since only

a handful of popular credit rating providers exist, this adds a great deal of standardization in

the rating process. The credit ratings of different borrowers can be easily compared using

ratings provided by a credit rating company and the applications can be easily sorted.

1.20 Limitations of Credit Rating

Some limitations of credit rating are-

Rating could be biased depending on the relationship between the credit rating agency

and rated company. The "Big Three" global credit rating agencies--U.S.-

based Standard and Poor's, Moody's, and Fitch Ratings--have been under intense

scrutiny since the 2007-2009 global financial crises. They were initially criticized for

their favorable pre-crisis ratings of insolvent financial institutions like Lehman

Brothers, as well as risky mortgage-related securities that contributed to the collapse

of the U.S economy.

Credit rating requires a fine knowledge about the rated company. Analyst needs to

know about the company, its operation properly which is time consuming and

requires a very good effort. Several meetings and conversations over phone are done

to ensure that. Once a company is rated by a financial analyst of a credit rating agency

and after that if that financial analyst switches his/ her job, new analyst faces a lot of

troubles while performing surveillance of the company.

http://www.standardandpoors.com/home/en/us

http://www.moodys.com/

http://www.fitchratings.com/index_fitchratings.cfm


As ratings are designed exclusively for the purpose of grading obligations according

to their credit quality, they should not be used alone as a basis for investment

operations. For example, they have no value in forecasting the direction of future

trends of market price. Market price movements in bonds are influenced not only by

the credit quality of individual issues but also by changes in money rates and general

economic trends, as well as by the length of maturity, etc.


Part-2

CRAB


2.1 About CRAB:

Credit Rating Agency of Bangladesh Limited (CRAB) was established in 2003 at the

initiative of some leading personalities in private sector and institutions of the country with

the commitment to contribute to the development of the capital market by providing quality

ratings and comprehensive research services. CRAB was incorporated as a public limited

company in 2003 and received its Certificate for Commencement of Business in the same

year.

In 2004, CRAB was granted license by the Securities & Exchange Commission (SEC) of

Bangladesh (under the Credit Rating Companies Rules 1996) for operating as a Credit Rating

Company. In 2009 CRAB has been accredited as an External Credit Assessment Institution

(ECAI) by Bangladesh Bank, to provide rating of Bank Clients under Basel II regime. CRAB

has established its reputation as a reliable source of independent opinion on risks based on

systematic and standardized analysis done by professionals.

2.2 Mission & Objectives

Mission

CRAB‘s mission is to Effect significant contribution towards qualitative development of the

money and capital markets and enhancement of transparency of financial information and

credibility of the corporate sector in Bangladesh for helping in the growth of investment.

Objectives

To perform the credit rating of various debt instruments as Commercial papers, Bonds

and Debentures, Islamic bonds, Preference shares, Equity instruments, Rights issue,

Mutual fund units etc.

To perform grading of various institutions as banks, non-banking financial

institutions, insurance companies, corporations, non-corporations, societies, trusts or

individuals or their clients for purposes requested clients or required by authorities.

To accumulate, process and offer information services in broad areas for the use of

organization and clients at different levels.


To provide consultancy and advisory services in broad areas to their clients at

different levels.

To act as trustees of any debentures, bonds, securities, commercial papers or any other

obligations and to exercise the powers of executor, administrator, receiver, treasurer,

custodian in respect of such debts and securities.

2.3 CRAB Profile:

2.3.1 ACRAA Membership

CRAB is a member of the Association of Credit Rating Agencies in Asia (ACRAA).

ACRAA, established in 2001, is a federation of domestic rating agencies of the Asian

Continent- including those of Japan, Philippines, Uzbekistan, Sri Lanka, Malaysia, Indonesia,

Korea, India, Pakistan, Taiwan, China, Thailand and Bangladesh, formed with support and

cooperation of the Asian Development Bank (ADB). As a member, CRAB participates in all

the activities of this Association. As of April 2009, membership has increased to 25 members

from 14 countries. (Web: www.acraa.com).

The Association of Credit Rating Agencies in Asia is organized for the following purposes:

To develop and maintain cooperative efforts that promote interaction and exchange of

ideas, experiences, information, knowledge and skills among credit rating agencies in

Asia that would enhance their capabilities and their role of providing reliable market

information.

To undertake activities aimed at promoting the adoption of best practices and

common standards that ensure high quality and comparability of credit ratings

throughout the region, following the highest norms of ethics and professional conduct.

To undertake activities aimed at promoting the development of Asia's bond markets

and cross-border investment throughout the region.


2.3.2 Technical Collaboration with ICRA (an Associate of Moody's)

CRAB has a Technical Collaboration Agreement with ICRA Ltd. of India, one of the leading

credit rating agencies of the region. This collaboration has provided CRAB with facility for

development of rating methodologies, for performing rating assignments and for training of

its professionals. ICRA-CRAB collaboration facilitates sharing of resources and information

base and professional expertise between the two organizations, much to the advantage of

CRAB. ICRA Limited (an Associate of Moody's Investors Service, USA) was incorporated

in 1991 as an independent and professional company. ICRA is a leading provider of

investment information and credit rating services in India. ICRA's major shareholders include

Moody's Investors Service and leading Indian financial institutions and banks. With the

growth and globalization of the Indian capital markets leading to an exponential surge in

demand for professional credit risk analysis, ICRA has been proactive in widening its service

offerings, executing assignments including credit ratings, equity grading, specialized

performance grading and mandated studies spanning diverse industrial sectors. In addition to

being a leading credit rating agency with expertise in virtually every sector of the Indian

economy, ICRA has broad-based its services for the corporate and financial sectors, both in

India and overseas. (Web: icra.in)

2.3.3 Rating Service of CRAB:

Code of Conduct:

The Board of Directors of CRAB on 02 April 2006 adopted the Code of Ethics prescribed by

Association of Credit Rating Agencies in Asia (ACRAA) and Code of Conduct for Credit

Rating Agencies prescribed by International Organization for Securities Commission

(IOSCO). CRAB complies with the Code of Conduct as prescribed under the Credit Rating

Agencies Rules of Securities & Exchange Commission. This Code of conduct focus on the

followings:

1. Responsibility & Trust: CRAB deems the Credit Rating as a function of serious

responsibility and the persons exercising the function view it as a matter of great trust.

2. Integrity & Competence: Rating Committee members and professionals apply

highest degree of integrity, competence, objectivity and thoroughness.

3. Quality of Rating: CRAB uses standardized methodologies following international

standard considering local context. The methodologies are regularly fine-tuned

through rigorous validity tests.


4. Confidentiality: CRAB and its staff presume the confidentiality of the information

received from clients.

5. Independence: CRAB's ratings are assigned by independent Rating Committee

Members.

6. Avoidance of Conflict of Interest: Rating Committee members and professionals

disclose conflict of interest in the internal process and refrain from participating in

any manner in such assignments.

7. Transparency and Timeliness of Rating Disclosure: Disclosures given through

website and information to regulators.

2.4 Requirement for Rating in Bangladesh

1) The Credit Rating Agencies Rules 1996 issued by the Securities & Exchange

Commission requires that the following instruments be rated prior to making issuance

and that the information on rating be incorporated in the prospectus of offer

documents:

a. Public offering of all debt instruments: bond, debenture, commercial paper, structured

finance (asset/mortgage backed securities) and preference shares.

b. Public issue of shares at a premium.

2) Securities & Exchange Commission through its Securities and Exchange (Rights

Issue) Rules, 2006 requires rating of the followings:

a. All rights issue at premium

3) The SEC rules 2004 (asset backed security issue) requires the credit rating of asset

pools to be securitized with optional requirements of credit rating of the originator.

4) Bangladesh Bank through its circulars require mandatory credit rating for the

followings:

a. All scheduled Banks on an annual basis

b. All financial institutes in case of IPO

c. Bank exposures

5) Chief Controller of Insurance through its circulars require mandatory credit rating for

the followings:

a. All general insurance companies on an annual basis

b. All life insurance companies on biennial basis


2.5 Rating Process:

CRAB's Rating process is initiated on receipt of a formal request (or mandate) from the

Client. A Rating team consisting of Financial Analysts is engaged for conducting Rating

assignment. Analysts collect information from the client through documents, data, meeting,

site visits etc. CRAB also draws on secondary sources of information, including its own

research division.

After completing the analysis, Analysts prepare a Draft Rating Report, which is discussed in

the Internal Committee. A draft report is provided to the client also to ensure that there is no

factual mistake or misrepresentation in the report. The report is then presented to the CRAB

Rating Committee. The Rating Committee is the final authority for assigning Ratings. The

assigned Rating, along with the key issues, is communicated to the issuer's top management

for acceptance. If the client does not find the Rating acceptable, it has a right to appeal for a

review.

Such reviews are usually taken up only if the issuer provides certain fresh inputs. During a

review, the issuer's response is presented to the Rating Committee. If the inputs and/or fresh

clarifications so warrant, the Rating Committee would revise the initial Rating decision. As

part of a mandatory surveillance process, CRAB monitors the accepted Ratings over the

tenure of the contract period. The Ratings generally reviewed once every year, unless the

circumstances of the case warrant an earlier review. The Rating outstanding may be retained

or revised (that is, upgraded or downgraded) on surveillance.

2.6 Rating Methodology:

CRAB has developed highly standardized rating methodologies for different instruments and

entities. The methodologies have been developed considering all the relevant factors affecting

the future cash generation capacity of the issuers. These factors include industry

characteristics, competitive position of the issuer, operational efficiency, management

quality, commitment to new projects and other associate companies, and future funding

policies of the issuer.

A detailed analysis of the past financial statements is made to assess the actual business

performance. Analysis considers the estimated future earnings under various sensitivity

scenarios are drawn up and evaluated against the future obligations that require servicing

over the tenure of the instrument being rated. CRAB rating methodology intends to assess the

relative comfort level of the issuers to service the obligations and this is reflected in the rating


of a debt instrument. In case of equity instruments, the rating reflects the future earning

capabilities with reference to the resilience to perform in adverse situations.

2.7 Banks and Financial Institutions:

CRAB's ratings assess the creditworthiness of financial institutions, i.e. commercial and

merchant banks, non-bank finance companies, housing finance companies etc. While each of

these entities has the same function, i.e. leveraging on own funds and lending to others on a

cost plus basis, there are significant differences in terms of scale of operations, products and

services offered, product delivery, regulatory obligation, and their internal control system.

Ratings of financial institutions focus on the risks that can possibly affect the operations of

such a company - operating risks, financial risks and management risks.

2.7.1Banking Sector of Bangladesh

Banks are the financial institutions which work as intermediaries between the two parties one

is the party has surplus of money and the other party is in a need of money. After

independence of Bangladesh, there were only six nationalized banks and one specialized

bank. The first private commercial bank came into being in 1982. Before the private banks

entered the scene, the people of Bangladesh, who were directly or loosely related with the

banking sector, were not in a position to realize the benefits offered by real banking. As AB

Bank Limited, the first-ever private commercial bank in Bangladesh, began operating in the

market, the banking scenario took a new shape. The nationalized commercial banks (NCBs)

witnessed a new era of competition in course of time.

Now, banks in Bangladesh are primarily of two types:

Scheduled Banks: The banks which get license to operate under Bank Company Act,

1991 (Amended in 2003) are termed as Scheduled Banks.

Non-Scheduled Banks: The banks which are established for special and definite

objective and operate under the acts that are enacted for meeting up those objectives,

are termed as Non-Scheduled Banks. These banks cannot perform all functions of

scheduled banks.

There are 47 scheduled banks in Bangladesh who operate under full control and supervision

of Bangladesh Bank which is empowered to do so through Bangladesh Bank Order, 1972 and

Bank Company Act, 1991. Scheduled Banks include 4 State Owned Commercial Banks


(SOCBs), 4 Specialized Banks (SDBs), 30 Private Commercial Banks (PCBs), 23

Conventional PCBs, 7 Islami Shariah based PCBs and 9 Foreign Commercial Banks (FCBs).

There are now 4 non-scheduled banks in Bangladesh which are Ansar VDP Unnayan Bank,

Karmashangosthan Bank, Probashi Kollyan Bank and Jubilee Bank.

2.7.2 Governing Body of Banks

The central bank took initiatives to streamline the assets of the banks according to their

quality through issuing Banking Regulation and Policy Department (BRPD) circular No-14

regarding loan classifications and provisioning. It was the first fruitful initiative taken by the

Bangladesh Bank (BB). If the central bank of Bangladesh had not taken this remarkable

initiative, the banking sector would have been affected by repeated volatilities.

While banks have benefited from an overall good economic growth over the last decade,

strong supervisory role by Bangladesh Bank (BB), setting up of credit information bureaus,

internal improvements such as upgrade of technology infrastructure, tightening of the

appraisal and monitoring process and strengthening of the risk management platform have

also contributed to the improvement.

2.7.3 Current situation of Banking Sector

Banks in Bangladesh, the dominant financial intermediaries, have made good progress over

the last seven years, as is evident from several parameters, including annual credit growth,

profitability and trend in gross non-performing loans (NPLs).

An extensive expansion has been achieved in the capital base of the country‘s banking sector

in the last four years, according a Bangladesh Bank release. According to Basel II accord,

banks had to maintain risk based capital adequacy up to 2008. As per this accord, the total

amount of actual capital maintained by banks was tk 20, 578 crore at the end of 2008. The

figure has gone up to Tk. 56, 201 crore over the last four years (upto June 2012). In other

words banking sector as a whole has witnessed a gross increase of Tk. 35,623 crore in capital

base. That means, overall growth of capital has been 173 percent over the last four years with

yearly growth of about 49 percent.

The capital base has increased due mainly to response to risk sensitive Basel II accord and

due to the transfer of a larger proportion of profit of banks into capital. As a result, the base

of banking system becomes stronger, according to the central bank.


This is why for strengthening of the capital base of banks, Basel II accord relating to capital

adequacy has been fully implemented by the central bank following the international best

practices rules and regulation.

The BB also said necessary steps have been taken for implementing the Basel III accord in

near future. According to Basel II, banks are required to maintain capital at 10 percent of risk

weighted assets, but in reality the banks have been able to maintain more than the required

level which is now 11.31 percent.

Risk management systems are expected to be centralized, thereby ensuring uniform credit

evaluation standards across the bank. It will also help banks better manage their growing

consumer credit business, where the current delinquency levels at a few banks are sometimes

significantly higher than the best in the Bangladeshi industry. The introduction of improved

technology, including interconnectivity among branches, and ‗core banking‘ software, is

expected to drive such changes. Other aspects include a reappraisal of the existing credit risk

measurement parameters, tempering the weights of the qualitative factors, and appropriately

valuing collaterals. Introducing specialized loan monitoring groups and early warning

systems are proactive measures to control delinquencies. These steps will also help banks

meet some of the requirements of the internal ratings-based (IRB) approach of the new Basel

capital accord.

Most Bangladeshi banks have recently focused on improving their risk management systems,

and a few of the ‗new‘ private sector banks are ahead in terms of technology and skill levels

compared with the public sector and the old private sector banks. Most banks will, however,

need to upgrade their existing technology and skill levels before they can be considered

compliant with the IRB approach of the new Basel capital accord.

2.7.4 Challenges for Banking Sector

Currently banks face several challenges such as increase in interest rates on saving deposits, a

tighter monetary policy, a large government deficit, increased stress in some sectors such as

utilities, real estates, restructures loan accounts, increasing infrastructure loans (power sector)

and implementation of Basel II and looking forward for Basel III.

Over the last two years the Bangladesh financial markets have witnessed wide ranging

changes a fast pace. Intense competition for business involving both the assets and liabilities,

together with increasing volatility in the domestic interest rates, foreign exchange rates as


well as capital market, has brought pressure on the management of banks to maintain a good

balance among spreads, profitability and long term viability. These pressure call for

structured and comprehensive measures and not just ad hoc action. The management of banks

has to base their business decisions on a dynamic and integrated risk management system and

process, driven by corporate strategy. Banks are exposed to several major risks in the course

of their business- credit risk, interest rate risk, foreign exchange risk, equity/ commodity price

risk, liquidity risk and operational risks.

2.7.5 Factors in Bank Rating by CRAB

Profitability

Earning &

Volatility

Liquidity &

Funding

Capital

Adequacy

Earning

Diversification

Corporate

Governance

Controls & Risk

Management

Investment

Quality

Asset Quality &

Provisioning

Sectoral

Adjustment

Bank

Rating Asset

Quality


2.7.6 Impact of Credit Rating on Banking Sector

Bangladesh Bank has made credit rating mandatory to all scheduled banks and insurance

companies on an annual basis. With a view to managing various risks in a prudent manner,

scheduled banks are hereby instructed to follow the attached risk management guidelines.

The document should be treated as Supplement to, and not a substitute for, existing core risks

guidelines.

Banks have to prepare a risk management paper and must place the same in the monthly

meeting of the Risk Management Unit. The minutes of the meetings should contain specific

decisions based on the analyses/recommendations made in the risk management paper. Banks

have to submit risk management papers (hard & soft copies for successive months of each

quarter) along with the minutes of the meetings within 10 days of each quarter end to the

Department of Off-site Supervision of Bangladesh bank.

In case of banks clients who have loan exposure of 10 million or above are required to be

rated. The eight credit rating companies are involved in the process. Banks can be rated by

more than one credit rating Company. In that situation lowest rating should be considered as

per rule of BB.

CRAB‘s ratings assess the creditworthiness of financial institutions, i.e. commercial and

merchant banks, non-bank finance companies, housing finance companies etc. CRAB

focuses on the factors while rating a bank are- Profitability, Earnings & Volatility, Asset

Quality, Capital Adequacy, Liquidity & Funding, Investment Quality, Asset Quality &

Provisioning, Controls & Risk Management, Corporate Governance, and Earning

Diversification. Rating definition and rating methodology for banks practiced by CRAB is

presented in the Appendix part of the report.

Credit Rating has 2 types of impact on Banks which are:

When Banks themselves are rated and how they are using these ratings- Bank as

borrower.

The ratings of banks‘ clients and how banks are using those ratings- Bank as lender.


2.7.7 Impact while Bank is a Borrower

According to a very general thought banks are here to lend money. But banks sometimes

need to borrow money to meet its monetary necessity. Banks borrows this money either from

other banks or from other financial institutions. When bank is a borrower bank is rated by

credit rating agencies and bank can use that rating to get loans for its operation. The impact of

credit rating on a bank while it is a borrower are-

The main advantage of a credit rating is being rewarded for managing budget and

finances responsibly. This qualifies a bank for the best credit offers, including low

interest. Good credit ratings allow borrowers to easily borrow money from financial

institutions or public debt markets.

A better rated company gets priority while applying for a loan to a bank or a financial

institution.

Pricing of fresh loans supposed to be effected by the rating of the borrower. Higher

rated companies in particular will benefit from this.

Good credit rating qualifies for insurance at preferred rates

Good credit rating makes an organization look more attractive to employers as well.

Risk grading would also be relevant for surveillance and monitoring, internal MIS and

assessing the aggregate risk profile. It is also relevant for portfolio level analysis.

2.7.8 Impact while Bank is a Lender

At the pre-sanction stage, credit rating helps the banks to decide whether to lend or

not to lend, what should be the pricing for a particular exposure, what should be the

extent of exposure, what should be the appropriate credit facility and the various risk

mitigation tools.

At the post-sanction stage, the bank can decide about the depth of the review or

renewal, frequency of review, periodicity of the grading, and other precautions to be

taken.

Banks enjoy a facility while maintain capital reserve requirement of Bangladesh.

Basel II accord allows banks to maintain capital reserve requirement according to the

risk weight which saves capital of the bank and increase capital base of overall

banking sector.

An illustration of capital-saving potential by banks on a loan of Tk. 1000 million is as

following


Table 2: illustration of capital-saving potential by banks on a loan of Tk. 1000 million

Rating Risk

Weight

Capital

Required

(in million BDT)

Capital Saved

(in million BDT)

AAA, AA1, AA2, AA3 20% 20 80

A1, A2, A3 50% 50 50

BBB1, BBB2, BBB3, BB1, BB2,

BB3

100% 100 0

B1, B2, B3, CCC1, CCC2, CCC3 150% 150 -50

Unrated 125% 125 -25

Source: Basel II: New Capital Adequacy Framework, Credit Rating Agency of Bangladesh

Ltd.

2.8 General and Life Insurance

CRAB ratings of Insurance Companies assess the ability of the insurers concerned to honor

policy holder claims and obligations on time. Rating provides an opinion on the financial

strength of the insurer from a policyholder's perspective, which may act as important input

influencing the consumer's choice of insurance companies and products. The analysis also

includes an assessment of company's ownership strength, profitability, liquidity, operational

and financial leverage, capital adequacy, and asset/Liability management method.


2.9 Corporate

CRAB's corporate rating methodology is developed for analysis of nonfinancial organizations

operating in manufacturing, assembling, service sector etc. The generic factors are common

for all entities/issuers, while criterion specific for different industries are used for rating.

There are separate rating criterions for rating of entities in different industries.

2.9.1 Corporate Sector of Bangladesh

Corporate sector includes business entities which are Public Limited Companies and obtained

consent from the Commission to raise paid up capital of more than 1.00 crore. Bangladesh

corporate sectors are still in its initial stage. Most of the companies depend on the banks as

their major source of financing. Capital market in Bangladesh is still at an emerging stage

with market capitalization amounting to only 6.5% of GDP with low investor confidence on

corporate governance and financial disclosure practices in many companies listed in the stock

exchanges. The neighboring countries are well ahead vis-à-vis Bangladesh in terms of depth

of capital market. For example, in India, Pakistan and Sri Lanka, the market capitalization is

56%, 30% and 18% of their GDP respectively. However, Awareness of the importance of

corporate governance in Bangladesh is growing.

Securities and Exchange Commission of Bangladesh (SECB) issued a notification on

Corporate Governance Guidelines (CG Guidelines) for the publicly listed companies of

Bangladesh under the power vested on the Commission by Section 2CC of the Securities and

Exchange Ordinance, 1969.

2.9.2 Corporate ownership structures

All corporate governance (CG) systems revolve around four core principles: Fairness,

accountability, responsibility and transparency. The specific challenges of upholding these

principles depend on the ownership structure of the corporate sector. However, in

Bangladesh, general practice is that the corporate structure is dominated by family members.

Such practice hinders the level of fairness, accountability and transparency. Inadequate

Bankruptcy Laws: Bankruptcy laws and processes are inadequate in terms of provisions and

not strong in terms of enforcement in Bangladesh. No country can have good CG standards

with poor bankruptcy laws and processes. Besides, inefficient

Foreclosures and securitization processes have compounded the problems in Bangladesh.

Lack of initiatives to drive for CG from the International Investor Community; most


companies in Bangladesh have a pessimist approach in attracting foreign investment. As a

result, there is a lack of drive from the international investor community for better corporate

governance.

2.9.3 Accounting standards, audit and disclosure

The scenario of internal audit; accounting standards and disclosure and its impacts on CG and

management practices in Bangladesh are mixed. There are now elements of both positive

scopes and new challenges and risk for the corporations in these areas. Bangladesh

accounting standards rely on Generally Accepted Accounting Principles (GAAP) developed

by accounting profession. These principles are primarily shareholder oriented and are

independent of tax considerations. In Bangladesh the companies have to make disclosure of

information required by law. Disclosure requirements for Initial Public Offerings are defined

by the Companies Act and the orders under the Securities and Exchange Ordinance, 1969.

2.9.4 Categories of Corporate Sector

Bangladesh has a thriving industrial sector with a diverse range of sectors outperforming

global growth rates. The abundant natural resources of the country combined with

competitive high quality labor and a business friendly environment, make Bangladesh a

compelling proposition for companies investing in the region.

Below are five broad business categories of special opportunity:

Quality garment design and production

ICT and business services

Pharmaceuticals and life sciences

Agribusiness

Leather products

2.9.5 Quality garment design and production

From spinning to weaving, from knitwear to leisurewear and high street fashions, the textiles

and clothing industry is Bangladesh‘s biggest export earner with over USD 9.3bn of exports

in 2007. Their factories design and produce for the world‘s leading brands and retailers. A

good number of reasons are mentionable behind the growth of this sector are lower cost but


quality products, on time delivery, skilled labor, training and technical development facilities

that support the industry etc.

2.9.6 ICT and business services

Businesses ranging from inbound call centers to the latest in Web 2.0 software development

can be successfully operated in Bangladesh. Widespread use of English helps to make

Bangladesh a fast emerging option for the global business services industry.

2.9.7 Pharmaceuticals and life sciences

Pharmaceutical companies worldwide can benefit from setting up a facility in Bangladesh.

The country has tremendous potential to build a pharmaceuticals and life sciences workforce

for international companies. Bangladesh is developing a strong manufacturing and

technically experienced industrial base with growth in excess of 10% most years.

Thanks to the country‘s quality of its tertiary education, the scientific talent pool is not only

plentiful but also offers excellent cost/quality opportunities. Bangladesh also offers

significant potential for R&D, contract research outsourcing (CRO) and clinical trials

development.

2.9.8 Agribusiness

Over 90 varieties of vegetable are grown in Bangladesh, yet for such a fertile land there are

huge gaps in local resources and under-utilization of the country‘s agricultural capacity. This

presents many opportunities for investors seeking to export agricultural products, or to meet

the rapidly growing local demand.

2.9.9 Leather products

Bangladesh has a long established tanning industry that already produces around 2-3% of the

world‘s leather from a ready supply of raw materials. Bangladesh is therefore an established

and attractive location to source and outsource the manufacture of finished leather products.

Three key enabling business factors are:

Attractive export incentives

Tariff and quota free access to major markets such as the EU

A skills pool and rural/industrial locations to support foreign investors


2.9.10 Rating Methodology of CRAB for Corporate

2.9.11 Impact of Credit Rating on Corporate Sector

Rating assesses the level to which an organization accepts and follows the codes and

guidelines of corporate governance practices. It is evaluated from the system of distribution

of rights and responsibilities among different participants in the organization such as the

board, management, shareholders and other financial stakeholders, and the rules and

procedures have lay down and followed for making decisions on corporate affairs. Credit

rating is not mandatory under Basel II. However banks are likely to save capital if they get

their counterparties/ loan portfolios rated. If a bank chooses to keep some of its clients/ loans

unrated, it may have to provide a risk weighted of 125% for credit risk on such loans. That is

why banks push their clients to be rated by credit rating agencies. For the same reason credit

rating agencies reach corporations or other business organizations through their banks.

Industry Risk

Analysis

Business Risk

Analysis

Operating

Environment

Security Risk

Analysis

Strategy and

Financial Policies

Industry Risk

Analysis

Business Risk

Analysis

Operating

Environment

Security Risk

Analysis

Strategy and

Financial Policies

Generic Rating

Factors

Corporate

Rating


CRAB‘s corporate rating methodology is developed for analysis of non-financial

organizations operating in manufacturing, assembling, service sector etc. The generic factors

are common for all entities/ issuers, while criterion specific for different industries are used

for rating. The criterions used for corporate rating are Industry Risk Analysis, Business Risk

Analysis, Operating Environment, Strategy & Financial Policies, Security Risk Analysis,

Management Evaluation, Corporate Governance, Operating Performance, Financial Strength

and Relationship Risk Analysis. Among these Security Risk Analysis and Relationship Risk

Analysis are considered as generic risk factors, others are considers as corporate rating

factors. A chart of corporate rating factors and rating definition are presented in the appendix

part of the report.

Impact on Bangladesh Bank has made credit rating mandatory to all the business entities who

have bank loan exposure of BDT 10 million or more. The impacts of credit rating on the

corporate sector of our country are as following-

Credit rating work as a reward for managing budget and finances responsibly. This

qualifies a company for the best credit offers, including low interest. Good credit

ratings allow the companies to easily borrow money from financial institutions or

public debt markets.

Credit rating may help in stabilizing issuers; access to the market even when the

market price of listed equities is relatively unfavorable in the prevailing market

conditions.

Credit ratings of Entities would grant upon the companies a greater confidence of the

market and enhance a greater access to the financing sources.

Rating opinion would facilitate the investors to decide their portfolios by choosing

investment options in the market according to their profiles and preferences which

gradually help a corporation to raise capital from shareholders.

A better rated company gets priority while applying for a loan to a bank or a financial

institution.

Pricing of fresh loans supposed to be effected by the rating of the borrower. Higher

rated companies in particular will benefit from this.

Good credit rating qualifies for insurance at preferred rates.

Good credit rating makes an organization look more attractive to employers as well.


Credit rating would also be relevant for surveillance and monitoring, internal MIS and

assessing the aggregate risk profile. It is also relevant for portfolio level analysis.

Credit ratings may facilitate the process of issuing and purchasing bonds and other

debt issues by providing an efficient, widely recognized, and long-standing measure

of relative credit risk. Investors

Other market participants may use the ratings as a screening device to match the

relative credit risk of an issuer or individual debt issue with their own risk tolerance or

credit risk guidelines in making investment and business decisions.

2.10 Debt Instrument

CRAB ratings of debt instruments assess the likelihood of timely repayment of principal and

payment of interest over the term to maturity of such debts, as per terms of a contract with

specific reference to the instrument being rated. A missed or delayed payment by an issuer in

breach of the agreed terms of the issue is considered as default. The rating is based on an

objective analysis of the information and clarifications obtained from the Issuer, as also other

sources considered reliable.

2.11 Structured Finance Rating

Structured Finance Rating inducted under this category will be asset backed securitization,

mortgage backed securitization, future flow transaction etc. Structured Finance ratings are

opinions on the likelihood of the concerned structured instrument servicing its debt

obligations in accordance with the terms. An SFR, which is generally different from the

corporate credit rating of the originator, is based on the risk assessment of the individual

components of the structured instrument:

Assessment of issuer and/or originator/servicer

Legal issues and documentation

Originations, underwriting criteria and portfolio servicing

Historical portfolio performance

Portfolio characteristics and concentrations

Obligor characteristics and concentrations

Loan and lease features

Manufacturer/vendor concentration

Derivation of credit enhancement

Cash flow analysis


2.12 Services under BASEL II

Bangladesh Bank (BB) issued new guidelines on capital adequacy for Banks under the

implementation process of Basel II framework. Under the guidelines, Banks require to link

the minimum size of their capital to the credit risk in their portfolios. So far Banks were

calculating required capital as proportion of the entire loan portfolio, regardless of the degree

of credit risk. To determine credit risk in their loan portfolios, banks will need to use credit

ratings assigned by approved External Credit Assessment Institutions (ECAIs) such as

CRAB.

2.12.1 What is Basel II

Basel II is recommendatory framework for banking supervision, issued by the Basel

Committee on Banking Supervision in 2004. The objective of Basel II is to bring about

international convergence of capital measurement and standards in the banking system. BB,

in December 2008, issued guidelines on the New Capital Adequacy Framework (BRPD

Circular 09, dated 31.12.08) to banks operating in Bangladesh, based on the Basel II

framework. These guidelines inform that BB suggests implementation of Basel II with the

following approaches:

i. Standardized approach for calculating RWA against credit risk

ii. Standardized approach for calculating RWA against Market Risk; and

iii. Basic indicator approach for calculating RWA against Operational Risk

Under standardized approach for measuring credit risks, the risk grades are determined on the

basis of ratings assigned by ECAIs.

2.12.2 Basel II Accord

Understanding Basel II accord

The world financial market is an extremely complex system that involves many different

participants from local banks to the central banks of each nation and even the investor. Due to

its importance on the global economy and our everyday lives it is vital that it is functioning

properly.

One tool that helps the financial markets run smoothly is a set of international banking

agreements called the Basel Accords. These accords coordinate the regulation of global

banks, and are "an international framework for internationally active banks". The accords are

obscure to people outside banking, but they are the backbone of the financial system; the


Basel Accords were created to guard against financial shocks, which is when a faltering

capital market hurts the real economy, as opposed to a mere disturbance.

Basel II is recommendatory framework for banking supervision, issued by the Basel

Committee on Banking Supervision in June 2004. The objective of Basel II is to bring about

international convergence of capital measurement and standards in the banking system. The

Basel Committee members who finalized the provisions are primarily representatives from

the G10 countries, but several countries that are not represented on the committee have also

stated their intend to adopt this framework.

Basel II is the second accord of the Basel Committee on Bank Supervision's

recommendations, and unlike the first accord, Basel I, where focus was mainly on credit risk,

the purpose of Basel II was to create standards and regulations on how much capital financial

institutions must have put aside. Banks need to put aside capital to reduce the risks associated

with its investing and lending practices

2.12.3 Basel Committee

The Basel Committee on Banking Supervision (BCBS) is a committee of banking

supervisory authorities that was established by the central bank governors of the Group of

Ten countries in 1974. It provides a forum for regular cooperation on banking supervisory

matters. Its objective is to enhance understanding of key supervisory issues and improve the

quality of banking supervision worldwide. The Committee also frames guidelines and

standards in different areas - some of the better known among them are the international

standards on capital adequacy, the Core Principles for Effective Banking Supervision and the

Concordat on cross-border banking supervision. The Basel Committee formulates broad

supervisory standards and guidelines and recommends statements of best practice in banking

supervision (see bank regulation or "Basel III Accord", for example) in the expectation that

member authorities and other nations' authorities will take steps to implement them through

their own national systems, whether in statutory form or otherwise.

2.12.4 Basel II in Bangladesh

Bangladesh Bank in December 2008, issued guidelines on the New Capital Adequacy

Framework (BRPD Circular 09) for banks operating in Bangladesh, based on the Basel II

framework. These guidelines inform that BB suggests implementation of Basel II with the

following approaches


Standardized approach for calculating Risk Weighted Amount (RWA) against credit

risk

Standardized approach for calculating RWA against Market Risk

Basic indicator approach for calculating RWA against Operational Risk

Basel II is implemented from January 2009. In this regard a quantitative impact study (QIS)

to assess the preparedness for implementing Basel II as well as the bank‘s view on the

optional approaches for calculating Minimum Capital Requirement (MCR) as stated in Basel

II was carried out in April-May 2007. Study & subsequent discussion with few related banks

revealed that bankers should be more acquainted with the New Capital Accord (Basel-II). To

address this challenge capacity building of concerned implementing & supervisory officials

were given first priority in the Action Plan/Roadmap.

Under standardized approach for measuring credit risks, the risk grades are determined on the

basis of ratings assigned by External Credit Assessment Institutions (ECAIs).

Table 1: Risk weights of Corporate Claims under Basel II

Claims on

Corporate

(Excluding equity

exposure)

Bangladesh

Bank Rating

Grade

Equivalent CRAB Rating Risk

Weight (%)

1 AAA 20

2 50

3, 4 , 100

5, 6

CC, C, D

150

Unrated 125

Source: CRAB brochure. Credit Rating Agency of Bangladesh Limited (CRAB)

2.13 Bank Loan Rating

CRAB offers Bank Loan Ratings to various types of facilities provided by banks, such as

working capital demand loans, cash credit, project loans, loans for general corporate

purposes, and non-fund-based facilities. Bank loan ratings indicate the degree of risk with

regard to timely payment of interest and principal on the facility being rated.


The Bank Loan Rating service from CRAB entails evaluating the capability of an issuer

(borrower of a bank) to timely meet its debt obligations against a specific line of credit, in the

light of the relevant terms, conditions and covenants. CRAB considers all relevant factors

that have a bearing on the future cash generation and debt servicing ability of the issuer. The

rating methodology and scale used are similar to that used for Debt Instrument Rating.

2.14 Bank Client Rating

CRAB also offers entity ratings of different companies. CRAB has conducted ratings of

companies of different industries, including textile, telecom, engineering, agro processing,

power, manufacturing, and service sector. The rating methodology and scale used are similar

to that used for Corporate Rating.

2.15 Special Offer for Corporate needing this service

CRAB offer that Corporate would reach an arrangement with CRAB for rating of the

companies and their bank exposures. Under such arrangement Corporate will have the

following privileges.

Assist Corporate in selecting the Companies under the Group for rating

CRAB would offer special rates for rating of more than one Company and/or

exposure

CRAB would arrange programs for the officials of Companies for familiarization of

rating

CRAB would offer special privileges to all future rating requirements of the

Corporate, i.e. IPO, Debenture, Bonds etc.

CRAB professionals would assist Corporate in providing information

2.16 Other Rating Services

2.16.1 Mutual Funds Schemes Rating

Mutual Funds Schemes Rating is designed to provide investors, intermediaries and Fund

Sponsors/Asset Management Companies with an Independent opinion on the performance

record and risks associated with various Mutual Fund Schemes. Funds ratings incorporate

various qualitative and quantitative factors affecting a fund's portfolio. Such analyses focus

on the resilience of portfolio companies to economic changes, assessing asset quality,

portfolio diversification and performance, and liquidity management.


2.16.2 Corporate Governance and Stakeholder Value Addition Rating

Such rating assesses the level to which an organization accepts and follows the codes and

guidelines of corporate governance practices. It is evaluated from the system of distribution

of rights and responsibilities among different participants in the organization such as the

board, management, shareholders and other financial stakeholders, and the rules and

procedures lay down and followed for making decisions on corporate affairs.

2.16.3 Micro Finance Capacity Rating

Micro Finance Capacity Assessment rating is intended as a service to lenders by providing

informed opinion on the credit worthiness of the MFIs, This would facilitate flow of funds to

MFIs by providing detailed information and analysis on the programs and performance of the

organization. The rating would also provide suggestions for improvements in MFIs'

performance strength facilitating the ability of more efficient utilization of funds.

2.16.4 Entity Rating

Entity ratings are a measure of a company's intrinsic ability and overall capacity for timely

repayment of its financial obligations. These ratings may be required for any regulatory

compliance or sought by companies to enhance credit, corporate governance, and

transparency. These ratings are useful for benchmarking a company against its peers,

enhancing investors' confidence, market profiling, reducing time for future debt ratings,

enhancing a company's standing for counter party risk purposes and facilitating credit

evaluation for Bank borrowings and Bank credit lines.

2.16.5 Project Finance

Credit rating of Project Finance provides opinion on the types of risks associated with the

project and the relative ability of the project and its sponsors/executing agency to service the

financial obligations. These ratings are useful for the project sponsors in raising funds, and

for the lenders in designing and pricing their funds.


2.17 Other Services

2.17.1 Grading Service

CRAB is equipped to offer specialized evaluation methodologies addressing exclusive and

area specific requirements under the umbrella of Grading services. The services are meant for

evaluation of different activities and entities belonging to multifaceted industries. CRAB's

grading service is designed to provide an objective, credible and independent opinion on the

quality of entities being examined with specific reference to parameters and issues unique to

the sector/sub-sector. Construction and real-estate development activities, hospitals and

diagnostic services are examples of such sector/subsectors. CRAB intends to establish

strategic association with reputable and specialized bodies associated with the sector/sub-

sector to develop and offer specialized grading products. The services include:

A. Corporate Governance & Stakeholders Value Addition Grading

B. Real Estate Developers Grading

C. Health Care Institutions Grading

D. NGO Social Impacts Grading

E. Educational Institutions Quality Grading

F. Other Grading Services

2.17.2 Advisory Service

The Advisory & Consultancy Services will offer wide-ranging management advisory

services, which include client specific need-based service in the following areas for banks,

financial institutions, corporate and other core sectors:

A. strategic counseling

B. restructuring solutions

C. financial feasibility

D. financial structuring/modeling

E. studies in different areas

F. credit risk management services for banks and other lenders

G. Project design and feasibility reports etc.

CRAB also offers advisory/consulting services to clients who are seeking to be more

competitive in their operating spheres. Such advisory services will be useful for a variety of

clients - corporate entities, regulatory authorities, banks/financial service organizations,


industry associations, local governments, government organizations, and multi-lateral

agencies, through selective tie-ups with reputed organizations having expertise in specific

sectors.

2.17.3 Information Service

CRAB Information Service focuses on providing authentic data and value-added products

used by intermediaries, financial institutions, banks, asset managers, institutional and

individual investors, and others. The service includes sector/industry specific

studies/publications and mandate-based studies (customized research).


Part-3

Rating Process of CRAB


Rating Process of CRAB

Rating is an interactive process with a prospective approach. It involves a series of steps. The

main steps are described as follows:

A) Rating Request: Ratings in CRAB are usually initiated on formal request (or Mandate)

from the prospective Issuer. An undertaking is also obtained on a Taka 150 non-judicial

Stamp Paper before commencement of a Rating assignment; which spells out the terms

and conditions of the engagement of credit rating agency.

B) Team: The Rating team usually comprises two members. The composition of the team

is based on the expertise and skills required for evaluating the business of the Issuer. The

team is usually led by the lead analyst with adequate knowledge of the relevant

instrument to be Rated.

C) Role of the Lead Analyst: The lead analyst shall arrange to finalize the Rating report

and send the same to the Rating Committee members. The lead analyst shall arrange to

make a presentation before the Rating Committee. The lead analyst will make sure that all

the relevant and material issues that may have an impact on the credit quality of the issuer

(including, but not limited to those which are related to the program being Rated) are

presented before the Rating Committee for discussion. The lead analyst will ensure

communication of the Rating decision to the Issuer and initiate all the necessary actions

consequent to the reaction of the issuer depending on the circumstances.

D) Information Requirements: Issuers are provided with a list of information requirements

and broad framework for discussions. These requirements are derived from the

experience of the Issuers business and broadly conform to all the aspects, which have a

bearing on the Rating.

E) Secondary Information: CRAB draws on the secondary sources of information

including its own in-house research and information obtained through meetings with the

Issuers‘ bankers, auditors, customers and suppliers among many other relevant market

participants. CRAB also has a panel of industry experts who provide guidance on

specific issues to the Rating team. The secondary sources generally provide data and


trends including changes in industry structure, sector outlook, global trends and

government policies, etc. for the industry.

F) Management Meetings and plant visits: Rating involves assessment of number of

qualitative factors with a view to estimate the future earnings prospects of the Issuer. This

requires intensive interactions with the Issuers‘ management specifically with a view to

understanding the business plans, future outlook, competitive position and funding

policies, etc.

G) Other Meetings: The CRAB analyst team may also decide to meet the auditors

(accounting policies followed, quality of internal controls, standard of disclosures, etc.),

bankers / lenders (relationship, reputation, dealings in the past in respect of timeliness of

servicing obligations) lawyers (if there are major litigations pending which may have

serious impact on credit quality), trade union leaders (if industrial relations is a sensitive

issue), key functional executives as well as a few investors, customers and suppliers,

depending upon the circumstances to get a direct feedback from different stakeholder.

H) Meeting with the Issuers’ CEO /CFO: This would be a very important meeting

(usually, the last meeting) when the Rating team would discuss all the critical issues /

findings that may impact the Rating decision with the CEO / CFO of the Issuer (in the

absence of CEO / CFO, with a senior executive nominated by the Issuer for this purpose).

I) Internal Review Committee Meeting: Once the draft report is prepared by the Analysts

team, it is placed before the Internal Review Committee Meeting. The committee

comprise of senior analysts. The committee reviews the draft rating report and analysis

made by the analysts. Committee also reviews the due diligence, documents, meetings,

site visits etc.

J) Rating Committee Meeting: The authority for assigning Ratings is vested in the Rating

Committee of CRAB. The Rating reports are sent by the analyst team in advance to the

Rating Committee members. A presentation about the Issuers business and the

management is made by the Rating team to the Rating Committee at the meeting. All the

key issues are identified and discussed at length during the meetings and all relevant

issues, which influence the Rating, are considered. The differences if any arise during the


discussion are taken note of. Finally, a Rating is assigned either by a consensus or by

majority votes.

K) Surveillance: It is obligatory on the part of CRAB to monitor Accepted Ratings (including

the Ratings treated as Deemed Acceptance) over the tenure of the Rated instrument or till

any amount is outstanding under the program(s) Rated. The Issuer is bound by the

agreement to provide information to CRAB to facilitate such monitoring. In case the Issuer

do not co-operate by way of providing information, etc, for the purpose of surveillance,

CRAB may on its own carry out the surveillance on best efforts basis based on the available

information and possible interactions after giving the Issuer adequate notice requesting him

to co-operate. The Ratings are generally reviewed every year, unless the circumstances of

the case warrant an earlier review due to changes in circumstances or major developments

that were not anticipated / factored in the Rating decision. The Ratings may be Upgraded,

Downgraded or retained after the surveillance. The CEO, at his sole discretion, may give

one opportunity to the Issuer to represent his case if he is not satisfied with the Rating

decision after the surveillance process. However, the Issuer would not have any option of

not accepting the Rating after the surveillance.

Figure 1: Rating Process of CRAB

Source: CRAB brochure, Credit Rating Agency of Bangladesh Limited (CRAB)

Issuer mandate rating

assignment to CRAB

Primary discussion between

issuer & rating team of CRAB

Issuer prepares & submits

required data requested by

rating team

Additional information

gathering, visits & meetings

with issuer & management

Analysis & evaluation by

CRAB analysts

Rating team presents

primary rating report to

internal committee.

Rating Committee meeting

Notification to issuer

Appeal by issuer &

reappraisal (if appropriate)

Announcement of rating

Publication of Credit analysis

report

Ongoing surveillance/ formal

annual reviews


Part – 4

Industry Analysis According to CRAB & CRISL Rating


Rating Definition Value Rating Definition Value

AAAExtremely Strong Capacity &

Highest Quality 10 AAA Highest Safety 10

AA1, AA2, AA3Very Strong Capacity & Very High

Quality 9 AA+, AA, AA- High Safety 9

A1, A2, A3 Strong Capacity & High Quality 8 A+, A, A- Adequate Safety 8

BBB1, BBB2, BBB3Adequate Capacity & Medium

Quality 7 BBB+, BBB, BBB- Moderate Safety 7

BB1, BB2, BB3Inadequate Capacity &

Substantial Credit Risk 6 BB+, BB, BB- Inadequate Safety 6

B1, B2, B3 Weak Capacity & High Credit Risk 5 B+, B, B- Risky 5

CCC1, CCC2, CCC3Very Weak Capacity & Very High

Credit Risk 4 CCC+, CCC, CCC- Vulnerable 4

CCExtremely Weak Capacity &

Extremely High Credit Risk 3 CC+, CC, CC- High Vulnerable 3

C Near To Default 2 C+, C, C- Near To Default 2D Default 1 D Default 1

CRISLCRAB

Industry Analysis According to CRAB & CRISL Rating:

I have done a comprehensive analysis on 30 industries in Bangladesh. As we have already

known that credit rating gives us an overall idea of the company and also the credit

worthiness. So, I have considered all valid rating of companies from CRAB & CRISL.

4.1 Analysis Methodology:

I have distinguished these companies into 30 different industries. Then I have compared their

rating according to weighted average methodology. As CRAB & CRISL has different rating

criteria, so I have given weight to each of the rating. This weight helped me compare

CRAB‘s and CRISL‘s ratings. The weights are as follows:

As AAA is the highest rating for both CRAB & CRISL, so I have given 10 weight to this

rating notch. Then I have given 9 weight to AA rating category for both rating company.

Actually these weights are representing each of the rating. As I have done the analysis on MS

Excel, I must need the numerical value for each of the rating to compare the ratings. Thus 4

indicates CCC category and so on you can see.

I have counted the long-term credit ratings, and distributed to each category. The number of

ratings were totaled and matched with the number of ratings done by the rating companies.

For CRISL there are some ratings for small and medium enterprise (i.e: CRISL-SME 1,

CRISL-SME 2, CRISL-SME 3 etc.) which are not considered in my analysis part. Rest of all

long-term rating has been considered in my analysis. After counting and distributing each of

rating, I have done the weighted average for these ratings for both of the rating companies.

Then I have compared the weighted average for each of the industry for my analysis.

Now a comprehensive analysis part will be described for all the industries I have analyzed.


4.2 Industries:

I have analyzed 30 industries in Bangladesh. I have excluded over 80 industries from my

analysis, as there were lack of information. There were some industries, in which CRAB has

done some ratings but CRISL didn‘t and vice versa. There were also some industries where

the rated companies were very few. So, I have excluded all of these industries from my

analysis. Then finally I got 30 industries. The industries are as follows:

S/L No:

ALPHABET WISE Industries

1 A Accessories

2

Agro Inputs & Agriculture

3

Automobiles & Automotives

4 B Banks

5

Bricks

6 C Cement

7 E Electronics

8

Engineering & Construction

9 F Financial Institutions

10

Fishery

11

Food & Allied

12

Fuel & Power

13 H Hospital & Healthcare

14

Hotel & Hospitality

15 J Jute

16

Life Insurance

17 M Miscellaneous

18 N Non-Life Insurance

19 P Packaging

20

Paper & Printing

21

Pharmaceuticals

22

Plastic

23

Polymers

24 R Real Estate

25

RMG

26 S Ship Breaking

27

Steel

28 T Telecommunication

29

Textile

30

Trading

Analysis.xlsx#Accessories!A1

Analysis.xlsx#'Agro Inputs & Agriculture'!A1

Analysis.xlsx#'Automobiles & Automotives'!A1

Analysis.xlsx#Banks!A1

Analysis.xlsx#Bricks!A1

Analysis.xlsx#Cement!A1

Analysis.xlsx#Electronics!A1

Analysis.xlsx#'Engineering & Construction'!A1

Analysis.xlsx#'Financial Institutions'!A1

Analysis.xlsx#Fishery!A1

Analysis.xlsx#'Food & Allied'!A1

Analysis.xlsx#'Fuel & Power'!A1

Analysis.xlsx#'Hospital & Healthcare'!A1

Analysis.xlsx#'Hotel & Hospitality'!A1

Analysis.xlsx#Jute!A1

Analysis.xlsx#'Life Insurance'!A1

Analysis.xlsx#Miscellaneous!A1

Analysis.xlsx#'Non-Life Insurance'!A1

Analysis.xlsx#Packaging!A1

Analysis.xlsx#'Paper & Printing'!A1

Analysis.xlsx#Pharmaceuticals!A1

Analysis.xlsx#Plastic!A1

Analysis.xlsx#Polymers!A1

Analysis.xlsx#'Real Estate'!A1

Analysis.xlsx#RMG!A1

Analysis.xlsx#'Ship Breaking'!A1

Analysis.xlsx#Steel!A1

Analysis.xlsx#Telecommunication!A1

Analysis.xlsx#Textile!A1

Analysis.xlsx#Trading!A1


4.3 Industry Analysis:

Here I will describe each of the 30 industries according to my analysis. There should be 5

major parts of my industry analysis. Each of this industry analysis will include:

a. Overall Industry Scenario in Bangladesh

b. Comparison Graphs

c. My Findings

d. Interpretation According to My Analysis

e. Recommendations


1. ACCESSORIES

Garments accessories here in after referred as accessories business has a wide business

opportunity in Bangladesh. As Garments industry is one of the leading industries in

Bangladesh. A lion share of foreign currency is earned from this sector. Garments industry is

nothing without these accessories companies. The products of these companies are:

1. Button

2. Zipper

3. Ribbon

4. Polybag & Packaging

5. Label or Tag etc.

These companies sale products to the garments factories and also export globally. So, their

market opportunity and customer range is huge. In Bangladesh the labor cost is lower, so they

can produces these goods at a low cost than other countries. The major buyers are USA,

Canada, and other European countries.

Analysis:

According to my analysis, I have compared two rating company‘s rating to find out the

current position of this industry.

Graph 1.1: Rating Acquired

Graph 1.2: Rating Average


In above two graphs we can see that, according to CRAB rating 1 company has got A, 2

companies has got BBB, 3 companies has got BB and 1 company got B.

Rating Definition Value Acquired Rating Definition Value Acquired


Highest Quality 10CRAB

AverageAAA Highest Safety 10

CRISL

Average

AA1, AA2, AA3Very Strong Capacity & Very

High Quality 9 6.43 AA+, AA, AA- High Safety 9 7.33A1, A2, A3

Strong Capacity & High

Quality 8 1 A+, A, A-Adequate

Safety 8 2

BBB1, BBB2, BBB3Adequate Capacity &

Medium Quality 7 2 BBB+, BBB, BBB-Moderate

Safety 7 4


Substantial Credit Risk 6 3 BB+, BB, BB-Inadequate

Safety 6

B1, B2, B3Weak Capacity & High Credit

Risk 5 1 B+, B, B- Risky 5

CCC1, CCC2, CCC3Very Weak Capacity & Very

High Credit Risk 4 CCC+, CCC, CCC- Vulnerable 4




Total7

Total6

According to CRISL rating 2 companies has got A and 4 companies has got BBB. If we sum

up all the ratings of CRAB & CRISL, then we can find that:

3 companies got A, 6 Companies got BBB, 3 companies got BB and 1 company got B rating

range. By using weighted average method we can get 6.43 from CRAB and 7.33 average

rates from CRISL. According to my industry ranking analysis this industry in on 26 (twenty

sixth) rank. From these averages we can say that most of these industries have adequate

financial capacity with adequate safety of their return. Though accessories industry position

is now above average, but it has a huge opportunity for growth. The main obstacles for this

market are:

1. Dollar rate fluctuation

2. Increased price of raw materials

3. Labor strike

4. Failure to meet the buyer‘s lead time

These are the major problems faced by the industry. If the companies can overcome these

problems, I believe accessories business can grow and have a better bright future in

Bangladesh.


2. AGRO INPUTS & AGRICULTURE

Bangladesh has a primarily agrarian economy. Agriculture is the single largest producing

sector of the economy since it comprises about 18.6% (data released on November, 2010) of

the country's GDP and employs around 45% of the total labor force. The performance of this

sector has an overwhelming impact on major macroeconomic objectives like employment

generation, poverty alleviation, human resources development and food security.

The main products of this industry are:

1. Crops

2. Poultry

3. Meat Products

On the basis of this industry huge number of companies has been grown up. They are

meeting national demand as well as international.

A plurality of Bangladeshis earns their living from agriculture. Although rice and jute are the

primary crops, wheat is assuming greater importance. Tea is grown in the northeast. Because

of Bangladesh's fertile soil and normally ample water supply, rice can be grown and

harvested three times a year in many areas. Due to a number of factors, Bangladesh's labor-

intensive agriculture has achieved steady increases in food grain production despite the often

unfavorable weather conditions. These include better flood control and irrigation, a generally

more efficient use of fertilizers, and the establishment of better distribution and rural credit

networks.

Analysis:






In above two graphs we can see that, according to CRAB rating 1 company has got AA, 13

companies has got A, 26 companies has got BBB, 26 companies has got BB and 3 companies

got B.

According to CRISL rating 1 company has got AA, 2 companies has got A and 3 companies

has got BBB. If we sum up all the ratings of CRAB & CRISL, then we can find that:


AAAExtremely Strong Capacity

& Highest Quality 10CRAB


CRISL

Average


High Quality 9 1 6.75 AA+, AA, AA- High Safety 9 1 7.67A1, A2, A3



Safety 8 2



Safety 7 3



Safety 6

B1, B2, B3Weak Capacity & High

Credit Risk 5 3 B+, B, B- Risky 5






Total 69 Total 6

2 companies got AA, 15 companies got A, 29 Companies got BBB, 26 companies got BB

and 3 companies got B rating range. By using weighted average method we can get 6.75 from

CRAB and 7.67 average rates from CRISL. According to my industry ranking analysis this

industry in on 21 (twenty first) rank. From these averages we can say that most the

companies of this industry have adequate financial capacity with adequate safety of their

return. But these averages say us that, the financial & business position is average not


outstanding. According to our geographical position and climate our agriculture business

should be very good. But according to the current position the industry averages are not up to

the mark.

There are also some problems faced by the companies in this industry. Those are:

1. Population pressure continues to place a severe burden on productive capacity

2. Creating a food deficit, foreign assistance and commercial imports fill the gap.

3. Natural Disaster

4. Increased price of Fertilizer, Insecticides & Chemicals.

Underemployment remains a serious problem, and a growing concern for Bangladesh's

agricultural sector will be its ability to absorb additional manpower. Finding alternative

sources of employment will continue to be a daunting problem for future governments,

particularly with the increasing numbers of landless peasants who already account for about

half the rural labor force. So, our government should focus on this industry, because it can be

the main source of earning foreign currency as well as meet the local demand.


3. AUTOMOBILES & AUTOMOTIVES

The automobile industry is the selling of cars as a whole; the automotive industry produces

the cars and parts, and then fixes them when they are broken.

The automotive industry in Bangladesh currently manufactures auto rickshaws and a

locally designed three-wheeler motor vehicle, Mishuk, utilizing an engine from Honda. The

country has a few large car plants which assemble the Mitsubishi Pajero, Hino bus, and also

the Tata bus and motorcycles.

In 2009, the Malaysian Agate group proposed to build a car manufacturing plant in

Bangladesh in cooperation with Walton, which itself is preparing to produce motorcycles. In

the same year, car manufacturing company TagAZ announced that they would build their

third factory in Bangladesh, aiming for exporting. The plant is to be completed by 2012. In

February 2010, Japanese car manufacturer Mitsubishi officially proposed to the Bangladesh

government to manufacture the Pajero in collaboration with Pragoti Industries, with a goal of

production in 2011.

Mitsubishi is in talks to start producing the Pajero in Bangladesh. So, we can see that the

numbers are very few of companies in this industry. But the future is very bright because of

our:

1. Labor Force

2. Labor Skills

3. Land Availability


Analysis:





In above two graphs we can see that, according to CRAB rating 1 company has got A and 1

company has got BBB.

According to CRISL rating 1 company has got AA and 3 companies have got BBB. If we

sum up all the ratings of CRAB & CRISL, then we can find that:





CRISL

Average


High Quality 9 7.5 AA+, AA, AA- High Safety 9 1 7.5A1, A2, A3



Safety 8



Safety 7 3


Substantial Credit Risk 6 BB+, BB, BB-Inadequate

Safety 6


Risk 5 B+, B, B- Risky 5






Total 2 Total 4


1 company got AA, 1 company got A and 4 Companies got BBB rating range. By using

weighted average method we can get 7.5 from CRAB and 7.5 average rates from CRISL.

According to my industry ranking analysis this industry in on 13 (thirteenth) rank.

The number of companies in this industry is very few. So, I didn‘t get enough population for

the analysis. Hence I have analyzed according to these companies and find out:

1. According to the number of companies, this industry has strong financial capacity

2. Market players are very few

3. Production cost is low and customer demand is huge

4. So the chances of future profitability and growth for this industry is huge

Bangladesh automobile industry is not a big industry and maximum automobile parts are

imported from other countries. Japan largest automobile corporation TOYOTA capture the

Bangladeshi automobile markets by their car and made by Japan, auto vehicle are more

popular in here. But recent time Bangladesh automobile industry is turning around, as a result

local and foreign investor are interest about this sector for investment.

Progoti is the only state own automobile company in Bangladesh and they made & repair

only government related automation product. Bangladesh machine tools Factory (BMTF) was

establish in February 11, 1979 and it is the commercial automobile assembly plant, maintain

by Bangladesh Army, especially for defense industry.

Walton & Aftab is the largest Bangladeshi private automobile company in Bangladesh.

Walton Company establish a large plant for motorcycle production, on the other hand Aftab

automobile is famous for bus accessories assembling.

Mitsubishi Pajero, Hino Bus, Tata bus/Truck, Proton automobile manufacturer company

already buildup their production assemble plant in Bangladesh and here is the important

news, near Dhaka, location name is Dolaikhal, is the largest automobile market in

Bangladesh for expire & new automobile parts.

We can say that this industry has been doing profit from years. But it is overlooked by our

government till now. Our government should allocate more budgets in this sector. This can be

one of the domestic economy changing industries in our country.


4. BANKS

Bangladesh is a third world country with an under developed banking system, particularly in

terms of the services and customer care provided by the government run banks. Recently the

private banks are trying to imitate the banking structure of the more developed countries, but

this attempt is often foiled by inexpert or politically motivated government policies executed

by the central bank of Bangladesh, Bangladesh Bank. The outcome is a banking system

fostering corruption and illegal monetary activities/laundering etc. by the politically powerful

and criminals, while at the same time making the attainment of services or the performance of

international transactions difficult for the ordinary citizens, students studying abroad or

through distance learning, general customers etc.

The banking industry in Bangladesh has flourished over the years, making double-digit profit

percentages, sustaining growth and surviving cut-throat competition while providing

attractive returns to shareholders. However, the greed for more without befitting platform and

fundamentals brings its own challenges and questions in people's minds.

Services of Bangladeshi banks are:

1. Deposits

2. Loans

3. Credit Cards

4. Internet Banking

5. Mobile Banking etc.

Analysis:






In above two graphs we can see that, according to CRAB rating 1 Bank has got AAA, 17

Banks have got AA, 5 Banks have got A and 1 Bank has got BBB.

According to CRISL rating 3 Banks have got AAA, 7 Banks have got AA and 1 Bank have

got A. Sonali Bank Limited and Agrani Bank Limited also got Additional A. If we sum up all

the ratings of CRAB & CRISL, then we can find that:



Highest Quality 101

CRAB


3CRISL

Average


Quality 9 17 8.75 AA+, AA, AA- High Safety 9 7 9A1, A2, A3 Strong Capacity & High Quality 8 5 A+, A, A-

Adequate

Safety 8 3


Quality 7 1 BBB+, BBB, BBB-Moderate

Safety 7

BB1, BB2, BB3Inadequate Capacity & Substantial

Credit Risk 6 BB+, BB, BB-Inadequate

Safety 6







Total 24 Total 13

4 Banks have got AAA, 24 Banks got AA, 8 Banks got A and 1 Bank got BBB rating range.

By using weighted average method we can get 8.75 from CRAB and 9 average rates from

CRISL. According to my industry ranking analysis this industry in on 2 (second) rank. These

weighted averages are very satisfactory. We can see that most of the banks are very financial

sound. These banks have very strong capacity to meet financial commitments, maintains very

high quality, with very low credit risk. My analysis appropriately matched with the current

scenario of Bangladesh. We can see that this sector has consistently grown up. Now banks

are doing huge profit.


Banking sector of Bangladesh is one of the major sectors, which contributes significantly to

the national economy. The sector comprises a number of banks in various categories.

Considering ownership the sector can be classified in to four major categories - such as

Nationalized Commercial Banks (NCBs), Specialized Banks (SPBs), Private Commercial

Banks (PCBs), and Trans-National Banks (TNBs).

Economic development - of the country is executed by the contribution of various economic

sectors. Banking sector also has a contribution to the economic growth. In mid 80s Banking

and Insurance contributed 1.69% of GDP and gradually the figure was increasing. The

maximum contribution was 2.09% of GDP in the year 1993 and it was 2.00% in 1996-97

Average growth rate of this contribution was 1.51% of GDP, which shows a positive trend.

In case of profitability, i.e. amount of profit per Tk. 100 of asset. The ratio indicates the

effective utilization of assets. Performance of the organization can be expressed by this ratio.

Average profitability ratios for the various categories of banks during 1980 to 1995 were

exhibited in the table below:

Table 1: Profit Ratio for Various Banks

Banks Profit Ratio (%)

NCBs 0.08

SPBs -0.32

PCBs 0.13

TNBs 0.71

Over all 0.09

Source: Adopted from Internet

The performance of the banking sector in terms of net profit varies in various groups of bank.

The study revealed that in every aspect, TNBs had a commendable performance. But

comparing among other groups of banks (NCBs, SPBs, and PCBs), PCBs had preferred

achievement aiming profit. On the other hand Specialized Banks in Bangladesh had a very

poor performance. This meager activity affected the overall banking sector's performance.


5. BRICKS

In Bangladesh, bricks are the predominant building material in urban areas.

They have also become a significant building material in the rural areas. High prices

and/or scarcity of alternative building materials, such as stones, iron sheets,

wood, bamboo, and straw are very rapidly increasing the demand for bricks.

To meet the increasing demand, brickfields are mushrooming all over the

country with heavy concentrations on the outskirts of urban area. In

our c o u n t r y , t h e r e i s 4 5 0 0 b r i c k m a n u f a c t u r i n g c o m p a n y

p r o d u c i n g a b o u t 9 billion bricks per year. The brickfields are situated all over the

Bangladesh (fig: 1.1)

Figure 5.1: Major concentrations of brick-fields in Bangladesh

Bangladesh has started making bricks using new technology, which cuts carbon emission

almost by half and creates scope for earning huge foreign currencies. Entrepreneurs and

financiers said Bangladesh will be able to sell per ton of saved carbon at $15 after June 2010.

Diamond Auto Bricks at Aduria Saughat in Narayanganj has set up such a brick kiln.

So, there will be also another opportunity for making more profits for the bricks companies.

Media reports that the Asian Development Bank (ADB) will provide $50 million in loan to

help improve the environment by financing more energy-efficient brick kilns in Bangladesh.

ADB approved the "Financing Brick Kiln Efficiency Improvement Project" on May 10, 2012.

Within the scope of the project, ADB will provide $50 million in local currency to the

Bangladesh Bank which will re-lend the funds through local financial institutions. These


financial institutions will subsequently provide loans to brick makers in order to upgrade their

existing kilns to less polluting and comparatively energy efficient kilns.

The local brick industries will appreciate the financial assistance as the demand for bricks are

increasing and the industry requires new technology and investment. The cost for production

of brick has been growing steadily due to increased prices of inputs for production. Brick

making has been dominated so far mainly by the 'seasonal' brick kilns in Bangladesh. Brick

burning technology in Bangladesh used to be based on so-called 'Bull's Trench Kiln' (BTK)

technology or some variation of it. This type of technology is over 150 years old and

exceedingly inefficient in terms of fuel usage. Although there are Fixed Chimney kilns

(FCK), Zigzag kilns, gas fired Hoffman kilns (HK) and Hybrid Hoffman kilns (HHK) to

produce bricks. One study reveals that in 2006, market share for different brick kilns in

Bangladesh was FCK-75.4 per cent, BTK-19.2 per cent, Zigzag kiln-4.8 per cent and HK-0.6

per cent.

Analysis:






In above two graphs we can see that, according to CRAB rating 2 companies have got BBB.

According to CRISL rating 3 companies have got BBB. If we sum up all the ratings of CRAB

& CRISL, then we can find that:





CRISL

Average


High Quality 9 7 AA+, AA, AA- High Safety 9 7A1, A2, A3


Quality 8 A+, A, A- Adequate Safety 8


Medium Quality 7 2 BBB+, BBB, BBB- Moderate Safety 7 3


Substantial Credit Risk 6 BB+, BB, BB- Inadequate Safety 6








Total 2 Total 3

5 companies have got BBB rating range. By using weighted average method we can get 7

from CRAB and 7 average rates from CRISL. BBB indicates that companies have adequate

financial capacity with moderate safety. We can also say that the qualitative factors for these

companies are quite satisfactory. According to my industry ranking analysis this industry in

on 22 (twenty second) rank.

Bangladesh is still grappling with problems like illegal brick kilns, use of firewood for brick

baking, brickfields on cropland and the loss of top soil and cutting of hills blamed on brick

manufacturing. The brick industries contribute in three major problems:

1. It is a major source of urban and now increasingly rural air pollution.

2. It contributes to the land degradation. and

3. It is a significant cause of deforestation.

As the companies are going to adopt eco-friendly technology, they‘ll be able to save more

energy and sell the carbons to other companies. It helps them to reduce cost and enhance the

profit. As the weighted average is 7 out of 10, we can say that this industry is doing well

enough in our country. But there are also so many scope of improving this sector.


6. CEMENT

Bangladesh cement industry is the 40th largest market in the world. Currently capacity of the

industry is about 20 mn tonnes (MT). Top 13 players are alone controlling over 78% of the

total industry capacity. However, the balance capacity still remains quite fragmented.

Currently, Heidelberg, Holcim and Lafarge are the leaders among multinational cement

manufacturers and Shah and Meghna are the leading domestic manufacturers. Shah cement is

the market leader with close to 14.20% of the market share, followed by Heidelberg with

about 9.30% of the market share. During the 2010, many small local manufacturers like

Premier, Seven Circle, Crown, Fresh and King cement increased their sales drastically riding

on their benefits of economies of scale, backward linkage and aggressive marketing effort.

In Bangladesh, cement consumers are categorized as follows:

1. Individual home makers (25%)

2. Real estate developers (35%)

3. Govt. organizations, i.e., LGED, RHW etc. (40%)

Graph 6.1: Consumption Per Capita

Cement consumption has steadily been rising. It is expected that cement companies will

enjoy a good growth of margin over the next 3 years. Because, in next couple of years when

large capacities are expected to come on-stream, pass through of input cost will be easier and

clinker (main raw material of cement) price is expected to remain stable at $53-$58.


Considering the Life cycle of the industry, currently cement industry of Bangladesh is in the

growth stage. Sales of cement are increasing due to an enormous demand for cement in both

the local and foreign markets. The industry realized about 30% and 21% growth in 2009 and

2010 respectively after suppressed demand from previous years.

Figure 6.1: Industry Stage

Industry expected demand growth is 20%-25% for the next three years.

Analysis:





In above two graphs we can see that, according to CRAB rating 1 company has got AA and 3

companies has got A.


According to CRISL rating 2 companies have got A. If we sum up all the ratings of CRAB &

CRISL, then we can find that:





CRISL

Average


Quality 9 1 8.25 AA+, AA, AA- High Safety 9 8A1, A2, A3 Strong Capacity & High Quality 8 3 A+, A, A-

Adequate

Safety 8 2


Quality 7 BBB+, BBB, BBB-Moderate

Safety 7



Safety 6







Total 4 Total 2

1 company has got AA rating range and 5 companies have got A. By using weighted average

method we can get 8.25 from CRAB and 8 average rates from CRISL. According to my

industry ranking analysis this industry in on 3 (third) rank.

From these averages we can say that, current position of this industry is very good. As

Bangladesh is a developing country, lots of structures are under construction. So, the demand

of cement is very high. Bangladesh also has enough number of cement manufacturing

companies to meet this demand. Their production capacity is also huge.

Graph 6.4: Industry Demand & Production Scenario

As we have seen that this industry is in growth stage, there are lots of opportunities for this

industry to grow further. The cement industry is likely to maintain its current growth

momentum and continue growing at around 20% to 25% in the medium to long term.


Government initiatives in the infrastructure sector and the housing sector are likely to be the

main growth drivers. Hence it needs government support.

If the import duty structure of various cement products, e.g. finished cement, semi-finished

cement and basic raw materials for cement (25%, 12% and 7% respectively) continues i.e.

import duties is on favor of the local manufacturers and the construction sector remains

booming with smooth power supply than nothing to be surprised that cement industry will be

the most evolving industry in the next three to five years.


7. ELECTRONICS

The electronics industry in Bangladesh mostly produces consumer items. Home appliances

includes televisions, radios, DVDs and CD players, refrigerators, air conditioners, ovens,

electronic fans, blenders etc. are being assembled to a large extent. To ensure the

performance reliability, the key challenges in this sector are technical assistance and proper

technology orientation of the industry. Developing the significant capacity and skill in

assembly and manufacture of a wide range of electronic components and parts is crucial.

Bangladesh's experience in basic electronics spans over two decades. In recent years,

European and Asian electronic firms have established technical collaboration with their

Bangladeshi counterparts to produce some electronic goods at competitive prices. This has

tremendous potentiality for expansion.

Manufacturing of semiconductors could be established as a standalone industry.

Bangladesh is going to be one of the largest cell-phone markets in South Asia.

The home appliance market in Bangladesh is growing rapidly.

The labor-intensive nature of the electronic industry matches the ability of

Bangladesh to provide a high skilled labor source.

It is time that the government would introduce tax incentive for electronic industry of the

country. Bangladesh has gained the reputation of an exporting country of refrigerators and

motorcycles thanks to companies like Walton. Walton has given Bangladesh the name of an

exporting country as like Toyota and Tata helped branding Japan and India respectively in the

field of electronics. The government should impose high import duty on electronics products

which are now manufactured in Bangladesh and should reduce import duty on raw materials

to help local companies to sustain and compete in international market.

It indeed augurs well that after meeting the local demand Walton has begun going beyond

borders. The company has already exported its products to Asian, Middle East and African


countries. It also wants to export its products to France, Italy, Germany, Spain and other

European countries. Electronics industry has been included in the export item list and Walton

has made Bangladesh known to the world through exporting its products to different

countries. Walton brand televisions, fridges and motorcycles are being exported to Qatar,

Dubai, Abu Dhabi and Kuwait of Middle East, Ghana of Africa and India, Nepal and Bhutan

of South Asia. It has also formally launched the marketing activities of its products to the

USA and UK. Walton is going to manufacture some other electronics products at its own

factory in the country very soon.

Analysis:





In above two graphs we can see that, according to CRAB rating 2 companies have got AA

and 1 company has got BBB.





AAAExtremely Strong Capacity & Highest

Quality 10CRAB


CRISL

Average


Quality 9 2 8.33 AA+, AA, AA- High Safety 9 7A1, A2, A3 Strong Capacity & High Quality 8 A+, A, A-

Adequate

Safety 8

BBB1, BBB2, BBB3 Adequate Capacity & Medium Quality 7 1 BBB+, BBB, BBB-Moderate

Safety 7 3



Safety 6







Total 3 Total 3

2 companies have got AA rating range and 4 companies have got BBB. By using weighted

average method we can get 8.33 from CRAB and 7 average rates from CRISL. According to

my industry ranking analysis this industry in on 11 (eleventh) rank.

We can say from these averages that, electronic industry has strong growth future. The

companies of this industry have strong financial capacity and adequate safety. Their product

demand is huge and these companies are eligible to meet them. They have skilled labor force

and the quality of product is European standard.

Skilled, easily trainable and low-cost human resources are the main cost advantage of setting

up electronic industry in Bangladesh. Growing domestic demand and international market

access are some key attractive issues to the investors. In the economies like Malaysia,

Singapore, Korea and Thailand, electronics contribute a major portion in the GDP. They are

encouraging electronic industry to shift from low-end assembly operations with high import

content of inputs to upstream higher value-added activities.

The export item list should be diversified for the development of country‘s economy. The

electronics industry will go ahead side-by-side the export-oriented garment sector through

earning huge amount of foreign currency, contributing to national economy and creating

employment opportunity in the country. The government should consider restructuring the

current tariff regime. It is quite extraordinary that the existing duties are in favor of the

importers.


8. ENGINEERING & CONSTRUCTION

The construction industry of Bangladesh has improved substantially during the last twenty

years. About 10% of GDP of the country comes from this sector alone. It absorbs a very big

labor force as well as enhances big job opportunities for engineers, architects, managers,

foremen, supervisors, technicians, electricians, machine operators, drivers etc. At present this

is a booming industry and people engaged in this sector are earning a reasonable salary and

other benefits. And this is surprising to note that there is a dearth of trained personnel in this

sector, in our country.

Construction includes buildings of all types‘ i.e. high rise and low rise for accommodation of

people or providing space for commerce and industry, jetties in river or sea, bridges, air ports,

roads, highways etc. All structures are supposed to be built following designs and drawings

prepared by architects and foundation engineers, structural engineers, sanitary engineers,

mechanical, electrical and electronic engineers etc.

The design and drawings in the country are generally based on Code of Practice of USA, UK,

EU and BANGLADESH named as Bangladesh National Building Code (BNBC). The

construction activities are carried out as per specifications of the contract presently based on

Federation Internationale Des lngenieurs Conseils (FIDIC). Engineers of all advanced

countries of the world prepare design and drawings following relevant Codes of Practice and

these are being checked thoroughly before sending to sites for execution. During construction


I execution stage, drawings are followed thoroughly. Execution of the works is carried out by

the contractors under constant supervision of the engineers I architects of the owner

(employer) and the consultant. As all these stages are implemented under strict management;

accidents during construction are rear. Structures rarely collapse during construction or after

construction works are completed or at a later stage due to natural calamities e.g. earthquake,

tsunami, severe storm etc.

Analysis:





In above two graphs we can see that, according to CRAB rating 2 companies have got AA, 3

companies got A, 10 companies got BBB and 5 companies has got BB.

According to CRISL rating 2 companies have got A and 2 companies have got BBB. If we







CRISL

Average


Quality 9 2 7.1 AA+, AA, AA- High Safety 9 7.5A1, A2, A3 Strong Capacity & High Quality 8 3 A+, A, A-

Adequate

Safety 8 2



Safety 7 2



Safety 6







Total 20 Total 4

2 companies have got AA rating range, 5 companies have got A, 12 companies have got BBB

and 5 companies got BB. By using weighted average method we can get 7.1 from CRAB and

7.5 average rates from CRISL. According to my industry ranking analysis this industry in on

18 (eighteenth) rank.

Most of the companies under this industry have adequate financial capacity but more

susceptible to adverse economic conditions or changing circumstances and has moderate

credit risk. Possess certain speculative characteristics.

So, we can say that this industry is growing in this country and have a very good future

prospect. Hence it needs government support to increase its profitability. Government should

decrease tax on importing high technology construction equipment and machineries. These

machineries can help the companies do their construction more easily and effectively. Our

structures can also be high technology supported and strong. The possibility of collapse for

earthquake will be reduced. Foreign investment will be increased.

There are also some major issues for which this industry is facing problems.

In our country various stages as explained above are not implemented properly. The

consultant or employer's engineers responsible for preparing designs and drawings do not

generally send drawings in time, there by delaying the project implementation. After

drawings are sent to sites, various mistakes are found on the drawings which are to be

corrected. Sometimes, drawings prepared by consultants I owner's representatives do not

match the real condition on site. These defects are being addressed subsequently causing

delay in implementation of the project. In many cases, decisions of the owners (employers)

are not received in time causing delays and pave ways to contractor's claims.


The contractors in our country generally do not like to work properly and interested to have

maximum profit neglecting maintenance of the quality of works. However, big contractors do

not come under this point. Good Real Estate Developers are also careful in maintaining

quality of works in building construction. Bangladesh Association of Construction Industry

(BAd), Real Estate & Housing Association of Bangladesh (REHAB) and Society for

Technological and Economic Advancement of Bangladesh (STEAB) trying to help the

Government in formulating laws in relation to construction sector improvement, preparation

of contract documents etc.

There have been many incidents/ accidents in our country during execution of construction

works or after completion of these works causing loss of life of the people and their property.

These occurred due to negligence of representatives of the contractor or engineers of other

associated agencies and come under human right violation. But a few people are punished for

their negligence. Various structures have collapsed due to construction defects and/ or design

defects or fire caused due to short circuit, killing many poor people and injuring a lot. But

very few people responsible were punished for their negligence of duties. We recently have

seen such a huge collapse of Rana Plaza at Savar. Over 1500 people had died there.

To solve these problems both companies and government should take some actions:

1. Design of foundations, shore protection, support etc. should be done properly through

mathematical analysis as well as following relevant Code of Practice.

2. Proper prop support should be provided by the contractor before concrete casting.

3. There should be training program for engineers and other technical personnel whether

in Government Departments, Semi-Government or Autonomous organizations or

private organizations, NGO's etc.

4. For accidents due to negligence, Government should be very strict and try those

people responsible and punish them through courts. However, harassment by police or

any other authority should be strictly controlled.

Engineering & construction industry will be growing very soon, if government can solve the

problems by taking actions. Now accidents have been the main obstacle for this industry. So

engineers must design faultless structure so that accidents can be reduced. Engineers also

should maintain good quality for everything in their structure.


9. FINANCIAL INSTITUTIONS

Non-banking financial institutions are governed by Bangladesh Bank (BB) in terms of the

provisions of the Financial institutions Act 1993. This Act delimits the scope of activities of

non-banking financial institutions. It provides for the regulatory steps which may be taken by

Bangladesh Bank, including powers to license and give directions to such companies in the

public interest, in the interest of monetary policy, in order to prevent the affairs of such

companies being conducted in a manner detrimental to the interest of the companies or

depositors, and to ensure their proper management.

There are some big Financial Institutions in our country:

1. Uttara Finance and Investment Limited

2. Delta Brac Housing Limited

3. Union Capital Limited

4. United Leasing Company

5. Prime Finance & Investment Limited

6. Premier Leasing & Finance Limited

7. National Housing Finance & Investments Limited

8. People‘s Leasing and Financial Services Limited

9. Midas Financing Limited Bangladesh

10. Lanka Bangla Finance Limited

There are some common operations of financial institutions:

1. Gives loans or advances for industry, commerce, agriculture or housing, or

2. Carries on business of the underwriting or acquisition of, or the investment or re-

investment in, shares, stock, bonds, debentures or debenture stock or securities or

marketable other securities issued by the Government or any statutory body, or

3. Carries business of hire purchase transactions including leasing of machinery or

equipment, or


4. Finances venture capital, and includes merchant bank, Investment Company, mutual

association, mutual company, leasing company or building society.

Non-bank financial institutions represent one of the most important parts of a financial

system. In Bangladesh, NBFIs are new in the financial system as compared to banking

financial institutions (BFIs). A total of 25 NBFIs are now working in the country. The NBFIs

sector in Bangladesh consisting primarily of the development financial institutions, leasing

enterprises, investment companies, merchant bankers etc. The financing modes of the NBFIs

are long term in nature. Traditionally, our banking financial institutions are involved in term

lending activities, which are mostly unfamiliar products for them. Inefficiency of BFIs in

long-term loan management has already leaded an enormous volume of outstanding loan in

our country. At this backdrop, in order to ensure flow of term loans and to meet the credit

gap, NBFIs have immense importance in the economy. In addition, non-bank financial sector

is important to increase the mobilization of term savings and for the sake of providing

support services to the capital market.

Analysis:






In above two graphs we can see that, according to CRAB rating 1 company has got AAA, 1

company has got AA, 3 companies got A and 2 companies got BBB.





Highest Quality 101

CRAB


CRISL

Average



Adequate

Safety 8 7



Safety 7 2



Safety 6







Total 7 Total 9

1 company has got AAA, 1 company has got AA rating range, 10 companies have got A and

4 companies have got BBB. By using weighted average method we can get 8.14 from CRAB

and 7.78 average rates from CRISL. According to my industry ranking analysis this industry

in on 5 (fifth) rank. Here I want to mention that Delta Brac Housing (DBH) achieved AAA,

and they have retained this highest rating for 10 years. By this kind of performance and

observing the averages we can undoubtedly conclude that Financial Institutions are

performing very well in this country. In the time of global economy fall in 2008, these

institutions in our country have performed very well. We can see that none of these company

got below BBB rating notch. It usually means that, maximum of the company has very strong

financial capacity, maintains very high quality, with very low credit risk. To run a country‘s

economic cycle properly Non-Banking Financial Institutions play a vital role. They give

loans for various purposes to individual or company. So their role is also very important for

developing a country‘s financial position.


10. Fishery

Bangladesh being a first line littoral state of the Indian Ocean has a very good source of

marine resources in the Bay of Bengal. The country has an exclusive economic zone of

41,000 square miles (110,000 km2), which is 73% of the country's land area. On the other

hand, Bangladesh is a small and developing country overloaded with almost unbearable

pressure of human population. In the past, people of Bangladesh were mostly dependent upon

land-based proteins. But, the continuous process of industrialization and urbanization

consumes the limited land area. Now there is no other way than to harvest the vast under

water protein from the Bay of Bengal, which can meet the country's demand.

The role of Fisheries and Livestock sectors in the development of agro-based economy of

Bangladesh is very important and promising. They contribute around 8% to national income,

which also is 32% of the total agricultural income. About 90% of animal protein in our diet

comes from fish and livestock.

Almost every person in Bangladesh has a connection with the country‘s fisheries resources,

whether catching or producing fish, supplying markets or services, or as a consumer. A

growing export sector is also contributing substantially to the national economy. This review

sets out to provide a strategy for fisheries, to enable priorities to be established, and to explain

how investment can be placed to best effect.

These are very real challenges, and there is a clear possibility for declining output and

negative economic and social impacts. However, with well-considered strategies, good

management and well-targeted investment, the outlook for the fisheries sector over the next

decade can be very positive. Linked in turn with initiatives and mechanisms which recognize

the needs and potential opportunities of poorer groups, there is also a very real prospect of

harnessing the sector‘s potential for wider social and economic development.

There is scope for progress in most subsectors

The private sector will play an increasingly important role in development; it requires


a positive environment

Social development objectives need to be understood and linked with production and

market opportunities

Capture fisheries sectors will require careful support to ensure sustained benefits;

alternative livelihoods for fishing communities will be important

Sector and resource knowledge is critical and needs to be efficiently developed and

used.

Analysis:





In above two graphs we can see that, according to CRAB rating 6 companies have got BB.






Quality 10CRAB


CRISL

Average


Quality 9 6 AA+, AA, AA- High Safety 9 7A1, A2, A3 Strong Capacity & High Quality 8 A+, A, A-

Adequate

Safety 8

BBB1, BBB2, BBB3 Adequate Capacity & Medium Quality 7 BBB+, BBB, BBB-Moderate

Safety 7 2


Credit Risk 6 6 BB+, BB, BB-Inadequate

Safety 6


CCC1, CCC2, CCC3Very Weak Capacity & Very High Credit

Risk 4 CCC+, CCC, CCC- Vulnerable 4

CCExtremely Weak Capacity & Extremely

High Credit Risk 3 CC+, CC, CC- High Vulnerable 3


Total 6 Total 2

2 companies have got BBB and 6 companies have got BB rating range. By using weighted

average method we can get 6 from CRAB and 7 average rates from CRISL. According to my

industry ranking analysis this industry in on 30 (thirtieth) rank.

From these averages we can say that, fisheries and livestock business is not that much

established in our country. But we have seen that there are lots of opportunities for this

industry to do much better.

There are also some obstacles for which fisheries business is not doing as expected:

The laws, rules and regulations as they currently stand are adequate in most areas, but the

enforcement structure is inadequate

There is a total absence of regular law review and updating mechanism. By-law

formulation is also isolated and slow

The legal system is unable to keep pace with the policy environment

The prevailing practice of regulation by memos and circulars from MoL is ineffective in

meeting constitutional obligations and in promoting judicious resource use

Restrictive laws and management systems may contradict with customary rights that will

only widen the gap between the public, public agencies and public property

The needs and welfare of the most disadvantaged in society are largely unmet

Access to due process is difficult for the most vulnerable groups in society

The importance of global processes and Bangladesh‘s position in the global market

cannot be ignored: at the moment it is ‗reactive‘ to the global market‘s demands for

change – to survive it will have to become more proactive in its approach.


Some Recommendations for this industry:

A Natural Resources Management Council (NRMC) should be set up to promote

sectorial objectives in production, social development and natural resource

management and the needs to co-ordinate and implement fishery sector development

Donor funds for renewable natural resources programmes should be coordinated via

the NRMC

A Fisheries Development Executive Committee (FDEC) should be established to

enact decisions made by the NRMC. The FDEC will coordinate commercial

development (aquaculture and commercial trawling) and conservation/protection of

CPR pro-poor national assets (capture fisheries).

Effective linkages might be made between natural resource policies.

A Commercial/private sector development strategy to be implemented that allows for

the development of a sustainable aquaculture and commercial fishing industry.


11. FOOD & ALLIED

The food industry is a complex, global collective of diverse

businesses that supply much of the food energy consumed by the

world population. Food products are sold in Bangladesh in

different forms, like- canned, packed, baked, raw etc. This

business is very good in our country. There are number of

organizations doing business here in Bangladesh. Domestic

companies are performing outstanding as well as multinationals.

160 million people lives in our country. Food is a product which is

consumed by all of them. So these companies have a very wide range of customers. Now a

day they are not only selling in our country but also beyond borders. Most of the companies

exporting quality full product outside Bangladesh. Especially tin can and packed foods are

very popular to the customers, but some of the companies now adding preservatives in food

which is very harmful for health. So, they should be aware of this crime. This is also a great

threat to this industry. These companies should maintain proper nutrient in their food

products. Otherwise they‘ll lose their buyers.

In Bangladesh there are lots of food & allied companies. Some are:

PRAN Foods Limited

BD Foods Limited

Square Food Products

ACI Food Products

Laila Food Products Ltd

Samannaz Condensed Milk Ltd

S. A. Salt Industries Ltd

Farzana Oil Refineries Ltd

Samannaz Dairy Foods & Products Ltd

City Dal Mills Ltd

City Seed Crushing Industries Ltd etc.


Analysis:





In above two graphs we can see that, according to CRAB rating 10 companies have got AA,

11 companies have got A, 17 companies have got BBB and 7 companies have got BB.







CRISL

Average


High Quality 9 10 7.53 AA+, AA, AA- High Safety 9 7.75A1, A2, A3 Strong Capacity & High Quality 8 11 A+, A, A-

Adequate

Safety 8 9



Safety 7 3



Safety 6








Total 45 Total 12


10 companies have got AA, 20 companies have got A, 20 companies got BBB and 7

companies have got BB rating range. By using weighted average method we can get 7.53

from CRAB and 7.75 average rates from CRISL. According to my industry ranking analysis

this industry in on 12 (twelfth) rank.

From these averages we can easily conclude that, most of the companies of this industry have

adequate capacity to meet financial commitments but more susceptible to adverse economic

conditions or changing circumstances, subject to moderate credit risk and possess certain

speculative characteristics. But these risks can be overthrow by implementing some

compliance.

1. Maintain the quality of food products

2. Assure the perfect nutrient supplements

3. Avoid adding preservatives

4. Use better technology for production

5. Choose healthy and hygienic factory area for production

Apart from these recommendations this industry also need proper care of the government.

Otherwise this industry will fall down.


12. FUEL & POWER

Natural Gas is the most important source of energy in our country as it accounts for about

75% of the total commercial energy of the country. At present, about 37% of natural gas

production is used as fuel for electricity generation. Overdependence on the natural gas must

be reduced as the present reserve is not sufficient enough to support the country for long term

economic growth.

Bangladesh, with a very low reserve of petroleum, has

become a net petroleum import country. Because of the

recent liquid oil based power plants, petroleum

requirements have increased by 28% in 2011. Because of

the unrest in Middle-East region, petroleum price is going

up which will increase import bill of Bangladesh Petroleum Corporation (BPC).

Aside from natural gas and petroleum, coal resource of the country is still underutilized

because of lack of proper guideline. Coal policy, which will ensure proper guideline

regarding the usage of this resource for the economic development of the country, is yet to be

finalized.

Lack of investment in power generation in the last decade has created electricity shortage.

With a view to combat this, the Government of Bangladesh (GOB) has taken initiative to set

up power plants so that the country has sufficient electricity within 2016.

Successful implementation of this is highly dependable on the supply of fuel. Over

dependency on gas for electricity generation must be reduced, while coal and renewable

energy based power plants must be introduced for sustainable electricity generation. Overall,

in long term, an intelligent mix of the different available energy

sources can enable Bangladesh to ensure a sustainable

economic growth of the country. Right conditions and

framework at policy and regulatory level is a must.

Energy is the driving force behind all economic activities and most importantly the economy

can be seen as a system of energy flows, as a sequence of energy conversion that culminate in

the production of goods and services. Hence economic growth of a country is directly linked

to energy growth of the country.

Analysis:







companies have got A and 1 company has got BB.

According to CRISL rating 4 companies have got AA, 6 companies have got A and 7

companies have got BBB rating notch. If we sum up all the ratings of CRAB & CRISL, then

we can find that:





CRISL

Average


High Quality 9 2 8 AA+, AA, AA- High Safety 9 4 7.82A1, A2, A3 Strong Capacity & High Quality 8 2 A+, A, A-

Adequate

Safety 8 6



Safety 7 7



Safety 6








Total 5 Total 17


6 companies have got AA, 8 companies have got A, 7 companies have got BBB and 1

company have got BB rating range. By using weighted average method we can get 8 from

CRAB and 7.82 average rates from CRISL. According to my industry ranking analysis this

industry in on 8 (eighth) rank.

From these averages we can easily assume that, this industry is doing very good in our

country. It has also many future prospects. We have seen that recently Bangladesh

government designed some fruitful plan for electricity industry which really very positive

side for this industry.

Bangladesh has initiated a Power and Energy Sector Development Roadmap (2010-2021)

which targeted to produce 8,500 MW by 2013, 11,500 MW by 2015 and 20,000 MW by

2021.

Only 47% of the total population of Bangladesh is enjoying the electric facilities.

Per capita generation is 220 KW hr which is comparatively lower than other developed

countries in the world

Public and private sector produces 63% and 37% of electricity respectively.

Govt. encourages Foreign Investors in this sector with different incentives.

Fiscal incentives for private power companies

A number of fiscal incentives are provided to the private power companies. Some of them are

as follows:

Exemption from corporate income tax for a period of 15 years.

Allowed to import plant and equipment and spare parts up to a maximum of ten percent

(10%) of the original value of total plant and equipment within a period of twelve (12)

years of commercial operation without payment of customs duties, VAT and any other

surcharges as well as import permit fee except for indigenously produced equipment

manufactured according to international standards.

Repatriation of equity along with dividends allowed freely.

Exemption from income tax for foreign lenders to such companies.


The foreign investors will be free to enter into joint ventures but this is optional and not

mandatory.

Source: Private Sector Power generation Policy of Bangladesh, Ministry of Power, Energy and Mineral Resources

Facilities and incentives for foreign investors

There are number of facilities and incentives would be provided to the foreign investors.

Some of them as follow:

Tax exemption on royalties, technical know-how and technical assistance fees, and

facilities for their repatriation.

Tax exemption on interest on foreign loans.

Tax exemption on capital gains from transfer of shares by the investing company.

Avoidance of double taxation case of foreign investors on the basis of bilateral

agreements.

Exemption of income tax for up to three years for the expatriate personnel employed

under the approved industry.

Remittance of up to 50% of salary of the foreigners employed in Bangladesh and

facilities for repatriation of their savings and retirement benefits at the time of their

return.

No restrictions on issuance of work permits to project related foreign nationals and

employees.

Facilities for repatriation of invested capital, profits and dividends.

Source: Private Sector Power generation Policy of Bangladesh, Ministry of Power, Energy and Mineral Resources

Power industry development plan

In order to realize the government‘s vision to provide electricity to most of the population at a

reasonable price and to achieve overall socio-economic development of the country, the

government of Bangladesh has initiated a Power and Energy Sector Development Roadmap

(2010-2021) which targeted to produce 8,500 MW by 2013, 11,500 MW by 2015 and 20,000

MW by 2021. However, to ensure overall and balanced development of this sector

government has taken immediate plan (2010), short-term plan (2011), medium-term plan

(2012-2015) and a long-term development plan (2016-2021). The plans have been developed

based on a techno-economic analysis and a least-cost option. These plans include balanced


development in generation, transmission and the distribution system to achieve a desired

level of reliability of supply. A summary of the development plan is given as follows:

Immediate plan (2010)

According to the immediate plan, short term implementable (six to twelve months) liquid fuel

based quick rental power stations will be established through private sector. In the first phase,

3 power plants with a capacity of 360 MW each are implementing in different places of the

country and are expected to initiate by 2010. However, capacity of 1,000-1,200 MW quick

rental power stations will be expected to establish by 2010 and by early 2011. Meanwhile,

power plant with a capacity of 432 MW is implementing privately.

Short term plan (2011)

According to the short-term plan, liquid fuel based 12-24 months of implementable power

stations will be established. However, government has initiated to implement a power station

with a capacity of 920 MW.

Midterm plan (2012-2015)

Under this plan, government has taken into account to establish 3 to 5 years of implementable

coil based power stations with a capacity of 2,600 MW to the total capacity of 7,714 MW.

Long term plan

As of the Power and Energy Development Roadmap (2010-2021), government expects to

meet the desire destination (20,000 MW by the year 2021) through the increment of 10%

production per year towards reaching the per capita consumption to 600 Kw.

Bangladesh is steadily climbing up the development ladder. Energy and power needs to act as

a key catalyst in helping Bangladesh in this endeavor. Industries are being automated and the

country is gradually moving from a labor-intensive economy to a capital intensive one.

Electricity and power are vital to the nation at such a stage. Bangladesh has a vast market as

far as power and electricity is concerned and good prospects for constructing power

generation plants exist in the country in terms of resources available and government policies.

There are many positive future plans which will help this industry to increase their growth.


13. HOSPITAL & HEALTHCARE Large segments of the population in developing countries are deprived of a fundamental

right: access to basic health care. Without an appropriate and adequate health support and

delivery system in place, its adverse effects will be felt in all other sectors of the economy.

The government's policy objectives in the health care sector were to provide a minimum level

of health care services for all, primarily through the construction of health facilities in rural

areas and the training of health care workers. The strategy of universal health care by the year

2000 had become accepted, and government efforts toward infrastructure development

included the widespread construction of rural hospitals, dispensaries, and clinics for

outpatient care. Program implementation, however, was limited by severe financial

constraints, insufficient program management and supervision, personnel shortages,

inadequate staff performance, and insufficient numbers of buildings, equipment, and supplies.

Private hospitals are perceived as more responsive than public hospitals. Similarly, on

communication and discipline, private hospitals obtained a significantly higher rating than

public hospitals. Some of the Hospitals & Healthcare Centre names:

STS Holdings Ltd

Renaissance Hospital & Research Institute Ltd

Eastern Medical College & Hospital Ltd

Jalalabad Ragib-Rabeya Medical College and Hospital

Mirpur Diagnostic Centre Ltd

Medinova Medical Services Ltd

Health services in urban areas also were inadequate, and their coverage seemed to be

deteriorating. In many urban areas, nongovernment organizations provide the bulk of urban

health care services. Programming and priorities of the nongovernment organizations were at

best loosely coordinated.


Analysis:





In above two graphs we can see that, according to CRAB rating 2 companies has got A, 2

companies has got BBB and 2 companies has got BB rating range.





CRISL

Average


Quality 9 7 AA+, AA, AA- High Safety 9 7.8A1, A2, A3 Strong Capacity & High Quality 8 2 A+, A, A-

Adequate

Safety 8 4



Safety 7 1



Safety 6








Total 6 Total 5

According to CRISL rating 4 companies has got A and 1 company has BBB. If we sum up all



6 companies has got A & 3 Companies has got BBB & 2 companies got BB rating range. By

using weighted average method we can get 7 from CRAB and 7.8 average rates from CRISL.

According to my industry ranking analysis this industry in on 15 (fifteenth) rank. From these

averages we can say that a financial capacity of the companies in this industry is normal &

above average. We can also see that this industry position is now above average. But still it

requires further development to maintain its growth. Our country healthcare facilities should

be improved to provide better services. It is important, especially for public hospitals and

regulatory agencies, to understand how market incentives work. With better understanding

and over time, public hospitals may be gradually weaned from their present survival

guarantees that do not seem to motivate them to enhance service quality; such guarantees are

also not available to private hospitals.

It is apparent that private hospitals are playing a meaningful role in Bangladesh, justifying

their existence, continuation and growth. However, before unleashing the forces of

privatization in this sector more widely, it must be noted that private hospitals have been

known to reduce quality by reducing inputs, to disregard social pricing considerations or,

worse, to try to increase their profi ts by providing services that are unnecessary or even

harmful. This therefore needs careful consideration.


14. HOTEL & HOSPITALITY

Not so long ago, the highly capital intensive hospitality industry in Bangladesh was

dependent on public sector investment as the private sector was very shy. This resulted in

building major properties like now defunct Shahbagh Hotel - the first international standard

hotel in Dhaka in 1 950s, Inter-continental - now Ruposhi Bangla in 1960s and Pan Pacific

Sonargaon Hotel in 1980s, by the public sector. Only two notable hotels - Purbani in Dhaka

and Agrabad in Chittagong represented private sector for quite some time those days.

But now, the situation has been reversed.

Now, the hospitality industry of the country is

dominated by a vibrant private sector. In the

span of little over two decades, private sector

has greatly enriched hospitality industry of the

country in general and the capital Dhaka in

particular. Apart from upscale hotels in

different parts of the country, the private

sector has made a great contribution in

enriching the country in another sector of hospitality industry -the holiday resorts. For

upscale accommodation, for many years Dhaka was dependent on Pan Pacific Sonargaon and

Dhaka Sheraton (now Ruposhi Bangla). Now the Westin Dhaka, Radisson Blue Water

Garden Hotel, Dhaka Regency Hotel & Resort and Hotel Sarina have enriched Dhaka's

hospitality industry. And together they are offering about 1400 five-star quality rooms. There

are about seven other hotels including Hotel Orchard Plaza, Hotel Washington, Best Western

La Vinci, Lake Shore Hotel &

Apartments, Platinum Suites, Royal Park

Residence, Ascott the Residence offering

about 500 three to four-star quality rooms.

The hotel and hospitality sector is growing

steadily in Bangladesh thanks to the

political stability, growth in export earnings and high turn-up of tourists and corporate and

business clients, sources said. The hotel industry is growing by at least 10 percent as the

economy of Bangladesh is posting 6-7 percent growth per annum, said Azeem Shah, General

Manager of the Westin Dhaka.


Analysis:






company has got A and 1 company has got BBB rating range.





CRISL

Average


High Quality 9 1 8 AA+, AA, AA- High Safety 9 7.67A1, A2, A3 Strong Capacity & High Quality 8 1 A+, A, A-

Adequate

Safety 8 2



Safety 7 1



Safety 6








Total 3 Total 3

According to CRISL rating 2 companies has got A and 1 company has BBB. If we sum up all



1 company has got AA & 3 Companies has got A & 2 companies got BBB rating range. By

using weighted average method we can get 8 from CRAB and 7.67 average rates from

CRISL. According to my industry ranking analysis this industry in on 9 (ninth) rank. From

these averages we can say that a financial capacity of the companies in this industry is strong

& outstanding. There is a vibrant possibility in hotel and hospitality industry in Bangladesh.

We have the longest sea beach Cox's Bazar and the largest mangrove forest Sundarban.

Religion tourism and eco-tourism can take an important role here. If we can brand our

tourism sector, it will take a place after garment sector in earning foreign currency. So,

further development is essential to maintain its growth.

Right now we have government certified 7 five star hotels, 4 four star hotels, and 12 three

star hotels in the country. Besides, Ocean Paradise Hotel and Resort in Cox's Bazar is

keeping all facilities of five-star hotel.

There are 11 hotels with brand like Hilton, Hotel Sheraton, two Le Meridiens (one in Airport

Road and the other in Banani), and two Westins (one more in Dhaka and one in Chittagong).

six Seasons, Platinum Suites 2, Heritage Hotel (Doreen Suites & Hotels and FARS Hotel),

ASCOT, Marriot Court Yard are in the pipeline and are expected to start operation by 2016

offering over 1700 rooms. If projects like Hotel Intercontinental and Holiday Inn at Hazrat

Shahjalal International Airport are taken into account, as they are also in the pipeline, the

situation will look even better.

It is encouraging to note that initial contracts have already been signed with Best Western,

Move & Pick, Marriot, Holiday Inn, Novotel, Radisson, and Swiss Hotels in various parts of

the country including Chittagong, Coxs' Bazaar and Sylhet. These hotels are likely to be

opened in 4 to 6 years period.

Public sector or in other words the government is no more required to invest in building

hotels. But that does not mean that government now has nothing to do. In fact, government

now has great responsibility as facilitator and regulator in guiding the sector in a planned

growth.


15. JUTE

Jute manufacturing sector is one of the oldest traditional manufacturing sectors of

Bangladesh, which emerged in erstwhile East Pakistan in the early 1950s. During the 1960s

and 1970s major share of the manufacturing sector in national income and manufacturing

employment was accounted for by this sector. Exports of jute and jute goods were the two

most important sources of foreign exchange of Pakistan during the 1960s. However, both

share and importance of jute and jute goods in manufacturing, export and overall foreign

exchange earnings, and the Gross Domestic Product (GDP) have gradually declined over

time. The sector currently accounts for a more 3.9 per cent of the country‘s total export,

which is of extremely low significance when compared to its contribution in the overall

export observed during the1970s (89.9 per cent in 1973). The ascendancy of the export-

oriented readymade garments (RMG) was a major reason. However, this was also the result

of successive policies pursued by Bangladesh alongside decline in the demand for jute goods

in both domestic and international markets over time.

Various stakeholders and civil society organizations have expressed concerns with regard to

the economic judgment which led the government to close down the jute mills and retrench

workers at a time when it was widely believed that resurgence of jute was emerging in both

global and domestic markets.

Graph 15.1: Sale in Domestic and International Market (%)


A total of 72 jute mills were operated by the public sector in 1982, immediately before the

initiative of denationalization. Since 1982-83, government started to denationalize the public

sector jute mills — out of 72 public sector jute mills, the government denationalized 34 jute

mills between 1982 and 1985 (Table 2). Out of these 34 privatized jute mills, 6 were

composite, 21 were conventional and 7 were CBC jute mills. A total of another 22 jute mills

were privatized during the last two decades. Besides, a number of new jute mills (mostly of

spinning type) were established under the private sector initiative. Currently a total of 129

jute mills are in operation, of which 18 mills operated under the public sector and the

remaining 111 mills operated under the private sector (Table 3). Of the 111 private mills, 61

mills were owned by the BJMA members while the remaining 50 mills were owned by the

BJSA members.

Analysis:



Graph 15.2: Rating Aquired


In above two graphs we can see that, according to CRAB rating 1 company has got BBB and

5 companies have got BB rating range.


According to CRISL rating 1 company has got A, 7 companies got BBB and 1 company has

B. If we sum up all the ratings of CRAB & CRISL, then we can find that:



Quality 10CRAB


CRISL

Average


Quality 9 6.17 AA+, AA, AA- High Safety 9 6.89A1, A2, A3 Strong Capacity & High Quality 8 A+, A, A-

Adequate

Safety 8 1



Safety 7 7



Safety 6

B1, B2, B3 Weak Capacity & High Credit Risk 5 B+, B, B- Risky 5 1






Total 6 Total 9

1 company has got A, 8 Companies has got BBB, 5 companies have got BB & 1 company got

B rating range. By using weighted average method we can get 6.17 from CRAB and 6.89

average rates from CRISL. According to my industry ranking analysis this industry in on 29

(twenty ninth) rank. From these averages we can say that most of the companies of this

industry have inadequate capacity to meet financial commitments and have major ongoing

uncertainties and exposure to adverse business, financial, or economic conditions. They have

speculative elements, subject to substantial credit risk.

According to my analysis we can also match this situation with current scenario of Jute

industry. Maximum of the companies have shutdown. Remaining companies cannot run their

organization frequently because of inadequate capital. Once upon a time it was one of the

major sources of earning foreign currency. But now the scenario is completely adverse.

Most of the jute mills have been experiencing poor financial conditions for a large part of the

time since Bangladesh‘s independence in 1971. According to the World Bank (1986), jute

mills were profitably operated by the pre-independence regime, when financial profit per unit

of manufacturing hessian product was Tk. 4,977; however, when considering the other

economic costs such as subsidy and fiscal incentives, overall economic profit can be

considered to be negative (-Tk. 1,545) (Table 4). In the following years, both financial and

economic profits of jute mills have continued to decrease. According to the BJMA, private

jute mills suffered a loss of Tk. 7,420 for manufacturing one MT of hessian in 1988, which


marginally declined to Tk. 6,640 during 1996-97. Similarly, BJMC mills had a negative

profit of Tk. 5,184 from manufacturing of one MT of hessian product in 1988, while the loss

further increased to reach Tk. 11,075 during 1994-95.

Some Recommendations to save Jute Industry:

First, there is no reason to close any jute mill based on the argument that Bangladesh‘s jute

sector had no prospect. However, global demand is not rising at a fast pace. A slow, steady

and guided growth mechanism needs to be designed. This would require a sound medium

term strategy.

Second, a thorough review and revision of the financial account of BJMC jute mills is

required before any kind of reform and restructuring is undertaken. The financial account

maintained at the mill level needs to be examined by taking into cognizance current stock of

all assets including both operating and non-operating machineries, land, buildings, liabilities

to all parties including financial institutions for current loans, cumulated loans and overdue

credit borrowed from suppliers, workers‘ arrears, and other liabilities. This will help

policymakers to understand where the public sector jute mill stands and how these mills

could be operated in a vibrant manner. It is also important to take necessary actions against

allegations of corruption in public sector jute mills.

Third, the huge past debt burden, for both public and private sector jute mills, has created a

dead-weight burden on their current operation and overall sustainability. In order to make

operation of jute mills financially viable, the debt burden needs to be restructured and written

off where necessary. An appropriate mechanism has to be found in this regard.

Fourth, a rationalization of the size of jute mills, especially for those in the public sector, is

urgently required. In view of the relatively slow pace of growth in the demand of jute goods,

operation of jute mills on a large scale would be risky in terms of mobilizing the necessary

working capital, selling products in time with minimum inventory, amount of fixed costs

required, etc. The survey found that when firms were operating on a small scale, they were

likely to make more profits. An optimum size appeared to be small and medium size, and not

a large one.

Fifth, rationalization of size of the workforce in BJMC mills is urgently required. In the case

of retrenchment, BJMC must ensure required level of funds for paying workers‘ overdue

amount was available. It was found in the course of the survey that not all the 14,000

retrenched workers received their arrears, and those that had, did not receive it to the fullest

amount. This is unacceptable, and the government should find the resources to pay all arrears

of workers on an urgent basis.


16. LIFE INSURANCE

Insurance is the equitable transfer of the risk of a loss, from one entity to another in

exchange for payment. It is a form of risk

management primarily used to hedge against the risk of a

contingent, uncertain loss. Life insurance provides a

monetary benefit to a decedent's family or other

designated beneficiary, and may specifically provide for

income to an insured person's family, burial, funeral and

other final expenses. Life insurance policies often allow

the option of having the proceeds paid to the beneficiary

either in a lump sum cash payment or an annuity. In most states, a person cannot purchase a

policy on another person without their knowledge. Annuities provide a stream of payments

and are generally classified as insurance because they are issued by insurance companies, are

regulated as insurance, and require the same kinds of actuarial and investment management

expertise that life insurance requires. Annuities and pensions that pay a benefit for life are

sometimes regarded as insurance against the possibility that a retiree will outlive his or her

financial resources. In that sense, they are the

complement of life insurance and, from an

underwriting perspective, are the mirror image of life

insurance. Certain life insurance contracts

accumulate cash values, which may be taken by the

insured if the policy is surrendered or which may be

borrowed against. Some policies, such as annuities

and endowment policies, are financial instruments to accumulate or liquidate wealth when it

is needed. Bangladesh Life Insurance is prospecting now-a-days. Some of the Life Insurance

Companies name is given below:

Sunflower Life Insurance Company Ltd

American Life Insurance Company, Bangladesh

Organization

Pragati Life Insurance Limited

Fareast Islami Life Insurance Company Limited

http://en.wikipedia.org/wiki/Risk_management

http://en.wikipedia.org/wiki/Risk_management

http://en.wikipedia.org/wiki/Hedge_(finance)

http://en.wikipedia.org/wiki/Annuity_(financial_contracts)

http://en.wikipedia.org/wiki/Pension

http://en.wikipedia.org/wiki/Retirement

http://en.wikipedia.org/wiki/Cash

http://en.wikipedia.org/wiki/Endowment_policy

http://en.wikipedia.org/wiki/Liquidation

http://en.wikipedia.org/wiki/Wealth


Every sorts of business consists of risks. These risks are more hazardous in Bangladesh.

Insurance companies minimize these risks by giving privileges on loss.

Analysis:





In above two graphs we can see that, according to CRAB rating 1 company has got AAA and

1 company has got BB.

According to CRISL rating 2 companies have got A. If we sum up all the ratings of CRAB &

CRISL, then we can find that:



Highest Quality 101

CRAB


CRISL

Average


Quality 9 8 AA+, AA, AA- High Safety 9 8A1, A2, A3 Strong Capacity & High Quality 8 A+, A, A-

Adequate

Safety 8 2



Safety 7



Safety 6







Total 2 Total 2


1 company has got AAA & 2 Companies have got A & 1 company got BB rating range. By

using weighted average method we can get 8 from CRAB and 8 average rates from CRISL.

According to my industry ranking analysis this industry in on 4 (fourth) rank. From these

averages we can say that financial capacities of the companies in this industry are strong &

outstanding also because the rate is above average. As the maximum people of our country

are illiterate so they have not much knowledge about the future life and what will do to

enhance the living standard. Different types of advertisement, publicity and others awareness

activities of life insurance company can increase the awareness of general people of country.

Problems faced by this industry are:

1. LOW PER CAPITAL INCOME: Poor economic condition is considered to be the

main reason for poor life insurance penetration in Bangladesh. The country has a very

low per capital income and over 50% of our total population lives below the poverty

line. Inability to save or negligible savings by a vast majority of population kept them

away from the horizon of life insurance.

2. POOR KNOWLEDGE OF AGENTS: The marketing of insurance is greatly

hampered in the remote village of Bangladesh where the agents are appointed from

respected locality. This is because; educated young people are seemed to be reluctant

to become insurance agents. Such agents cannot play efficient role in convincing a

prospective policyholder.

3. ILLETERACY: Mass illiteracy is another factor that adversely affects the marketing

of Life insurance. About 70% of the population is floating in the sea of ignorance.

Illiteracy leads one to think that the insurance is deception; it is no value in life. They

cannot think rationality because they do not know what is insurance and what its

importance as security for future.

4. RELIGIOUS SUPERSTITION: Religious attitude of the people also stands against

efficient insurance. The religious people believe that the future is uncertain, it is in the

hand of Allah and they do not think it necessary to buy life insurance policy for them.

5. LOW AWARENESS: Insurance awareness is poor. Agents are not skilled enough.

These agents cannot perform their job properly to make the people aware of life

insurance.


6. LOW SAVINGS: People of Bangladesh have a very small saving potentially and

thus have less or no disposable income. Almost the whole of the income is exhausted

in the process of maintaining the day-to-day life. Thus they are left with little amount,

which may not deemed to sufficient for the payment of premiums. This factor

discourages many to buy life insurance policy.

7. SHORTAGE OF FUND: Most of the policyholders cannot continue their policies

owing to price spiral and shortage of fund.

In Bangladesh, insurance industry has, no doubt, been growing in terms of premium income.

But it does not mean that this industry has developed in terms of quality. Till date Bangladesh

is a grossly underinsured nation. Therefore, in order to build a healthy insurance industry, a

set of measures should be adopted. The present situation of the insurance industry and

suggestions seek remedial measures. So, the problems of Life Insurance Industry should be

solved as soon as possible to increase its growth.

.


17. MISCELLANEOUS

Miscellaneous refers to things that have different or varying qualities. Miscellaneous

Products are:

Bags And Wraps

Gloves

Napkins

Paper Towels

Tissue

Canned Heating

Napkins

Miscellaneous companies name:

Max Automobile Products Ltd

Fabian Thread Ltd

M/S Md. Noor Hossain

Hamdard Laboratories (Waqf) Bangladesh

Air Trip International Ltd

Siraj Cycle Industries Ltd

C.P. Bangladesh Co. Ltd

Analysis:







companies have got A, 12 companies have got BBB, 5 companies have got BB and 1

company has got B. According to CRISL rating 1 company has got AA, 10 companies have

got A, 5 companies have got BBB & 1 company got BB. If we sum up all the ratings of

CRAB & CRISL, then we can find that:





CRISL

Average





Safety 8 10



Safety 7 5



Safety 6 1








Total 28 Total 17

4 companies has got AA & 17 Companies has got A & 17 companies got BBB, 6 companies

has got BB and 1 company got B rating range. By using weighted average method we can get

7.21 from CRAB and 7.65 average rates from CRISL. According to my industry ranking

analysis this industry in on 14 (fourteenth) rank. From these averages we can say that

financial capacities of the companies in this industry are normal but not outstanding.

Miscellaneous industry has a great impact in our country. The Government should try to

develop this industry as like other industry. Miscellaneous products can generate more

revenue. The present situation of the miscellaneous industry seeks remedial measures because

this industry facing some obstacles. So, the problems of this Industry should be solved as

soon as possible to increase its growth.


18. NON-LIFE INSURANCE Non-life insurance, also called property and casualty insurance, is a type of coverage that is

very common and covers businesses and individuals. It protects them, monetarily, from

disaster by providing money in the event of a financial loss. In a developing country like

Bangladesh, different insurance companies are playing a very crucial role in the economic

growth. Though insurance industry has significant prospects in the economy but for some

reasons it has failed to achieve its goal to some extent. There are 62 insurance companies in

Bangladesh. Among them, Peoples Insurance Company Limited is the second private

insurance company and it has been doing insurance

business in the country over 27 years since 1985.

The company was established and had been

operated under the Insurance Act 1938 since its

inception until 2010. However, as the need of time,

the parliament of Bangladesh passed a new

Insurance Act 2010 in March, 2010 in order to

reform & modernize the insurance sector in Bangladesh. Since just after passing a new act to

replace the old one, the previous Insurance Act 1938 became inactive due to pass Insurance

Act 2010.

A great advantage of insurance is that it spreads the risk of a few people over a large group of

people exposed to risk of similar type and the re-insurance system makes the total risk at zero

level in the long run. On the one hand, insurance can increase fraud; on the other it can help

societies and individuals in preparing catastrophes and in mitigating the effects of

catastrophes on households, business operations and societies.

Insurance has various effects on society through the way that it changes who bears the cost of

losses and damage of the insured according to the insurance contract.

The Insurance business has been introduced & developed in proportion to the development of

the economic growth in Bangladesh. There are 62 insurance companies in the country,

including two state-owned enterprises, the Jiwan Bima Corporation (JBC) for life insurance,

and the Sadharan Bima Corporation (SBC) for general insurance. Peoples Insurance

Company Limited is doing non-life insurance business in Bangladesh since 1958. It was

established under the Insurance Act 1938 and was operated under the same act until 2010.


Analysis:





In above two graphs we can see that, according to CRAB rating 2 companies has got AA, 4

companies has got A, 7 companies has got BBB.

According to CRISL rating 2 companies has got AA, 4 companies has got A & 1 company

got BB. If we sum up all the ratings of CRAB & CRISL, then we can find that:





CRISL

Average


High Quality 9 2 7.62 AA+, AA, AA- High Safety 9 2 8A1, A2, A3



Safety 8 4



Safety 7



Safety 6 1








Total 13 Total 7


4 companies have got AA, 8 Companies have got A, 7 companies got BBB and 1 company

has got BB rating range. By using weighted average method we can get 7.62 from CRAB and

8 average rates from CRISL. According to my industry ranking analysis this industry in on 10

(tenth) rank. From these averages we can say that financial capacities of the companies in this

industry are normal. If we consider CRAB average then financial capacity of this industry is

sound. But according to CRISL average financial capacity of this industry is strong &

outstanding. All the insurance companies in the insurance industry need to be responsive

equally and very actively. So, the concerned insurance authority should focus on spreading

necessary awareness among the insurance companies as well. To make it possible, regular

seminars, meetings with the business authorities and proper auditing must be conducted by

insurance companies.

The company should raise awareness among all the employees and staffs about the

implementation of the new law to make the implementation process much smoother. In order

to do so, regular weekly/monthly meetings and seminars can be arranged after the office

hours. As one of the most important tasks, client awareness needs to be increased in the

insurance sector in Bangladesh.

In this purpose, insurance companies should take the necessary steps through its large sales

and business development force to ensure a level of awareness among their clients throughout

the country. Even though it is quite difficult, the companies should try its best to reduce the

management expenses as well as commission expenses to cope up with the rules regarding

these issues under the new Insurance Act 2010. In this regard, each & every employee should

work as cost saver. At the end it will certainly be beneficial for them.

The company should consider the rules and regulations for the non-life insurance companies

in Bangladesh under the Insurance Act 2010 before and during setting any future plan

regarding operation and expansion of its business, so that there doesn‗t arise any conflicting

situation. It will make their way of business operations much smoother as well as easier and

less problematic.


19. PACKAGING

Packaging is effective tool for preservation, provision; protection of product information,

marketing & distribution of goods plays an important role in local & international trade.

Packaging also performs other functions such as meeting logistic & safety requirements &

convenience. In recent times there has been a

growing realizing of the importance of packaging in

Bangladesh. Many manufacturers are there for

investing in good quality packaging to enhance the

quantity of their products. With export growth

particularly ready-made garments & frozen food

products export growth, the country will have better

opportunity for deem export of packaging goods.

Although import restriction corrugated carton has

been lifted for quite some time but reportedly there

has been no import of corrugated cartons in Bangladesh, mainly due to locally available

exportable corrugated cartons. Increase in demand for goods both for local & export markets

will have a proportionate growth for packaging & will see a growth in the employment

generation too. The total printing & packaging sector is one of the largest employers in

Bangladesh like RMG sector, where about 2 million people are employed & 80% are women.

Some of the packaging companies name:

Mirza Jute Mills Ltd

Mirza Woven Bag (Pvt.) Ltd

Lodestar Packaging

Packaging sector plays an important role for the development of industry & export sector as

well as local consumption. Now it has become integral part of human necessities. Different

types of packaging are:

Paper Packaging

Glass Packaging

Plastic Packaging

Poly Packaging

Metal Packaging


Analysis:






companies have got BBB and 6 companies have got BB.

According to CRISL rating 1 company has got A and 2 companies have BBB. If we sum up

all the ratings of CRAB & CRISL, then we can find that:


AAA

Extremely Strong

Capacity & Highest

Quality10

CRAB


CRISL

Average

AA1, AA2, AA3Very Strong Capacity &

Very High Quality 9 6.44 AA+, AA, AA- High Safety 9 7.33A1, A2, A3



Safety 8 1



Safety 7 2



Safety 6

B1, B2, B3Weak Capacity & High

Credit Risk 5 B+, B, B- Risky 5

CCC1, CCC2, CCC3Very Weak Capacity &

Very High Credit Risk 4 CCC+, CCC, CCC- Vulnerable 4

CC

Extremely Weak

Capacity & Extremely

High Credit Risk3 CC+, CC, CC- High Vulnerable 3


Total 9 Total 3


2 companies have got A & 4 Companies have got BBB & 6 companies got BB rating range.

By using weighted average method we can get 6.44 from CRAB and 7.33 average rates from

CRISL. According to my industry ranking analysis this industry in on 25 (twenty fifth) rank.

From these averages we can say that a financial capacity of the companies in this industry is

not strong enough but it is above average. The demand for packaging for exports industries

are increasing every year. Apart from that because of the rapid increase of local demand,

packaging industries would continue to expand in the coming years too.

There is no packaging institute in Bangladesh. Actually it is a long cherished demand of

BCCAMEA for development of packaging sector & set up a packaging institute in

Bangladesh. Our neighboring countries have got packaging institute in every states. We

pursue the matter with different donor‘s agencies. Without setting up packaging institute it

will be impossible on our part to compete with other countries in this competitive world

market. So, we have to set up full-fledged packaging institute in Bangladesh.


20. PAPER & PRINTING

Printing and Packaging in Bangladesh is comparatively a young industry by world standards.

However, from a very modest beginning the packaging industry has come of age now and has

really taken off during the last two decades or so. Today it can be said with pride that all

types of packaging products specially based on paper and paper board, plastic film, aluminum

foil are manufactured locally. Quality of locally produced packaging material is excellent and

comparable to international standard. Packaging industries are fully capable to meet the local

requirements. There is also sufficient technical manpower to run these industries. The local

industries are regularly updating their technical know-how keeping in line with the

technological advancement of this sector. The pre-press facilities available here are also up to

the highest standard of the present age. Paper provides the means of recording, storage and

dissemination of information; virtually all writing and printing are done on paper. It is the

most widely used wrapping and packaging material, and is important for structural

applications.

As a user of paper and board, the printing industry can be seen as an important downstream

component in the 'wood cluster', which comprises the forest industry, paper-making, printing,

packaging, graphical communication and publishing industries.

However, the printing industry is also an important representative of the media and

information industries. It has changed over the past decade, in particular by moving from

analogue processes to digital workflows in which content is received and processed in

electronic form. Offering variable and personalized print is becoming a crucial part of many

businesses, and an increasing number of printers today possess digital printing equipment.


Analysis:






companies have got A and 1 company got BBB rating range.

According to CRISL rating 1 company has got A and 1 company has got BBB. If we sum up






CRISL

Average



Adequate

Safety 8 1



Safety 7 1



Safety 6








Total 7 Total 2


4 companies have got AA, 3 Companies have got A & 2 companies got BBB rating range. By

using weighted average method we can get 8.43 from CRAB and 7.5 average rates from

CRISL. According to my industry ranking analysis this industry in on 6 (sixth) rank. From

these averages we can say that a financial capacity of the companies in this industry is strong

enough. If we consider CRAB average then financial capacity of this industry is sound &

outstanding. But if we consider CRISL then this industry financial commitment is normal &

above average.

All paper mills in Bangladesh are producing around 600000 MT paper and board/yr. The

demand of paper and board is around 600000-700000 MT/yr. If we grow up to Asia level, our

consumption will increase to 10 times of current consumption. The per capita paper

consumption as well as total paper consumption is increasing all over the developing

countries and also in Bangladesh. It will increase further in future. So, there will be huge

demand of paper and board in near future.


21. PHARMACEUTICALS

In Bangladesh Pharmaceutical sector is one of the most developed hi tech sector which is

contributing in the country's economy. After the promulgation of Drug Control Ordinance -

1982, the development of this sector was accelerated. The professional knowledge, thoughts

and innovative ideas of the pharmacists working in this sector are the key factors for this

development. The major product of these companies is medicine. Top 5 pharmaceutical

companies in Bangladesh are:

Square Pharmaceuticals Ltd.

Incepta Pharmaceuticals Ltd.

Beximco Pharma ltd.

Bio-pharma Ltd.

Opsonin Pharma Ltd.

Due to recent development of this sector Bangladesh is exporting medicines to global market

including European market. This sector is also providing 95% of the total medicine

requirement of the local market. Leading Pharmaceutical Companies are expanding their

business with the aim to expand export market. Recently few new industries have been

established with hi tech equipment‘s and professionals which will enhance the strength of this

sector. Bangladesh Pharmaceutical Industry is successfully exporting Active Pharmaceutical

ingredients (APIs) and a wide range of pharmaceutical products covering all major

therapeutic classes and dosage forms to 79 countries. Beside regular forms like; Tablets,

Capsules & Syrups, Bangladesh is also exporting high-tech specialized products like HFA

Inhalers, CFC Inhalers, Suppositories, Nasal Sprays, Injectable, IV Infusions, etc. are also

being exported from Bangladesh, and have been well accepted by the Medical Practitioners,

Chemists, Patients and the Regulatory Bodies of all the importing nations.


Analysis:






companies have got A & 1 company has got BBB.

According to CRISL rating 1 company has got AA & 2 companies have got BBB. If we sum






CRISL

Average





Safety 8



Safety 7 2



Safety 6








Total 5 Total 3

3 companies have got AA, 2 companies have got A & 3 Companies got BBB rating range. By


CRISL. According to my industry ranking analysis this industry in on 7 (seventh) rank. From


these averages we can say that most of the companies in this industry have strong financial

capacity with adequate safety of their return. We can also see that this industry position is

now above average. But still it requires further development because there is a huge

opportunity for growth in this industry. The main obstacles for this market are:

1. Foreign competitors have more equipment, technology and plant facilities than that of

locally owned firms.

2. Foreign competitors have their own local market so that they can absorb some losses

here.

3. Foreign competitors get government help in some cases.

4. Unstable political situation is one of the vital reasons for not achieving the

expectation in export.

5. Problems of port (both sea and air) hinder the timely export.

6. One main problem is in producing rare drugs foreign companies are ahead of us in

terms of quality, experience and market share.

7. Like other industries, there is a crucial problem faced by the

8. Pharmaceutical industries that is power generation problem. They are not getting

power according to their demand.

These are the major problems faced by the industry. The local pharmaceutical companies

should produce quality product by using the updated equipment and raw materials, which can

help them to acquire the market share. Pharmaceutical companies should produce world class

medicine which may increase the demand for Bangladeshi drug in the world market. Healthy

growth is likely to encourage the pharmaceutical companies to introduce newer drugs and

newer research products, while at the same time maintaining a healthy competitiveness in

respect of most essential drugs.


22. PLASTIC

Plastic products are used in a wide array of commercial activities from leisure and nutrition to

communication and transport. Plastics are also particularly important due to their role in

recycling as governments and consumers look for

ways to lessen the burden on the environment.

Bangladesh could emerge as a global player in

plastic industry by hiking its turnover to $2 billion

by 2015 and $4 billion by 2020 cited a case study

on Bangladesh's plastic sector conducted by the

Economic and Social Commission for Asia and the

Pacific (ESCAP) of the United Nations. Plastic

Industries of Bangladesh are mainly engaged in

manufacture of different products like–

PVC pipe

Garments accessories

Hanger

poly bag

Polythene bag

leather

plastic household products

Jute and Textile spares Toys

plastic waste recycling

computer Accessories

This industry has grown up vastly. Plastic pipes are cheaper and last longer than iron pipes,

which get rusty after some years. For export government provides duty free import of raw

materials. Plastic goods are mainly exporting to USA, CANADA, UK, JAPAN,

AUSTRALIA, FRANCE etc. At present there are 3000 plastic manufacturing units, 98% of

which belong to the Small-Medium Enterprises (SMEs). The plastic sector constitutes 1.0 of

GDP and provides employment for half a million people. Some of the plastic companies

name are Joty Plastic, Concern Bengal Windsor Thermoplastics Ltd, Mercury Packaging &

Accessories Ltd , Quest Accessories (BD) Ltd ,Q N Queue Accessories (BD) Ltd .


Analysis:






company has got A, 6 companies have got BBB, 1 company has got BB and 1 company has

got B.

According to CRISL rating 3 companies have got A & 2 companies have got BBB. If we sum






CRISL

Average


Quality 9 1 7 AA+, AA, AA- High Safety 9 7.6A1, A2, A3 Strong Capacity & High Quality 8 1 A+, A, A-

Adequate

Safety 8 3



Safety 7 2



Safety 6

B1, B2, B3 Weak Capacity & High Credit Risk 5 1 B+, B, B- Risky 5






Total 10 Total 5


1 company has got AA, 4 companies have got A & 8 Companies got BBB, 1 company got

BB & 1 company has got B rating range. By using weighted average method we can get 7

from CRAB and 7.6 average rates from CRISL. According to my industry ranking analysis

this industry in on 19 (nineteenth) rank. From these averages we can say that most the

companies of this industry have adequate financial capacity with adequate safety of their

return. But these averages say us that, the financial & business position is above average but

not outstanding. So, this industry requires much more improvement for the coming years.

The main obstacles for this market are:

1. Major constraint in the plastic sector is the lack of an institutional arrangement

dedicated to this sector, in order to provide supporting services such as skilled

manpower, testing facilities for quality control, innovative technology and

consultancy services.

2. The availability of cheap labor and the fast developing plastic wastes recycling

industry due to rising cost of petroleum (raw material of polymers) provide

Bangladesh potential advantage of competitiveness in the global market.

An expert (BUET, BCSIR, BITAC, BPGMEA) consultation meeting held on the plastic

sector organized by the SME Foundation in 2008, has recommended setting up Bangladesh

Institute of Plastic Engineering and Technology (BIPET). Aims and activities of this institute

are given in this paper. This proposal is in the light of Indian experience. The entrepreneurs in

the plastic sector have developed the plastic industries with their own initiative and finance.

Now, considering huge potential of this sector and the multi-dimensional nature of the

constraints, the government must provide supportive policy and institutional arrangements.


23. POLYMERS

A polymer is a large molecule that is made up of repeating subunits connected to each other

by chemical bonds. The Polymer industry of Bangladesh is extremely dynamic, being subject

to many changes and opportunities arising from

technological change, development of new materials and

processing technology; not least, the development of new

products and changes in consumer requirements. The

Polymer Industry comprises four discrete processing

areas: Plastics Processing, Rubber Processing, Polymer

Composites Processing and Sign making. Products made

from polymer are: coatings with Teflon, discs, bags,

thermal insulators with polystyrene, bottles for liquids, laboratory ware, kitchen ware,

clothes, shoes, components for electronics, electro technics and mechanics, and many others.

The industries require innovators, technologists, designers and highly skilled processing

technicians to remain at the forefront of developments and changes in the world demand for

more versatile, lightweight, low-cost and energy-saving products and applications. Products

and component parts developed using polymers, are used in many applications. Each year the

demand steadily grows.

Analysis:







company has got BB & 1 company has got B.

According to CRISL rating 2 companies have got A & 1 company has got BBB. If we sum






CRISL

Average





Safety 8 2



Safety 7 1



Safety 6








Total 3 Total 3

3 companies have got A, 1 Company has got BBB, 1 Company got BB & 1 company has got

B rating range. By using weighted average method we can get 6.33 from CRAB and 7.67

average rates from CRISL. According to my industry ranking analysis this industry in on 23

(twenty third) rank. From these averages we can say that most the companies of this industry

have adequate financial capacity with adequate safety of their return. But these averages say

us that, the financial & business position is above average but not outstanding. So, this

industry requires further development for the coming years.


24. REAL ESTATE

Like any other country in the world, the housing sector plays vital roles both in the context of

the economy of Bangladesh and serving the fundamental human right of shelter. Apart from

providing physical shelter, housing may have significant impact on the lives of the dwellers

in terms of skills enhancement, income generation, increased security, health, self-confidence

and human dignity. With a rising population and increasing housing demand, apartment

culture has grown up in Dhaka sharply. Apartments were first introduced by the formal

private developers in early 80s to the housing history of Dhaka. It first appeared in Dhaka

near Central Road and subsequently the city experienced a boom in apartment development

in all residential areas including Paribagh, Maghbazar, Siddeshwari, Shantinagar,

Dhanmondi, Mirpur, Banani, old DOHS, new DOHS, Gulshan and Baridhara, to name just a

few.

The growth in this industry also facilitated a fast growth in many linkage industries like glass

and glass products industry, brick industry, cement industry, ceramic industry, iron and steel

industry etc. over the last decade. Such consistent growth in the real estate sector is mainly

due to a consistent demand at the consumer end. Some Real Estate companies name:

Advanced Development Technologies Ltd.

Asset Developments Ltd.

Amin Mohammad Foundation Ltd.

Navana Real Estate Ltd.

Concord Real Estate & Building Products Ltd

Major market players in the Bangladesh real estate market has been historically Eastern

Housing Limited, Shinepukur Holdings Limited, Bashundhara, BTI and Sheltech. This

market share has not changed much during the last few years.


Analysis:






company has got A, 7 companies have got BBB, 4 companies have got BB and 1 company

has got B.

According to CRISL rating 2 companies have got A, 9 companies have got BBB and 1

company got B. If we sum up all the ratings of CRAB & CRISL, then we can find that:





CRISL

Average



Adequate

Safety 8 2



Safety 7 9



Safety 6 1B1, B2, B3 Weak Capacity & High Credit Risk 5 1 B+, B, B- Risky 5






Total 14 Total 12


1 company has got AA, 3 Companies have got A, 16 companies got BBB, 5 companies have

got BB rating range and 1 company has got B. By using weighted average method we can get

6.79 from CRAB and 7.08 average rates from CRISL. According to my industry ranking

analysis this industry in on 24 (twenty fourth) rank. From these averages we can say that

most the companies of this industry have financial capacity is not strong. These averages say

us also that, the financial & business position is above average but not outstanding. So, this

industry requires further development for the coming periods. There are some obstacles of

this Industry:

1. Housing affordability is being eroded by poor land administration policies, which

have resulted in very high land prices that make urban housing prohibitive for lower-

income groups.

2. There is no active secondary market for real estate, mainly because of the high

transfer taxes and an uninterrupted long-term increase in land prices.

The growth of private Real Estate Sector is hindered due to the incredible increase in land

price. In fact, there is no control of the govt. over the price increase of land within Dhaka

City. While negotiating with the govt., this can be argued that, to support the private Real

Estate sector, govt. should take appropriate steps in fixing land prices and introduce price

ceiling of per katha lands in different regions of Dhaka City.


25. RMG

The economy of Bangladesh is largely dependent

on agriculture. However, in recent years, the Ready–

Made Garments (RMG) sector has emerged as the biggest

earner of foreign currency. The ready-made garment

(RMG) sector has experienced an exponential growth

since the 1980s. The sector contributes significantly to

the GDP. It also provides employment to around 4.2

million Bangladeshis, mainly women from low income

families which affect their social status.

Ready-made garments manufactured in Bangladesh are divided mainly into two broad

categories: woven and knit products. Shirts, T-shirts and trousers are the main woven

products and undergarments, socks, stockings, T-

shirts, sweaters and other casual and soft garments

are the main knit products. Woven garment

products still dominate the garment export earnings

of the country. The share of knit garment products

has been increasing since the early 1990s; such

products currently account for more than 40 per

cent of the country‘s total RMG export earnings

(BGMEA website). Although various types of

garments are manufactured in the country, only a

few categories, such as shirts, T-shirts, trousers, jackets and sweaters, constitute the major

production-share (BGMEA website; and Nath, 2001). At present there are more than two

thousand one hundred garment factories in the country employing more than 12 lack labors.

85 percent of the labor force is women.

Labor cost and duty advantage, raw materials and real estate costs are cheaper in Bangladesh.

There is also no doubt that Bangladesh is benefitting from various preferential trade

agreements providing tax free entry into several dozen countries.

http://en.wikipedia.org/wiki/Economy_of_Bangladesh

http://en.wikipedia.org/wiki/Agriculture

http://en.wikipedia.org/wiki/GDP

http://textilelearner.blogspot.com/2011/03/different-sections-in-readymate-garment_4189.html


Analysis:






companies have got A, 9 companies have got BBB and 7 companies have got BB.

According to CRISL rating 6 companies have got A, 11 companies have got BBB and 1

company got B. If we sum up all the ratings of CRAB & CRISL, then we can find that:





CRISL

Average



Adequate

Safety 8 6



Safety 7 11



Safety 6 1








Total 26 Total 18

8 companies have got AA, 8 Companies has got A, 20 companies got BBB & 8 companies

has got BB rating range. By using weighted average method we can get 7.42 from CRAB and


7.28 average rates from CRISL. According to my industry ranking analysis this industry in on

17 (seventeenth) rank. From these averages we can say that most the companies of this

industry have adequate financial capacity with adequate safety of their return. But these

averages say us that, the financial & business position is above average but not outstanding.

But Bangladesh has its own challenges to overcome. Impediments to investment include

unreliable power supply, high real interest rates, corruption, and weaknesses in law and order.

So, this industry requires further development for the coming years.

There are some obstacles of this Industry:

First, inefficient infrastructure, including transportation and energy supply, is the single

largest bottleneck hampering our RMG industry. This issue will become even more important

in the future, since buyers want to source more fashionable products with shorter lead times.

The government needs to prioritize improvement in this area and start to upgrade power

systems.

Second, although labor and social-compliance standards have improved over the past few

years, suppliers vary greatly in their degree of compliance. Environmental compliance is just

beginning to get attention.

Third, the suppliers' productivity must improve not only to mitigate the impact of rising

wages but also to close gaps with other sourcing countries, such as India and Cambodia, by

satisfying new customer needs for more sophisticated products. Lack of investment in new

machinery and technologies and the insufficient size of the skilled workforce, particularly in

middle management, is also hampering growth in this industry.

Fourth, access to raw material is crucial for clothing exporters. Lack of backward linkages

and Bangladesh's dependence on imports creates sourcing risks and lengthen lead times.

Compounding the problem is the volatility of raw-material prices in recent years. The

development of a local sector could improve lead times.

Fifth, political stability is a prerequisite for attracting foreign investors. Political unrest,

strikes, and the absence of ease of doing business are major concerns of foreign investors.

The three main stakeholders the government, suppliers and buyers must work together to

realize the potential of Bangladesh's ready-made-garment market. The government's top


priorities for investment should be developing infrastructure, maintaining political stability,

reducing corruption, and providing education and trade support.

Buyers should help to increase the supply chain's efficiency and transparency and increase

their support for lean operations and electronic data exchange. They should also build closer

relationships with suppliers and improve their own operational execution. Their long

response times, the complexity of internal procedures involving the merchandising and

sourcing functions, and a large number of last-minute changes slow down the overall

process.

While Bangladesh has some very promising advantages in certain dimensions in the garments

industry, a number of challenges remain. Only if these challenges can be overcome will

Bangladesh's RMG industry continue to prosper.


26. SHIP BREAKING

Ship breaking or ship demolition is a type of ship disposal involving the breaking up

of ships for scrap recycling. Most ships have a lifespan of a few decades before there is so

much wears that refitting and repair become uneconomical. Ship breaking allows materials

from the ship, especially steel, to be recycled. Equipment on board the vessel can also be

reused.

The ship breaking task is difficult, and dangerous, but Bangladesh is a poor country and ship

breaking is steady work that knows no off-season, unlike farming. The salvaged metal from

the ships is melted down at mills and recycled into construction materials. As already noted, a

significant proportion of new building construction in Bangladeshi cities and towns uses

metal cut from the ships that sailed the oceans of the world. Below is the list of some of

world's largest ship breaking yards:

Bangladesh- Chittagong Ship Breaking yard

China- Changjiang Ship Breaking yard, located in Jiangyin, China

India- Alang Ship Breaking Yard

The scrapping of ships provides the country‘s main source of steel and in doing so saves

substantial amount of money in foreign exchange by reducing the need to import steel

materials.

At present Bangladesh has a demand for 50,00,00 tons of metal / steels, but Bangladesh has

no iron ore sources or mines, which make ship scrapping is the inevitable and important

source of raw materials. More than 350 re-rolling mills have been using ship scraps as their

raw materials. The industry is currently supplying more than 60 per cent of the raw materials

for local steel industry. Besides, local shipbuilding industry also largely depends on this as

raw materials mostly are being used from scrap steel. A good number of local industries

http://en.wikipedia.org/wiki/Ship_disposal

http://en.wikipedia.org/wiki/Ship

http://en.wikipedia.org/wiki/Scrap

http://en.wikipedia.org/wiki/Recycling


including heavy and light engineering already been developed depending on ship breaking

industry

Analysis:






companies have got BBB & 2 companies have got BB.

According to CRISL rating 3 companies have got BBB and 1 company got BB. If we sum up






CRISL

Average





Safety 8



Safety 7 3



Safety 6 1








Total 5 Total 4


1 company has got A, 5 Companies have got BBB & 3 companies got BB rating range. By


CRISL. According to my industry ranking analysis this industry in on 28 (twenty eighth)

rank. From these averages we can say that most the companies of this industry financial

capacity are not so strong. But these averages say us that, the financial & business position is

above average but not outstanding. Ship breaking industry can increase revenue of our

country. So, this industry requires further development for the coming years.


1. A considerable amount of hazardous materials has already accumulated in Bangladesh

as a result of SBRI activities. Some hazardous materials are exposed during

dismantling and are managed (or spilled and spread) locally, but a considerable

amount is carried with equipment off the yards. This material may re-enter society in

disguise.

2. Hazardous materials that remain on beaches can be well managed locally with

improved housekeeping practices and with adequate handling and storage. The lack of

hazardous waste disposal and treatment facilities in Bangladesh means that wastes

produced must nevertheless be disposed of somewhere. And informal disposal may

occur on the beaches, on adjacent unused plots, or on other land in the vicinity.

Considerable efforts are needed in Bangladesh to achieve adequate institutional capacity and

provide ground level enforcement of protection of workers and environment in the ship

breaking industry. Infrastructure improvement regarding the capacity and safety of the main

road for transport of all waste and reusable materials generated in the ship breaking yards

should be initiated. Significant infrastructure and capacity development in the hazardous

waste management sector is required to achieve proper storage and disposal levels in the long

term in order to comply with the HKC and other relevant international agreements.


27. STEEL

The steel industry in Bangladesh has a good future

because it had grown steadily in the last 15 years. The

steel industry's growth is highly correlated with that of

the economy, and therefore when the economy does

well, the industry will also do well. For the industry to

grow, he says, the government needs to ensure basic

infrastructure, power, gas and an educated workforce --

without which, industrial growth will sputter. In the

industry, "mild steel" rebar (known as "MS rod") is

central, providing the bones inside the concrete muscle that holds buildings together. Steel

production in the country is fairly efficient when in automated plants; but he explains that this

isn't enough.

Bangladesh steel industry is efficient but not in

operations, but in costs. Our cost of labor, power and gas

is among the lowest in the world, which gives us a

competitive advantage. However, due to our port

restrictions, all raw materials that we import cost us more

in freight compared to our neighboring countries, and this

makes us not as cost-efficient for exports, which overrides

the benefits of low-cost utilities.

Some of the steel companies‘ names are given below:

Cosmic Steel Buildings

Habib Steel Corporation

Kingfisher & Woodpecker Co.

Quantam Builders and Engineering

Design Den Limited

HK Metal

Elegant Ltd.

Shima Corporation


Analysis:






company has got A, 17 companies have got BBB & 2 companies have got BB.

According to CRISL rating 2 companies have got AA, 3 companies got A, 7 companies have

got BBB & 2 companies have got BB.

If we sum up all the ratings of CRAB & CRISL, then we can find that:





CRISL

Average


Quality 9 6 7.42 AA+, AA, AA- High Safety 9 2 7.36A1, A2, A3 Strong Capacity & High Quality 8 1 A+, A, A-

Adequate

Safety 8 3



Safety 7 7



Safety 6 2








Total 26 Total 14


8 companies have got AA, 4 Companies have got A, 24 companies got BBB and 4 companies

have got BB rating range. By using weighted average method we can get 7.42 from CRAB

and 7.36 average rates from CRISL. According to my industry ranking analysis this industry

in on 16 (sixteenth) rank. From these averages we can say that most the companies of this

industry have adequate financial capacity with adequate safety of their return or we can say

that it have normal financial growth. These averages say us also that, the financial & business

position is above average but not outstanding. More stability is required to increase its

growth.


1. Steel making requires a lot of energy, good infrastructure and qualified human

resources. As a nation, we are lacking in all these.

2. State intervention is infrequent, whenever the government does intervene, it distorts in

the market. For example, the caretaker government saw global and local steel prices

were very high in 2008, so it forced steel makers to keep lower prices.

3. There are so many steel manufacturers that it is impossible for them to raise market

prices with a syndicate, hoarding, etc. "The steel market operates in the most

competitive environment at all times. There is no need for government to intervene at

any point in time and create disequilibrium."

Bangladesh is adopting new technologies but still has long way to go to improve as an

industry. As our economy keeps growing and size of the industry grows, more and more

companies will be able to afford newer technologies. The future of local steel is to become

greener as well as automated.


28. TELECOMMUNICATION

The liberalization of Bangladesh‘s telecommunications sector began with small steps in 1989

with the issuance of a license to a private operator for the provision of inter alia cellular

mobile services to compete with the previous monopoly provider of telecommunications

services the Bangladesh Telegraph and Telephone Board (BTTB). Significant changes in the

number of fixed and mobile services deployed in Bangladesh occurred in the late 1990s and

the number of services in operation has subsequently grown exponentially in the past five

years.

The incentives both from government and public sectors have helped to grow this sector. It is

now one of the biggest sectors of Bangladesh. As a populous country, its huge market has

attracted many foreign investors to invest in this sector.

Many foreign investors are now interested to do business in telecom sector in Bangladesh

which reveals that Bangladesh has become a significant hub for telecoms. It has been

forecasted that the average revenue from telecoms sector will be Tk1500 crore a year.

Bangladesh is a country which is densely populated and also is a flat and easily extends able

coverage. The infrastructure and Tele-density is low which on the other hand made the

market a perfect place for telecom business. The demand is very high and the consumer base

is very large but the investment is low because of the topographic layout. The government

has a receptive foreign investment policy with no restrictions on repatriation of profit. Even

though the current infrastructure is not much developed but it is suitable for foreign

investment. Bangladesh has a huge potential in WiMax and submarine cable which is a new

technology in the country and has attracted the foreign telecom operators. Many foreign

telecom operators are coming to Bangladesh to explore the potentiality of the technology.

http://en.wikipedia.org/wiki/Bangladesh_Telegraph_and_Telephone_Board


Analysis:





In above two graphs we can see that, according to CRAB rating 2 companies have got A.

According to CRISL rating 1 company has got AAA. If we sum up all the ratings of CRAB






1CRISL

Average


High Quality 9 8 AA+, AA, AA- High Safety 9 10A1, A2, A3



Safety 8



Safety 7



Safety 6








Total 2 Total 1


1 company has got AAA & 2 Companies have got A rating range. By using weighted average

method we can get 8 from CRAB and 10 average rates from CRISL. According to my

industry ranking analysis this industry in on 1 (first) rank. From these averages we can say

that most of the companies in this industry have strong financial capacity with adequate

safety of their return. We can also see that this industry position is now above average. But

still it requires further development to maintain its growth.

Bangladesh has cheap skilled and willing to be skilled labor. Communication infrastructure is

in good condition and has the ability to serve the international entrants. Customer demand for

telecom product is very high due to the high growth rate of the market. As the industry is

becoming bigger, availability of supporting industries are increasing and already there are

lots of supporting companies in the market. And finally the government policies are very

welcoming and liberal.

From the above discussion we can comment that the mobile telecommunication of

Bangladesh is very competitive & the rivals are facing huge competition in the market.

Therefore we observe that the mobile companies are changing their strategies day to day to

survive in the market. So it will be difficult for any new company to enter in this market. But

we can simply say that the mobile telecom market of Bangladesh is a well-balanced & fully

competitive.


29. TEXTILE

The textile and clothing (T&C) industries provide the single source of economic growth in

Bangladesh's rapidly developing economy. Exports of textiles and garments are the principal

source of foreign exchange earnings. Agriculture for domestic consumption

is Bangladesh‘s largest employment sector. Today, the textile industry of Bangladesh can be

divided into the three main categories: the public sector, handloom sector, and the organized

private sector.

By 2002 exports of textiles, clothing, and ready-made garments (RMG) accounted for 77% of

Bangladesh‘s total merchandise exports. By 2013, about 4 million people, mostly women,

worked in Bangladesh's $19 billion-a-year industry, export-oriented ready-made garment

(RMG) industry. Bangladesh is second only to China, the world's second-largest apparel

exporter of western brands. Sixty percent of the export contracts of western brands are with

European buyers and about forty percent with American buyers. Only 5% of textile factories

are owned by foreign investors, with most of the production being controlled by local

investors. Some Textile companies name:

Sirina Garments & Textiles Ltd

Rupali Garments

Unifill Textile Mills Ltd

Goldstar Garments Ltd

Tusuka Jeans Ltd

Turjo Apparels Ltd

Swiss Tex Ltd

Southern Clothings Ltd

http://en.wikipedia.org/wiki/Developing_country

http://en.wikipedia.org/wiki/Economy_of_Bangladesh

http://en.wikipedia.org/wiki/Textiles

http://en.wikipedia.org/wiki/Garments

http://en.wikipedia.org/wiki/Bangladesh


Analysis:





In above two graphs we can see that, according to CRAB rating 4 companies have got AA,

36 companies have got A, 56 companies have got BBB, 39 companies have got BB, 2

companies have got B and 1 company has got C.

According to CRISL rating 6 companies have got AA, 30 companies got A & 32 companies

have got BBB. If we sum up all the ratings of CRAB & CRISL, then we can find that:





CRISL

Average





Safety 8 30



Safety 7 32



Safety 6







C Near To Default 2 1 C+, C, C- Near To Default 2D Default 1 D Default 1

Total 138 Total 68


10 companies have got AA, 66 Companies have got A, 88 companies got BBB, 39 companies

have got BB, 2 companies got B and 1 company got C rating range. By using weighted

average method we can get 6.97 from CRAB and 7.62 average rates from CRISL. According

to my industry ranking analysis this industry in on 20 (twentieth) rank. From these averages

we can say that financial capacities of the companies in this industry are not strong enough &

also not outstanding. Textile industry is not growing rapidly. So, reduction of problems can

ensure the development of this industry.

Some of the problems faced by this industry:

All sectors of the textile industry face many of the same challenges. These main problems

include the following:

1. Lack of power

2. Obsolete technology

3. Low capacity utilization

4. Lack of machinery maintenance

5. A workforce that is not adequately trained

6. Problems with labor unrest and militancy

7. Political unrest causing disruption such as strikes and a lack of working capital

As the population is growing and the standard of living is increasing in Bangladesh, the

demand for textiles is increasing rapidly. The weaving and knitting sub-sectors will also need

to expand at a rapid rate, as there is a large demand-supply gap in the country. With increased

investment in the sub-sectors and modernized machinery, Bangladesh could profit greatly

from larger and more competitive weaving and knitting sectors.

As the current dyeing facilities are mostly dependent on imported fabrics, they are expanding

at a rate which is not dependent on any of the other sectors. However, as local grey becomes

more competitive, and its production is increased, the dyeing, printing, and finishing sub-

sector will also need to expand to accommodate for the increased supply.

The reduction of such problems will automatically improve the market position resulting in

improved opportunities for the expansion of the Bangladeshi textile industry.


30. TRADING

Trading companies are businesses working with different kinds of products which are sold

for consumer, business or government purposes. Trading companies buy a specialized range

of products, maintain a stock or a shop, and deliver products to customers.

Different kinds of practical conditions make for many kinds of business. Usually two kinds of

businesses are defined in trading. Importers or wholesalers maintain a stock and deliver

products to shops or large end customers. They work in a large geographical area, while their

customers, the shops, work in smaller areas and

often in just a small neighborhood. When talking

about "trading companies", today we refer

mainly to global B2B traders, highly specialized

in one goods category and with a strong logistic

organization. ―Trading Company‖ means any

company, except a railway or telegraph

company, carrying on business similar to that

carried on by apothecaries, auctioneers, bankers,

brokers, brick makers, builders, carpenters, carriers, cattle or sheep salesmen, coach

proprietors, dyers, fullers, keepers of inns, taverns, hotels, saloons or coffee houses, lime

burners, livery stable keepers, market gardeners, millers, miners, packers, printers,

quarrymen, share brokers, ship-owners, shipwrights, stockbrokers, stock-jobbers etc.

Since the independence quite extensive development cooperation has dominated the bilateral

relations between Bangladesh and Sweden. At the same time, however, trade has developed

in a positive way albeit from a low level. At the moment trade with Bangladesh accounts for

0.06 % of Sweden‘s total exports and 0.18 % of our total imports.

The economic, political, and social significance of our trade industry has been theorized in

the Industrial Age. The rise in the trade industry is essential for the growth of globalization. It

had helped our country to increase revenue by trading with other countries. Some trading

companies name is given below:

Nipa Oil and Flour Mill

Hossain International

Goldstar Steel House

http://en.wikipedia.org/wiki/Business

http://en.wikipedia.org/wiki/Product_(business)

http://en.wikipedia.org/wiki/Consumer

http://en.wikipedia.org/wiki/Government

http://en.wikipedia.org/wiki/Customer


Analysis:






companies have got A, 49 companies have got BBB 51 companies have got BB & 3

companies have got B.

According to CRISL rating 4 companies have got A, 50 companies have got BBB, 3

companies have got BB & 1 company got B. If we sum up all the ratings of CRAB & CRISL,

then we can find that:





CRISL

Average



Adequate

Safety 8 4



Safety 7 50



Safety 6 3B1, B2, B3 Weak Capacity & High Credit Risk 5 3 B+, B, B- Risky 5 1






Total 114 Total 58


1 company has got AA, 14 Companies have got A, 99 companies got BBB, 54 companies

have got BB and 4 companies got B rating range. By using weighted average method we can

get 6.61 from CRAB and 6.98 average rates from CRISL. According to my industry ranking

analysis this industry in on 27 (twenty seventh) rank. From these averages we can say that

financial capacities of the companies in this industry are not strong enough. As trading

industry playing a vital role in our country further development is required for its future

growth.

Benefits of trading industry are dependent on the opportunity cost of production. The

opportunity cost of production of goods is the amount of production of one good reduced, to

increase production of another good by one unit. A country with no absolute advantage in any

product, i.e. the country is not the most competent producer for any goods, can still be

benefited from focusing on export of goods for which it has the least opportunity cost of

production.


4.4 Industry Ranking:

After analyzing all of these 30 industries I have ranked these industries from 1 to 30

according to their industry average. First I have compared both CRAB‘s and CRISL‘s

weighted average of an industry. Then I have also used average method to calculate the

industry average. Thus I have calculated all the 30 industries industry average. Then I have

ranked these industries according to their industry averages.

According to my analysis here is the ranking of industries in Bangladesh:

RANKS INDUSTRIES INDUSTRY AVERAGE1 Telecommunication 9.00

2 Banks 8.88

3 Cement 8.13

4 Life Insurance 8.00

5 Financial Institutions 7.96

6 Paper & Printing 7.96

7 Pharmaceuticals 7.93

8 Fuel & Power 7.91

9 Hotel & Hospitality 7.83

10 Non-Life Insurance 7.81

11 Electronics 7.67

12 Food & Allied 7.64

13 Automobiles & Automotives 7.50

14 Miscellaneous 7.43

15 Hospital & Healthcare 7.40

16 Steel 7.39

17 RMG 7.35

18 Engineering & Construction 7.30

19 Plastic 7.30

20 Textile 7.29

21 Agro Inputs & Agriculture 7.21

22 Bricks 7.00

23 Polymers 7.00

24 Real Estate 6.93

25 Packaging 6.89

26 Accessories 6.88

27 Trading 6.79

28 Ship Breaking 6.78

29 Jute 6.53

30 Fishery 6.50


These industries are ranked on the basis of their industry averages. The highest average

industry has got rank1 (one), then the second highest got rank 2 (two). Thus all the 30

industries have been ranked.

From this analysis we can easily identify that, Telecommunication industry is now at the top

most position in Bangladesh. Not in only my analysis but also in the real scenario we can see

that telecommunication sector is now at leading position. Second highest industry is Bank

sector. These industry also making enormous profit in our country, in fact they are running

the cycle of our whole economy. As Bangladesh is a developing country, so of course there

should be lots of construction work. Thus the demand of cement is also should be high. So

we can see Cement industry holds the third highest position in Bangladesh. RMG and Textile

should come in the next, but unfortunately they are holding seventeenth & twentieth position

consecutively, because of some disastrous occurrences since last few years. The position of

this industry was very good, in fact lion portion of foreign currencies were earned from this

sector in Bangladesh. But the current scenario is completely different. There were some

occurrences like: Fire on Tazrin Fashions, Collapse of Rana Plaza, Workers Strike and lots

more. These disastrous occurrences and some previous issues have changed this industry.

Most of the big buyers have been moved from Bangladesh like: Walmart, GAP, Walt Disney

etc. Now this industry must turn around. Otherwise there will be big economic crisis in

Bangladesh.

This analysis will also help investors to choose their priority of industry to invest. I have tried

my level best to do this analysis. The purpose of this report will be served if this paper helps

you evaluate industries.


Conclusion:

This is a comprehensive analysis on 30 different industries. The main purpose of this analysis

is to understand the current position of industries in Bangladesh. This report also includes a

detail idea about credit rating, its history, its impact on the economy of Bangladesh, different

rating company and Credit Rating Agency of Bangladesh Limited (CRAB).

I have successfully done my internship in CRAB. It was really a great experience of working

with financial analysts of CRAB. Collecting information, assisting financial analysts,

learning corporate culture, learning rating process, analyzing financial statements etc. were

some of my major duties and responsibilities.

During Internship program a student undergoes practical learning process in an organization.

It is a good blend of theoretical and practical knowledge. This Internship Program gives the

students an opportunity to get ourselves introduced to the corporate world. It works as an

ice-breaking before they step into their working life. So, I can say that I really had the best

orientation in my corporate life.

Credit Rating Agency of Bangladesh is one of the leading rating agencies in Bangladesh. A

credit rating estimates the credit worthiness of an individual, corporation, or even a country.

Credit ratings are determined by credit ratings agencies. The credit rating represents the credit

rating agency's evaluation of qualitative and quantitative information for a company or

government; including non-public information obtained by the credit rating agencies analysts.

I am very glad to start my career at rating company like CRAB. After working here I have

learned many financial terminologies. I have done this analysis with the supervision of my

honorable faculty member Mrs. Farhana Rashid and CRAB‘s senior financial analyst and

manager of SME Corporation Mr. Mavin Ahmed. Without their proper support this report

preparing would this much successful.

I believe my internship report will not only serve the investors and analysts, this report will

serve the whole nation to evaluate our industries in Bangladesh.


References:

Risk Management Guidelines for Banks, DOS circular no. 2, February 15, 2012.

Bangladesh Bank

Strengthening Banking Sector in Bangladesh, Dr. Atiur Rahman, December 26 2012, The

Daily Sun

The Bangladesh Economy: Prospects for Future; Ishraq Ahmed, June 6, 2012, The

Financial Express

Basel II: New Capital Adequacy Framework, CRAB‘s Services for Bank Clients; Credit

Rating Agency of Bangladesh Limited

Websites:

Credit Rating & Information Services Ltd.: www.crislbd.com

Credit Rating Agency of Bangladesh Ltd. (2010).: http://www.crab.com.bd

Major Sectors of Economy, retrieved on December 15, 2012 from

http://www.economywatch.com/world_economy/bangladesh

Ratings Definitions, retrieved on December 20, 2012 from www.moodys.com

http://www.wikipedia.org

http://www.investopedia.com/terms/w/weightedaverage.asp

http://finance.yahoo.com

http://www.google.ca/finance

http://www.mof.gov.bd/en

http://www.idlc.com/research.php

http://www.crislbd.com/

http://www.crab.com.bd/

http://www.moodys.com/

http://www.wikipedia.org/

http://www.investopedia.com/terms/w/weightedaverage.asp

http://finance.yahoo.com/

http://www.google.ca/finance

http://www.mof.gov.bd/en

http://www.idlc.com/research.php

Documents

Credit Rating \u0026 Industry Analysis of Bangladesh Part-1 Credit rating