SME financing fair due February

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Pockets of Change
SME financing fair due February

Md Fazlur Rahman
Bangladesh Bank and SME Foundation will organise a financing fair in Chittagong in February, to bridge the gap between entrepreneurs and lenders.
The two-day fair at the Engineers Institute in the port city is scheduled to be held on February 15-16. The fair is a part of the government’s attempts to extend the much-needed financial services to prospective small and medium entrepreneurs across the country.
The aim of the fair is to create awareness among entrepreneurs about small and medium enterprises (SME) financing products that are available in the market.
It will also facilitate financing through a display of loan products and procedures, and required documents for funding.
It will also support SMEs to prepare new, innovative and demand-driven projects; act as a platform for match-making between the SME entrepreneurs and financial institutions; offer spot advice and guidance to potential SMEs; and identify strategies to reduce procedural bottlenecks in delivering loans to the SMEs.
The fair, which will start at 10:30 am and be open until 8pm, will also feature seminars. Besides, banks will have to answer queries made by entrepreneurs, said an official of SME and Special Programmes Department of Bangladesh Bank.
The participating banks and financial institutions will also offer SME loans directly at the fair, he said. Each lender will lend to at least five entrepreneurs.
Fairs will also be organised at all divisional cities and major district towns, such as Bogra, Comilla and Mymensingh.

Steelmaker plans big

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Steelmaker plans big

Zahirul Islam

Arun Bikash Dey, Ctg
PHP Group moves to expand and diversify, as it plans to make a strong foothold in the country’s steel industry. The company has recently acquired a steel mill at Ghorashal, AMK Steels Mill, to produce deformed bar.
“We wanted to expand our steel industry. At present we produce corrugated iron sheet in our PHP Cold Rolling Mills and PHP Continuous Galvanising Mills. Now we are going to make deformed bar in the new mill,” says Zahirul Islam, managing director of PHP Ispat Ltd, a sister concern of the group.
Islam shares his views with The Daily Star on the company’s latest move.
AMK Steels Mill that produces thermo mechanical treatment deformed bar was established in 2005. “The company was facing some problems, and those were hard for the company to avoid. So we acquired it for a renovation,” says Islam.
The net asset value of AMK Steels is around Tk 75 crore and the total asset value of the two mills is Tk 1,000 crore.
AMK Steels has been renamed PHP Ispat after acquisition.
PHP Cold Rolling Mills is the first of such mill in the country that started operations in 1999 and PHP Continuous Galvanising Mills started operations in 2001.
These two mills produce nearly 15,000 tonnes of corrugated iron sheet a month, meeting around 40 percent demand of the country. “Our annual turnover from the mills is Tk 2,000 crore.”
PHP Arabian Horse and PHP Arabian Horse Super are the two brands of the company’s tins.
The official says they expect an increase in annual turnover by Tk 500 crore with the latest acquisition.
The country needs nearly 17 lakh tonnes of thermo mechanical treatment deformed-bar and 60-grade bar a year, according to Bangladesh Re-rolling Mill Owners’ Association.
“We expect to produce one lakh tonnes a year and reach the three-lakh-tonne mark in the second or third year,” Islam says. “We hope to meet about 7 percent of Bangladesh’s total demand initially.”
The company exports its PHP Arabian Horse and PHP Arabian Horse Super tins to Europe and Africa. In case of deformed bar, he says the company targets to fulfil the domestic demands at first, as the country still depends on imports.
Islam says steel is one of the important sectors in Bangladesh. “The demand for rod will increase on a regular basis. We are heading to become a developed nation. So we want to produce the best quality rods and fulfil the country’s entire demand.”
“If we take initiatives to make best quality products then our competitors will also do so,” Islam says. “This healthy competition will let our people buy quality rods at competitive price.”

KYCR Coil plans to expand operations and raise funds from capital market

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Corrugated sheets shine
KYCR Coil plans to expand operations and raise funds from capital market

A view of the KYCR Coil manufacturing plant, 25 kilometres from Chittagong. Inset, Officials check the quality of products. Photo: KDS Group

Suman Saha, back from Ctg
A burner is blazing at nearly 900-degrees. It galvanises the cold rolled (CR) coils to give the metal a zinc coating.
Next in line, the metal goes through rolling dice, to take on a corrugated shape. This is the production process at KYCR Coil Industries Ltd, a subsidiary of KDS Group, at Kumira, situated 25 kilometres from Chittagong.
Munir H Khan, director of KDS Steel, walks us around the production lines to show how the final product, corrugated sheets, is made. The plant uses HR coil and zinc as raw materials.
“We set up the Cold Rolling Mills Complex in 2001 to provide the necessary raw materials for the KDS Group’s own galvanising plant. The surplus production is supplied to other consumers in the industry.”
KDS Group mainly does business in four segments — garments and textiles, steel, accessories and logistics. Under KDS Steel, it has three companies — KY Steel Mills Ltd, KYCR Coil Industries Ltd and Steel Accessories Ltd.
Machinery used at the KYCR Coil Industries plant has been supplied by SMS DEMAG Germany, a world leader in this sector. The complex, which was built on 10 acres, houses 6 Hi CVC cold rolling mill (costing nearly $80 million), with an annual capacity of around 1.20 lakh tonnes, said Khan.
“It is an unknown process in Bangladesh and requires massive investment. As a result, only five companies are in operation in the corrugated sheet business,” said Khan.
When the sheets are used as roofs, those are laid somewhat like tiles with a lateral overlap of two or three corrugations and a vertical overlap of about 150 millimetres, to provide waterproofing. The standard shape of corrugated material is round and wavy, but can be easily modified to a variety of shapes and sizes by simply changing the dice.
Bangladesh has to be self-sufficient in steel production, if the country graduates to a middle-income category by 2021 because it is necessary for any development, said Khan.
China and India are also trying to be self-sufficient in steel, he added. Steel sufficiency has played a significant role to turn Japan into a developed country, he added.
Khan, who oversees the operations of KDS Steel, said the company mainly manufactures corrugated sheets, which is around 80 percent of its product range.
Its flagship brand is ‘Murgi’ marka tin and has a significant market share in Bangladesh since 1988, said Khan.
“The annual market size of corrugated sheet in Bangladesh is around 5 lakh tonnes. The market has witnessed stable growth because the purchasing power of the lower income groups, who are the core customer for the product, is gradually increasing.”
KYCR also produces galvanised coil (GC), CR coil, cycle rim strips and slitted sheet. The hard GC sheets are mainly used for roof cladding, while the soft GC sheets are used for AC ducting, colour coating applications, rice storage boxes and vehicle bodies.
Around 15 percent of KDS Steel products are also exported to Singapore, Thailand, Myanmar, Vietnam, Sri Lanka, Malaysia, the Philippines, Indonesia, Dubai, Pakistan, Afghanistan, Peru, Colombia and eleven countries in West Africa.
The company manufactures the corrugated sheet, which ranges between Tk 120 and Tk 600 per piece, targeting all income groups, said Khan.
Corrugated tin prices are very sensitive because nearly 90 percent of customers are rural farmers. The lowest market price of corrugated tin is Tk 40,000 per piece-tonne. Each piece-tonne consists of 282 pieces of 6-foot long tin sheets.
The price of the corrugated tin in Bangladesh mainly depends on the districts’ economic condition, said Khan. For example, customers from Dhaka and its outskirts generally buy comparatively high priced products, while customers from relatively poor regions buy low priced products.
The company maintains a 24-hour production process with a 2-megawatt back-up captive generator.
“We pay nearly Tk 70 lakh a month in electricity bills, said Khan. “But power fluctuations sometimes force us to bear huge costs for instrument recovery because low voltage triggers the malfunction of the circuit, which costs nearly Tk 12 lakh.”
KYCR is also set to expand operations and plans to raise capital from the capital market. The company is scheduled for a roadshow on January 31 for the institutional investors to discover price under book building system.
“We plan to produce colour sheets in August,” said Khan. “We also want to expand production capacity by an additional 1 lakh tonnes by 2013 because of the gradual increase in demand for the product.”
For this, the company will invest nearly Tk 200 crore, he added.
The government should take proactive policies to deal with the external forces, especially for steel products.
“We import HR coil from the world market because we have no iron ore mines,” said Khan. “So, if the prices of steel products go up on the international markets, there will ultimately be great pressures on its rural customers.”
Khan urged the government to set a separate steel policy and fix the duty structure from time-to-time by considering the prices on the international markets as well as in the neighboring countries, such India and China.

Youngone chairman explains how Bangladesh can take apparel exports to $30b

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Seize the day or lose
Youngone chairman explains how Bangladesh can take apparel exports to $30b

Kihak Sung

Sajjadur Rahman
Bangladesh might double its apparel exports to $30 billion within three years, but limited capacity and a poor business environment could foil the opportunity, said Kihak Sung, chairman of Youngone.
The Youngone boss talked about Bangladesh’s export potential, in a recent interview with The Daily Star at his Uttara home. He spoke about the speculation of restricting foreign investment in the RMG sector, Bangladesh’s move for duty- and quota-free access to the US market and Korean Export Processing Zone in Chittagong.
Relaxation of generalised system of preferences (GSP) rules by the European Union and access to East Asian markets can become a major springboard for Bangladesh’s garment exports.
“Garment exports to Europe may double to $14 billion due to flexible GSP rules. Another $4 billion income is possible from exports to East Asian countries,” said Sung.
Sung is optimistic, particularly about the export potential in South Korea, Japan and China. However, it will not be easy for Bangladesh to cash in on the opportunity, he said.
Downside risks lie with four core areas: energy constraint, labour issues, port capacity and general law and order situation.
Seoul-based Youngone, the largest manufacturers and exporters of readymade garments in Bangladesh, had a business turnover of $1.2 billion in 2010. Nearly half — 45 percent — of it came from Bangladesh operations.
Youngone started business in Bangladesh in early 1980s and presently, it has 47,000 employees with some 4,500 in officer rank. Ninety-nine percent of them are locals as the company’s philosophy is to run enterprises by local people.
Sung said Bangladesh has an excellent opportunity to increase its garment exports in few years. Besides Europe, he sees East Asia as a major export destination as China gradually shifted to high-end products from low-end ones.
The European Union relaxed rules for the least developed countries (LDC) under GSP in textile trade. The new rules of origin (RoO), effective from January 1, allowed most apparel items from all LDCs would get duty-free access, no matter where the raw materials originated.
Korea has recently allowed Bangladesh duty-free export of some items including jackets. More items will follow, said Sung who is believed to be the main architect behind this duty free access.
“If four issues are resolved, at least reasonably, Bangladesh will have an enormous export opportunity.” They must be addressed simultaneously without specific prioritising, he noted.
Without building capacity in the areas such as energy and infrastructure, including ports, Bangladesh might lose the chance to its competitors, he added.
“The energy problem is looming over and disrupting business seriously,” said Sung. The unnecessary delay in the port cause huge business losses.
On the issue of minimum wage, Sung said: “It’s not enough, but agitation cannot ensure it.” He said his company gives Eid bonuses, rice subsidy and medical services for the workers.
About the recent agitation at Youngone factories in Chittagong, he said the company wanted to merge rice subsidy with the wages, but workers misunderstood it as a cancellation move.
Sung, a Korean national, blamed outsiders for the agitation. “Ninety percent of the agitators were outsiders,” he claimed.
Youngone invested Tk 130 crore to develop Korean EPZ in Chittagong, but the government took almost one decade to issue permit. In the meantime, he shifted some of his planned factories to China and Vietnam. The EPZ, if developed, would employ some 50,000 workers.
Foreigners were given special facilities at the EPZs in Bangladesh so that they would transfer technology and their skills to Bangladeshis but some raised questions about it.
He said technology has been transferred and it is one of the main reasons for flourishing apparel factories in Bangladesh. “Some 50 Bangladeshis run our factories in Vietnam and another five work in China,” he added.
However, the garment maker hailed local entrepreneurs for their relentless efforts to go forward amid lot of limitations.
Restricting foreign investment in garment sector in Bangladesh will not be a wise decision, Sung said. It will give bad signals to the global markets, he added.
The Youngone chairman said it is very unlikely that Bangladesh would get duty- and quota-free market access to the US, which he believes cannot negate the same facilities to Africa, Jordan and Israel.

Kafco plans $1b plant

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Kafco plans $1b plant

Star Business Report
The Karnaphuli Fertiliser Company Limited (Kafco) plans to set up its second plant to produce 3,000 tonnes of urea fertiliser a day.
“We’ll submit our proposal to Industries Minister Dilip Barua soon for the $1 billion plant. Primarily, we’ll choose a site anywhere at Ashuganj, with a hope of available gas supply here,”said Salahuddin Ahmed, Kafco’s chief executive officer.
“We now await government’s nod to start construction work this year. The profit of the existing plant will be reinvested in the new plant,” he told The Daily Star after a press conference at Sonargaon Hotel in Dhaka yesterday.
Ahmad also said Kafco has been a totally debt-free company since February 1, 2006.
The company contributed $744.48 million to the government’s exchequer since fiscal 2004-05 to 2009-10, he informed the press.
Kafco sold 82 percent to 421,384 tonnes of urea to the government last fiscal year and exported 91,851 tonnes.
The company has to export fertilisers despite the item’s scarcity in the local market, as it was set up in 1990 with foreign investment, the CEO said.
Bangladesh government holds 43.51 percent share of the company, Kafco Japan 31.28 percent, Subcontinent Ammonia Investment 8.63 percent and Stamicarbone 1.57 percent shares.
Since inception, Kafco paid $247.44 million in taxes and duties, the company’s top official said.
“Kafco has paid dividends to its shareholders since FY2005-06. Bangladesh government is the single largest beneficiary. Up to FY 2009-10, the company has paid dividends of $441.8 million, out of which the government has received $191.6 million,” he added.
While his attention was drawn to the planned new factory, Industries Minister Dilip Barua said he is not aware of it. “Perhaps, the plan is yet to be finalised. The government is busy with its own plant now,” Barua said.

Bangladeshi company to invest US$ 7.17m in Dhaka EPZ

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Bangladeshi company to invest US$ 7.17m in Dhaka EPZ
DHAKA, Jan 5 (BSS)- M/s Cassmark Fashion Limited will set up a Garment Industry in Dhaka Export Processing Zone.
This 100% Bangladeshi owned company will invest 7.671 million US Dollar in setting up their unit and will produce garments items. The company will also create employment opportunity for 1,897 Bangladeshi nationals.
An agreement to this effect was signed between Bangladesh Export Processing Zones Authority and M/S. Cassmark Fashion Limited in BEPZA Complex Dhaka yesterday.
Md Moyjuddin Ahmed, Member (Investment Promotion) of BEPZA and Ms Sabrina Islam, Managing Director of M/S. Cassmark Fashion Limited signed the agreement on behalf of their respective organizations.
Major General A T M Shahidul Islam, Executive Chairman, Abu Reza Khan, Member (Engineering), A K M Mahbubur Rahman, Member (Finance), Md Shawkat Nabi Secretary and other officials of BEPZA were present at the signing ceremony.

Rajshahi Jute Mills 2nd unit to be opened soon: Latif

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Rajshahi Jute Mills 2nd unit to be opened soon: Latif
Bangladesh Sangbad Sangstha . Rajshahi
Textile and jute minister Abdul Latif Siddiqui has said the second unit of Rajshahi Jute Mills would open as early as possible.
In this regard, he asked the authorities concerned to complete the construction and other infrastructure development works of the unit so that it can go into operation very soon.
Minister Abdul Latif made the instruction while sharing views with management of the mill and others concerned.
Mayor of Rajshahi AHM Khairuzzaman Liton, chairman of BMDA Nurul Islam Thandu, secretary of textile and jute ministry Ashraful Mokbul and chairman of Bangladesh Jute Mills Corporation Tulshi Das Mitra also spoke on the occasion.
Latif Siddiqui underscored the need for making the jute mills more effective for adequate consumption of the raw jute together with boosting the employment generation.
He said the nation produces around 60 to 65 lakh bales of jute at present and the BJMC consume 30 per cent of the total production annually and called for enhancing the consumption to at least 50 per cent.
‘We have enormous prospect of market expansion of jute and jute goods globally and we are committed to materialise the prospect through proper utilisation of the existing resources,’ the minister asserted.
Earlier, he visited different sections of the first unit and the under-construction second unit and directed the officials concerned to expedite the production rate of the first unit.
Later, he visited the now-defunct Paksi Paper Mills at Ishwardi in Pabna and shared views with the officials concerned on the last leg of his three-day official visit in the region.

Self-sufficiency in cement

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Heavy Industry
Self-sufficiency in cement

A truck loaded with raw materials for cement enters the Heidelberg Cement plant at Patenga in Chittagong (Bottom). Photo (Top-Bottom): Amran Hossain; Anurup Kanti Das

Sarwar A Chowdhury
It is hard to pinpoint where and when the uses of cement were first discovered, or who invented it. Some say it was in ancient Rome, where engineers first used concrete made from volcanic rock and ground brick or pottery. Now, in modern times, concrete is a composite construction material composed of cement and other materials.
Regardless of when the use of cement began, cement has become the major construction material for many centuries in the world. From housing to infrastructure, cement is a must.
Cement is a binder, a substance that sets and hardens independently, and can bind other materials together.
Many countries cannot produce enough cement to meet their internal demand, and they depend on imports. However, Bangladesh is self-sufficient in fulfilling local demand for cement. Even so, the installed production capacity is higher than local demand.
In Bangladesh, there are around 55 cement-manufacturing companies, most of which are in operations either on a large or small scale. A total of 34, including multinational cement manufacturers, are in commercial production.
The installed production capacity of the 34 cement factories is 1.85 crore tonnes a year, according to Bangladesh Cement Manufacturers Association (BCMA) data.
Cement consumption was 1.3 crore tonnes in 2009 and 1 crore tonnes in 2008. Consumption for 2010 has been estimated at 1.45 crore tonnes, the cement association data shows.
Dhaka and Chittagong account for nearly 65 percent of total consumption.
“We are self sufficient in cement production and meeting local demand. We don’t need to import cement, not even a single bag,” says Amirul Haque, managing director of Premier Cement.
“Bangladesh is over capacity. The entire industry and local demand is controlled and fulfilled by the Bangladeshi cement companies,” he says.
Some factors can manipulate the demand or consumption of cement to go up or down, as was seen in cement consumption in the last few years.
The cement sector experienced a downward trend, particularly in sales, in 2007-08 when the army-backed caretaker government was in power. The real estate sector was at a low ebb and no infrastructure development project was undertaken, leaving a negative impact on demand for cement.
But the cement industry regained momentum soon after an elected government took power in January 2009.
“Infrastructure, industrialisation, urbanisation and housing are the major factors that can have an impact on demand for cement,” says Mostafa Kamal, president of BCMA.
“We are seeing an ever-increasing growth in the cement sector, as the government looks seriously on some big infrastructure projects, such as flyover, airport, bridge and monorail, where cement will be a basic raw material,” he said.
There will be no problem in meeting the cement requirements to implement the infrastructure projects. “We are not only self sufficient in cement production, we also export to our neighbouring country, India,” says Kamal, also the owner of Fresh Cement.
In view of a bright future, many entrepreneurs are expanding their production capacities. “Currently, we have the capacity to produce 4,000 tonnes of cement a day, and we plan to add 4,000 tonnes of capacity this year and another 4,000 tonnes next year,” says Kamal.
As it is a heavy industry, huge investment is needed to set up a unit with backward and forward linkage facilities. It will cost around Tk 1,000 crore, if a unit has the capacity to produce 10,000 tonnes of cement a day with adequate backward and forward linkages.
The backward and forward linkages refer to the transportation of raw materials and shipment of finished products by a company’s own transportation chain, in which, ocean going vessels are included.
Haque of Premier Cement says cement is almost a seasonal product. Winter is the best season for construction. “Cement consumption rises to a peak in winter,” he says.
In the rainy season, construction works, especially on housing projects in rural and urban areas, go slow. “Every company cuts production in the rainy season,” Haque says.
With high demand for cement comes greater competition. It is a market for ‘maximum volume but minimum profit’, he says.
“Otherwise, one will be thrown out by competition.”
Although Bangladesh is self sufficient in cement production, it needs to import all the raw materials used in cement manufacturing. The main ingredients for cement include clinker, gypsum and fly ash, which are mainly imported from Thailand, Malaysia, Vietnam and China.
Bangladesh has surplus production capacity of cement, and with existing growth domestic demand can be met by local production in next 4 to 5 year, said Jasim Uddin Khandaker, vice-president of sales and marketing of Holcim.
“However, many companies are now going for expansion. Bangladesh will not face any problem meeting its local demand up to 2020,” he added.
Among local brands, Shah Cement, Meghna Cement, Crown Cement, Fresh Cement, Premier Cement and Seven Circle Cement are famous across the country.
The five multinational cement companies in operation are: Holcim, Heidelberg, Lafarge Surma, Cemex and Emirates.