National News Foreign funds treble in stocks 20 defaulters account for state banks' one-third bad loans BTRC may allow mobile virtual network operator

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1 DSEX 5, Gold (Ounce) $1, Dollar (Buy) (Sell) REPO Rate (20/08/2017) 3.32% CSCX 11, Oil (Barrel) $47.86 Euro (Buy) (Sell) REPO Rate (17/08/2017) 3.35% Source: DSE and CSE Source: Yahoo Finance Source: One Bank Limited Source: Bangladesh Bank (W AV) National News Foreign funds treble in stocks 20 defaulters account for state banks' one-third bad loans BTRC may allow mobile virtual network operator NBR to ask 5 luxury hotels to pay Tk 100cr in SD on alcohol sales, floor shows Local card transactions must go thru' national payment switch: BB Jute Export: Ministry seeks Tk 10,000cr scheme like BB s EDF Rawhides may rot for rundown roads: tanners WB gives $59m hard credit for power sector Cattle insurance essential: analysts Esquire Knit to invest Tk 576cr to set up green factory র ইট র জন য ব এসইবসট ব ট শন করট ল ক ল International News Rise in US business spending bolsters economic outlook No end to British wage squeeze despite tumbling jobless rate India to speed up state bank mergers for broader economic revival National News Foreign funds treble in stocks Net foreign investment in the capital market more than tripled to Tk 1,569 crore in the first seven months of 2017 compared to the same period last year riding on the positive movement of price indices. The net position of foreign portfolio stood at Tk 449 crore in the January to July period of 2016, according to Dhaka Stock Exchange (DSE) data. 1 P a g e

2 In July this year, foreign investors bought shares worth Tk 625 crore and sold shares worth Tk 424 crore. It means, the net investment position stood at Tk 200 crore in July, up by 25 times from Tk 8.3 crore in July last year. Foreign investors are mainly interested in buying bank shares, a senior executive of a merchant bank said. He said lack of investment opportunities in the global market amid economic recession prompted the foreign investors to widen their portfolio in Bangladesh. The International Finance Corporation has recently invested over Tk 131 crore to buy 5 percent share of City Bank. The private sector lending arm of the World Bank Group will put its director to the board of the local private bank. The foreign holdings of City Bank increased to percent in July, up from 6.10 percent in December last year. The share holdings of foreign investors in other private banks are also increasing, giving a boost to the prices of bank stocks. The market capital of banks shares rose by 15 percent to Tk 56,000 crore in June this year from Tk 48,400 crore in December last year, according to DSE data. Foreign investors like Islami banks the most, thanks to the fast-growing Islamic banking in Bangladesh, said a banker. The foreign holding of Islami Bank Bangladesh, the largest private commercial bank in the country, increased percent in July from 6.38 percent in December last year. Among other listed Islami banks, Al-Arafah Islami Bank saw a rise in foreign holding, from zero in December to 2.96 percent in July this year. The foreign holding of First Security Islami Bank rose to 4.95 percent in July from 2.77 percent last December, while it rose to 1.43 percent from 0.48 percent for Social Islami Bank during the period, DSE data show. Among other private commercial banks, Exim, IFIC, Mercantile, One, Trust, Prime, Southeast and Uttara also experienced a rise in foreign holdings. Source: 20 defaulters account for state banks' one-third bad loans The top 20 defaulters accounted for one-third of the state banks' total default loans in the first half of 2017, according to the finance ministry. As of June, the defaulters owed Tk 11,579 crore to Sonali, Janata, Agrani, Rupali, BASIC and Bangladesh Development Bank (BDBL), with the amount being percent of the lenders' total default loans, according to a paper prepared by the finance ministry. The paper was presented at a workshop styled Review of the Health of State Banks: Way Forward to Face Challenges, organised yesterday by the finance division at the Cirdap auditorium in Dhaka. BDBL's 52.5 percent default loans were held by the top 20 defaulters, followed by 51.3 percent for Rupali and 49 percent for Janata, the paper shows. 2 P a g e

3 The rising default loans put pressure on the state banks' capital, compelling the government to inject funds into them for their survival, said Md Eunusur Rahman, senior secretary of the bank and financial institution division, who presented the paper. Over the last four years the government injected Tk 9,639 crore into the state banks. This fiscal year, Tk 2,000 crore has been set aside for the purpose. The capital adequacy ratio of the state-run commercial banks was 6.99 percent, which is far below the regulatory requirement of 10 percent. Finance Minister AMA Muhith blamed the bankers for the increasing default loans: they do not release funds to clients as per schedule, which in turn leads to the projects' failure. Bankers do it consciously, so that clients default on their loans and come under their control, the minister added. SK Sur Chowdhury, a deputy governor of the Bangladesh Bank, acknowledged that there is a problem in loan disbursement, which is why new loans are defaulting. But the performance of the state banks is not as bad as commonly perceived. The banks are making profit but the higher provisioning requirement against their bad loans sets them back. Chowdhury said banks should follow the report from the BB's Credit Information Bureau before lending to clients to prevent a loan from defaulting. The default loans of the six state banks stood at Tk 34,581 crore, which was 27 percent of their loans. In June, the average default rate in the banking sector was percent. Banks should follow ethical lending practice to bring down the default loan ratio, said Fazle Kabir, governor of the BB. He also called upon the banks to put in more effort to recover write-off loans. The requirement for collateral is a major constraint for the success of a business project, said Md Ataur Rahman Prodhan, managing director of Rupali Bank. He said if clients want to borrow Tk 100 crore for a project they need to provide security worth Tk 150 crore. The project starts to fail from this point, he added. Zaid Bakht, chairman of Agrani Bank, said the financial performance of state banks becomes poorer as they participate in the development activities of the government. Under the social safety net programme of the government, the banks channel money across the country without any service charge, which costs them Tk 100 crore, he said. The board members of state banks do not have shares in the lenders, so they do not feel any ownership, said Hedayetullah Al Mamoon, senior secretary of the finance division. Subsequently, banks should float shares in the stockmarket to bring shareholders to the board, he added. MA Mannan, state minister for finance, asked banks to cut costs to make profit. Banks should be allowed to make the call on whether they will open or close a branch. Commercial banks, both private and public, have 9,720 branches across the country, 53 percent of which are owned by state banks, according to the finance division paper. The number of accountholders stood at 8.14 crore as of December 2016, 54 percent of which are with eight state banks. The eight banks also account for 31 percent of the total deposits of Tk 952,000 crore in the banking sector as of June. Source: 3 P a g e

4 BTRC may allow mobile virtual network operator The telecom regulator considers allowing mobile virtual network operators (MVNO) with a view to injecting more competition into the cellular communication market. An MVNO is a wireless communications services provider that does not own the wireless network infrastructure over which it provides services to its customers. It enters into a business agreement with a mobile operator to obtain bulk access to network services at wholesale rates and then sets its own retail prices independently. The MVNO may use its own customer service, billing support systems, marketing and sales personnel. The Bangladesh Telecommunication Regulatory Commission is now conducting a feasibility study on MNVOs in the country, said its Chairman Shahjahan Mahmood. The move comes after the Prime Minister's ICT Affairs Adviser, Sajeeb Wazed Joy, directed the telecom regulator to take preparations for the introduction of MVNOs in Bangladesh. Subsequently, the telecom regulator formed a committee to draft a guideline on it, said a senior BTRC official. After the study if we find that the MVNO would bring benefits to people, we must go for it, Mahmood said, adding that such players are in operation across the globe. MVNO agreements with network operators date back to the 1990s, when the European telecom market saw market liberalisation, new regulatory frameworks, better 2G network technology and a subsequent jump in wireless subscriber numbers. The global MVNO market is expected to reach a valuation of $75.2 billion by 2023, according to a market study. Source: NBR to ask 5 luxury hotels to pay Tk 100cr in SD on alcohol sales, floor shows The National Board of Revenue is likely to ask five luxury hotels to pay around Tk 100 crore in supplementary duty on alcohol sales and floor shows as the hotels lost a legal battle in this connection in the country s apex court. The large taxpayers unit of value-added tax wing of the NBR may issue separate notices to the hotels within a day or two asking them to pay the amount immediately to the government exchequer, officials said. The hotels Pan Pacific Sonargaon, Sheraton (now InterContinental), Westin, Radisson Blu and Dhaka Regency Hotel and Resorts last month lost the cases they filed with the Appellate Division of the Supreme Court against the LTU (VAT) s demand for Tk 54 crore in SD. Officials said that the revenue board in 2008 imposed 10 per cent supplementary duty on supply of alcoholic beverages along with accommodation and food, and organising any kind of floor show by a hotel. Hotels have to pay the SD if they organise such programme even for only one day in a year but the hotel authorities refrained from paying the tax. The LTU detected the evasion of SD worth Tk 54 crore up to 2012 and issued demand notices to the hotels. The authorities of the hotels filed separate writ petitions with the High Court against the notices and the court gave verdict in favour of the LTU. Then, the hotel owners went to the Appellate Division which also upheld the verdict of the High Court Division. A senior official of the LTU said that some hotels started to pay the SD since 2012 after they (LTU) detected the evasion. But the total payable amount of SD will cross Tk 100 crore including some hotels unpaid SD in the period after 2012, he said. The hotels will also have to pay interest amount at the rate of 2 per cent on dues, he said. 4 P a g e

5 The LTU may issue the notices tomorrow [Sunday] asking the hotels to pay the amount immediately, he said. The LTU will issue notices for the second time if the amount is not paid within seven days of the issuance of the first notice. The hotels may face bank account freeze if they disobey the second notices. Officials said the SD is applicable to all types of hotels, motels, resorts and restaurants which serve alcohol and arrange floor shows. Most of the luxury hotels, motels, resorts and restaurants particularly in tourists-prone areas have such services, they said adding that many of those evaded the SD as collection of the tax from the services was not organised. Field-level VAT offices may also claim the SD following the verdict of the apex court, they added. Source: Local card transactions must go thru' national payment switch: BB The central bank yesterday issued a notice that mandated domestic card transactions with its national payment switch, which is yet to be EMV-compliant and remains vulnerable to fraud. EMV, which stands for Europay, MasterCard and Visa, is a global standard for cards that uses computer chips to authenticate and secure chip-card transactions. The notice said all point-of-sales (POS) terminals have to be connected with the NPS and transactions must go through it. The Bangladesh Bank has also issued a number of regulations, including making all card-based transactions PIN-based by this year. All banks have to be certified by the Payment Card Industry-Data Security Standard (PCI-DSS), a global standard, by next year and all cards have to be chip and PIN-based by June next year, according to the notice. The move aims to crack down on rising card fraud and discourage cash transactions in the country. Bankers welcomed the decision, but they said making the NPS EMV-compliant is very urgent to avoid fraud. There will be risks unless the NPS becomes EMV-compliant, said Abul Kashem Md Shirin, managing director of Dutch- Bangla Bank, which runs around 3,000 automated teller machines and over 8,000 POS terminals across the country. Shirin also said there should be a contingency plan so that if anything serious happens with the NPS, card transactions remain active. Some other bankers said security continues to be an issue, as the NPS can only process data from the magnetic stripe and not from secure chips. As a result, the acquirer bank is always exposed to loss and fraud, and if there are frauds they are not going to be compensated. In February last year, when fraudulent cash transactions were detected at several ATM booths, some banks switched off the NPS line as they thought the fraudsters exploited the weakness of the NPS. Another group of bankers, however, said there is nothing wrong with the central bank's NPS platform; rather, the banks should take measures to protect their customers' PINs. Of the 57 banks operating in the country, 52 are connected with the NPS, according to the BB. 5 P a g e

6 Only a few banks have made their cards chip-based, with the majority still running with magnetic stripped-cards, which are highly vulnerable to fraud. Of all the banks, only two are PCI-DSS certified and four are awaiting the certification, which is a proprietary information security standard for organisations that handle branded cards from major card schemes like Visa, MasterCard, American Express, Discover, and JCB. The BB has also asked all banks to make their ATMs EMV-equipped and install anti-skimming devices by the end of the year. Source: Jute Export: Ministry seeks Tk 10,000cr scheme like BB s EDF The textiles and jute ministry has sought a Tk 10,000-crore export promotion fund for the jute sector so that jute and jute goods exporters can get low-interest loans from the fund. The ministry recently sent a letter to the finance ministry and Bangladesh Bank in this connection. In the letter, the textiles and jute ministry said exporters, who produce products using imported raw materials, are getting loans at only two per cent rate of interest from the BB s Export Development Fund but the jute and jute goods exporters are not eligible for the loans as they make their products using only local raw materials. In a recent meeting of the advisory committee on jute, state minister for textiles and jute Mirza Azam also requested the finance ministry and the central bank to allow a fund worth Tk 10,000 crore like the EDF for the jute sector. He said exporters are getting low-cost loan facilities from the EDF worth $2.5 billion but the jute sector exporters are not getting loans from the fund as the sector uses raw materials from local source only. In the meeting, Bangladesh Jute Mills Association secretary Md Abdul Barik Khan said the jute sector exporters should get more low-cost loans than the exporters in other sectors receive as jute goods exporters are using local source for raw materials. He said the export sectors including readymade garment, leather, ceramics and plastics are getting loans from the EDF at only two per cent interest and all the sectors depend on imported raw materials for producing export products. The policy of Bangladesh Bank for the EDF should be changed so that not only the raw material importing export sectors but also the jute sector can get the benefit from the fund, Barik said. Nasima Begum, joint secretary (jute) of the textiles and jute ministry, on Saturday told New Age that the ministry had send a letter to the finance ministry and Bangladesh Bank seeking an EDF-like fund worth Tk 10,000 crore for promoting jute sector s export. We are yet to get any feedback from the finance ministry, she said. Source: Rawhides may rot for rundown roads: tanners Tanners fear a lot of rawhides may get rotten before reaching the Savar leather estate this year because of the poor condition of the roads and highways. Rawhide-laden trucks will have to wait for hours on the roads to enter the estate after crossing tailbacks at Hemayetpur in Savar, said Mohiuddin Ahmed Mahin, president of Bangladesh Finished Leather, Leathergoods and Footwear Exporters Association. 6 P a g e

7 The trucks may also tilt aside on the way from Hemayetpur to the estate, as the condition of the connecting roads has become very poor and risky already, he said. The hot and humid weather will also play a role for the rawhides to get rotten before reaching their destination, he said at a press briefing in Dhaka yesterday. The association urged the government to take immediate measures to improve the condition of the roads and highways for the sake of the sector. They also demanded the salt prices to be lowered and an uninterrupted supply of gas, power and water for their businesses. In the previous years, the rawhides used to enter the Hazaribagh tannery estate through different points, but this year the situation is different, Mahin said. To tackle the situation, the tanners have specially advised the local traders to be cautious for transportation and preservation of the rawhides this year, he said. Any damaged hides may also create public sufferings in Savar areas, he said, adding that rawhides need to be treated with adequate amount of salt within six hours of the skinning of cattle. Last year, around 30 percent rawhides were damaged as salt was not applied on them in time, according to Mahin. The tanners will try to preserve the quality of the rawhides, but it would be difficult if the government does not move soon for quick transportation of the skins. Usually a bag containing 75kg of salt costs Tk , but the price increases before Eid-ul-Azha, when 50 percent of the country's annual requirement of rawhide is collected. Now such a bag of salt is sold at Tk 1,200, Mahin said. Six to eight kilograms of salt are required for a medium-sized rawhide, while a large-sized rawhide may consume 10 to 12 kgs. Mahin suggested the government ensure timely import of five lakh tonnes of salt to meet demand. Source: WB gives $59m hard credit for power sector Bangladesh is set to take a $59 million loan for the power sector from the World Bank at non-concessional terms for the first time. The rate of interest on the loan would be about 2.85 percent, with the repayment period being 30 years including a nine-year grace period. Even though it is a semi-commercial loan, it is more tolerable than the international market rate, said a finance ministry official. The decision to take the non-concessional debt from the World Bank comes as Bangladesh has a deficiency of resources in comparison to the investment need in the public and private sectors, he added. The loan will come from the Scale-up Facility (SUF) fund, a scheme formed in March last year to provide additional support to the clients of the International Development Association, the WB Group arm that hands out loans and grants to the world's poorest nations, until June 30. Only IDA client countries that are at low- or medium-risk of debt distress are eligible to access the SUF, the credit from which is expected to finance projects with strong development impact. 7 P a g e

8 Before this, Bangladesh only got loans from the IDA, which carried a 0.75 percent interest rate and came with a repayment period of 38 years including a six-year grace period. Bangladesh borrows the second highest amount from the Asian Development Bank after the WB. The ADB provides two types of loans to Bangladesh: one from the Asian Development Fund that carries a 2 percent interest rate and another from the Ordinary Capital Resource, whose interest rate is LIBOR-based. The rate of interest on OCR loans is up to 3 percent and the highest average repayment period is 20 years. Among the bilateral donors, Bangladesh is set to take a big amount of loan from China in the near future. The interest rate on the Chinese loan is 2 percent. In addition, 0.4 percent other charges are applicable and the repayment period is 20 years including five years' grace period. Taking the SUF credit would be a sound move on the part of the government considering the interest rate and the terms and condition, Sadiq Ahmed, vice-chairman of the Policy Research Institute, earlier told The Daily Star. It would be a good opportunity for Bangladesh, he added. The agreement to take SUF credit was signed yesterday by Kazi Shofiqul Azam, secretary of the Economic Relations Division, and Qimiao Fan, country director of the WB. In the last five years, Bangladesh has doubled its electricity generation capacity to meet the growing demand. Today, about 78 percent of the population have access to electricity. With rapid increase in the size of the power system, Bangladesh now faces challenges of ensuring quality and reliability of the electricity supply, Fan said. Subsequently, the SUF credit will go towards improving the reliability and efficiency of the country's power system such that low-cost power can be provided. Reliable and low-cost power supply will make doing business easier and benefit households, Fan said. Besides, the project will benefit the government with fiscal savings, as a modern power generation system will cut down fuel use. It will also lower greenhouse gas emissions by reducing the use of carbon-intense fuel in electricity generation. Furthermore, the project will construct and rehabilitate a 40-km transmission line. The government is committed to provide electricity to all, Azam said. The financing will help remove bottlenecks and optimise the national power system to ensure affordable and roundthe-clock electricity, he added. Source: Cattle insurance essential: analysts Farmers, particularly cattle rearers, suffer from losses for death of animals from natural calamities like flood and cyclone in the absence of insurance coverage, analysts said yesterday. The prices of animals have increased significantly. Under the circumstances, the death of a cow causes huge losses to farmers, said Md Ainul Haque, director general of the Department of Livestock Services (DLS). Haque's comments came at a seminar styled 'cattle economy: problem and prospects', organised by the Bangladesh Agricultural Journalists and Activists Federation at the Press Institute of Bangladesh. 8 P a g e

9 The comment has become all the pertinent as the ongoing flood has wiped off livestock and damaged crops. The DLS estimated that flood affected 1,234 farms and caused deaths of nearly 50,000 livestock, including poultry and cattle, in 113 upazilas, particularly up north. Haque said the government has decided in principle to introduce an insurance scheme for livestock under a World Bank-financed project. We are yet to fix the modalities but we want to introduce insurance benefits from July next year, he said. At the seminar, analysts said the potential for dairy development remains untapped in the absence of proper policy support and a lack of initiative from the policymakers. They suggested expediting the formation of a 'dairy development board', coming up with marketing facilities for milk, ensuring fair prices and extending credit and support. One of the major constraints is marketing, Haque said. In the absence of adequate marketing facilities, farmers in rural areas do not get fair prices for the milk. Out of frustration about the low prices, farmers throw away milk on the street. Producers have to sell a litre of fresh milk at Tk 30 whereas the same is sold at Tk 80 in Dhaka, according to Haque. Discussants said dairy farming has increased in recent years leading to a spike in the production of milk and meat. Yet, the country has to import milk and depend on smuggled cattle to meet a part of the demand for beef. Farmers' representatives at the event urged the government to discourage the entry of cattle from India and the import of powdered milk with a view to promoting domestic farming. The demand for milk and meat is rising because of an increase in income and population, said Jahangir Alam, an agricultural economist. Subsequently, he suggested low-cost credit schemes to promote cattle farming, expansion of artificial insemination and higher public and private investment in the livestock sector. The government should also provide reinsurance coverage to facilitate insurance in the sector, said Alam, also a former director general of the Bangladesh Livestock Research Institute. FH Ansarey, managing director and chief executive of ACI Agribusiness, said the government should frame clear and consistent policies to encourage private sector investment in dairy and beef production. The annual market size for beef is about Tk 15,000 crore and the sector needs Tk 10,000-12,000 crore of investment, he said. Md Anwarul Haque Beg, treasurer of Sher-e-Bangla Agricultural University, said he heard about the formation of the 'dairy development board' in the 1980s. But it is yet to be established, he said, adding that neighbouring India has formed such a board 40 years ago. Beg also recommended bringing the 50 lakh small farmers under registration for providing extension and other support such as credit. Big investors will come forward if the influx of cattle from India is stopped, said Mohammad Imran Hossain, president of the Bangladesh Dairy Farmers Association. Beef will be produced on an industrial scale and the prices will come down. He also demanded the government charge the dairy farmers the same rates as the agriculture sector for electricity. 9 P a g e

10 At present, dairy farmers have to pay commercial rate on their electricity usage although dairy and livestock farming falls under agriculture. As a result, the cost of production goes up. Source: Esquire Knit to invest Tk 576cr to set up green factory Esquire Knit Composite Ltd, a business unit of Esquire Group, plans to invest Tk crore to set up a green factory at Bhaluka in Mymensingh. The company will raise Tk 150 crore from the capital market through the book building method, said Kamal Munasinghe, CEO of the company. Of the amount, Esquire Knit will use Tk crore for building construction and the rest for buying machinery, he said at a press briefing held on the premises of the company's factory at Kanchpur in Narayanganj yesterday. Moreover, the company will take a loan of Tk 346 crore from International Finance Corporation and the directors of Esquire Knit will provide Tk 86 crore, he said. Currently, the company's paid-up capital is Tk 100 crore, which will increase to Tk 150 crore after the collection of the IPO proceeds. The earnings per share of the company were Tk 3.20 at the end of December 2016 and net asset value Tk 46. The knitting unit of the company has a capacity of producing 20 tonnes of knit fabrics a month. Source: র ইট র জন য ব এসইবসট ব ট শন করট ল ক ল ন ন - য বক আবথ ক প রব ষ ঠ ন ল ক ল ফ ইন য ন স বলব ট ট র র ই শশয় র ইসযযর প রস সম প রব ব ল কটরট বন য়ন ত রক স সৎ ল ট শ বসবকউবরট জ অ য ন ড এক সট ঞ জ কব শন (ব এসইবস) আর এ র ইট র জন য শক ম প বন র বর লন র যন র য় আট ন (ব ট শন ) কর র বসদ ধ ন ত বন টয়ট আজ হস পব র শক ম প বন র ১০৬ র সভ য় এ বসদ ধ ন ত বন টয়ট এর আট, ১ আ স ট শক ম প বন ট র কর র ই আট ন ব ল কটর ব এসইবস ল ক ল র বর লন বরর র র ই প রস ট র ধ যট ১:২ হ টর অ থ ৎ ব য ন ২ট শশয় টরর ব র ট ১ট বহটসট ১৫ শক ট ৯১ ল খ ২৫ হ জ র ৪৭০ট শশয় র ইসযয কর র কথ ব ল ১০ ক অ বভবহ টলয জ র শথটক ১৫৯ শক ট ১২ ল খ ৫৪ হ জ র ৭০০ ক উটত লটন র বসদ ধ ন ত বন টয়ব ল শক ম প বন ট Source: International News Rise in US business spending bolsters economic outlook 10 P a g e

11 New orders for key US-made capital goods rose slightly more than expected in July and shipments surged, pointing to an acceleration in business spending early in the third quarter. The Commerce Department's upbeat report on Friday also suggested the economy continued to gather momentum after growth slowed at the start of the year. Strength in business investment bolsters the case for the Federal Reserve announce next month a plan to start unwinding its massive bond portfolio. "Growth continues on a solid footing," said Andrew Hollenhorst, an economist at Citigroup in New York. "The announcement of a September balance sheet reduction looks close to a done deal. A December rate hike and further hikes in 2018 remain contingent on increasing inflation." Non-defense capital goods orders excluding aircraft, a closely watched proxy for business spending plans, increased 0.4 percent last month after being unchanged in June. Economists had forecast these so-called core capital goods orders to rise 0.3 percent last month. They were up 3.3 percent from a year ago. Shipments of core capital goods jumped 1.0 percent after an upwardly revised 0.6 percent increase in June. Core capital goods shipments are used to calculate equipment spending in the government's gross domestic product measurement. They were previously reported to have gained 0.1 percent in June. Core capital goods shipments advanced 2.4 percent on a year-on-year basis. Businesses are boosting spending despite uncertainty over the prospect of tax cuts. President Donald Trump and his fellow Republicans in Congress have said they want to lower both corporate and individual taxes as part of an overhaul of the tax code, but few details have emerged. With lawmakers soon to be preoccupied with legislation to raise the country's debt ceiling and keep the government funded beyond September, it is unclear how quickly the tax changes will be put on the legislative agenda. "The pickup in business investment is welcome as a sign of the economy's health, but we would need to see much stronger gains to meaningfully move the dial on productivity growth, and we suspect this is unlikely to happen without corporate tax reform," said John Ryding, chief economist at RDQ Economics in New York. National Economic Council director Gary Cohn told The Financial Times on Friday that starting next week Trump's "agenda and calendar is going to revolve around tax reform." The data and Cohn's comments helped to lift US stocks. The dollar fell against a basket of currencies, while prices for US Treasuries were largely higher. Business spending on equipment added 0.44 percentage point to the economy's 2.6 percent annualized growth pace in the second quarter, the most in nearly two years. It has been buoyed by the energy sector, where oil and gas drilling has rebounded after declining in the wake of the collapse in crude oil prices. That is helping to offset some of the drag on manufacturing from declining motor vehicle production. Manufacturing accounts for about 12 percent of the US economy. Last month, orders for machinery fell 1.4 percent, the biggest drop since May 2016, after rising 0.6 percent in June. Orders for computers and electronic products recorded their biggest gain in a year, as did those for electrical equipment, appliances and components. There were also increases in bookings for fabricated metal products. But a 19 percent plunge in orders for transportation equipment weighed on overall durable goods orders, which range from toasters to aircraft and are meant to last three years or more. They tumbled 6.8 percent last month, the biggest drop since August 2014, after a 6.4 percent increase in June. Orders for civilian aircraft plummeted 70.7 percent after soaring percent in June. Boeing has reported on its website that it received only 22 aircraft orders in July, sharply down from 184 in the prior month. 11 P a g e

12 Orders for motor vehicles and parts fell 1.2 percent in July, the biggest decline since May 2016, after decreasing 0.7 percent in June. Auto sales peaked in December 2016 and slowing demand has led to three consecutive monthly declines in motor vehicle production. Source: No end to British wage squeeze despite tumbling jobless rate Britain's economy faces a paradox. Unemployment has fallen to its lowest since 1975 but no end is in sight to the longest squeeze on pay in more than 100 years. Businesses and trade unions think workers are unlikely to see the 3 percent increase in average earnings that the Bank of England predicts for next year, despite record employment levels and widespread reports of shortages of skilled workers. Wage growth has been weak in many countries over the past decade, but in Britain the break with what was the norm before the global financial crisis has been particularly acute. Shifting employment patterns have weakened workers' ability to demand a greater slice of the pie from employers -- and the size of that pie is growing more slowly than before because of a slump in productivity growth. One top BoE official has even questioned whether Britain is returning to the wage stagnation that dogged the country for centuries before the 18th century Industrial Revolution. For Larry Joyce, chairman of metal foundry Kimber Mills, keeping a tight grip on wage costs is essential. Four percent annual pay rises were typical in Britain before the financial crisis. Now Joyce tries to raise wages by no more than the BoE's inflation target of 2 percent. During the worst of the crisis, pay was frozen. In good years, most staff can expect a bonus from a profit sharing scheme. "But it's for one year. So if things dip back down again, you are not saddled with a level of wages you can't sustain," he explained. Weakness in British wages pre-dates last year's vote to leave the European Union but concern about Brexit is among factors that make Joyce doubt wages will rise faster in future. Most British companies take a similar view. The Chartered Institute for Personnel and Development, a professional body for human resources staff, said 2 percent is the most common annual increase in basic pay in the private sector. In the public sector, pay rises have been capped at 1 percent since 2013 as part of government austerity measures. "Employers are not under pressure to raise wages," CIPD labour market analyst Gerwyn Davies said. The result is that after inflation is taken into account, average pay in Britain last year was 2.7 percent lower than at its peak in 2007, according to figures from the Paris-based Organisation for Economic Co-operation and Development (OECD) think tank. By contrast, average pay rose nearly 18 percent in real terms between 2000 and The 2.7 percent fall puts Britain in bottom place among the world's seven largest advanced economies. In Europe only Greece and Portugal have fared worse. Britain's shortfall looks set to worsen this year because of the pick-up in inflation since the Brexit vote. Pay grew 2.1 percent in the second quarter, but inflation was up 2.7 percent. What makes Britain different to Greece and Portugal is that, on the surface, its labour market appears to be booming. 12 P a g e

13 Unemployment fell to 4.4 percent in the three months to June, its lowest rate since Unlike in the United States, where unemployment is similarly low, there are not large numbers of people who have given up looking for a job. However this masks a big fall in job security for many Britons, and a weaker bargaining position for others. The number of workers on "zero-hours" contracts, which offer no guaranteed work and in practice often tie them to a single employer, peaked at 905,000 late last year. One million part-time workers also want full-time work. "Workers do not feel confident enough to ask for a pay rise," said Kate Bell, a senior official at Britain's Trades Union Congress. Bank of England data show rates of trade union membership are the lowest since the 1930s, while the proportion of British workers who are self-employed is the highest since records began in the mid-19th century. It was in this context that the BoE's chief economist, Andy Haldane, highlighted similarities between the weak response of wages to falls in unemployment since 2013, and a much longer period of stagnation between 1500 and "Prior to the Industrial Revolution... most workers were self-employed or worked in small businesses. There were no unions. Hours were flexible, depending on what work was needed to collect the crops, milk the cows or put bread on the table," he said in a speech in June. It is however possible Britain's labour market is nearing a turning point, and some of the post-crisis factors bearing down on wages are beginning to ease. The number of workers on zero-hour contracts has fallen in the past six months, employers report increased skills shortages and some recruiters are finding they must offer big pay rises to tempt candidates. The effect of a weaker pound since the Brexit referendum in June 2016 and concerns about Britain leaving the EU make this a particular issue for sectors such as construction that rely on foreign workers. "We'll advertise for people and unless we put these increased rates on the advert, people won't reply," said Simon Noakes of Bespoke Recruitment, who now offers bricklayers 210 pounds ($269) a day, up from pounds last year. But official data show wage growth in the construction sector as a whole is slowing, and CIPD analyst Davies said trends in recruiters' day-rates and starting salaries did not give a good steer on future moves in average wages. Moreover, faster wage rises will not be sustainable until British productivity growth improves its dismal post-crisis trend. Output per hour has stagnated since 2008, compared with an average of 2 percent a year before the crisis, and is closely correlated with wage trends. I can't overstate the significance of this underlying factor behind disappointing (pay) growth," Davies said. "Investment is not increasing in terms of skills or capital and machinery. Until that happens... employers won't be able to afford the two percent plus pay increases that we all want." Source: India to speed up state bank mergers for broader economic revival India approved a proposal on Wednesday to set up a ministerial panel to speed up consolidation of state-run banks as part of its efforts to revive credit and economic growth. Indian Prime Minister Narendra Modi will name the members of the panel, which will oversee proposals for mergers from the boards of the banks, Finance Minister Arun Jaitley said after a meeting of the federal cabinet. New Delhi owns majority stakes in 21 lenders, which account for more than two-thirds of banking assets in Asia's thirdbiggest economy. 13 P a g e

14 But these banks also account for the lion's share of more than $150 billion in sour assets plaguing the sector, and need billions of dollars in new capital in the next two years to meet global Basel III capital norms. Banking sector reforms are a major plank of Modi's administration to revive credit growth, which has slowed to multidecade lows as banks struggle with bad loans. After top lender State Bank of India merged with its five subsidiary banks and also took over a niche state-run lender for women earlier this year, officials have said that more deals are being planned. "The object is to create strong banks," Jaitley told reporters, adding decisions would be solely based on "commercial considerations". The minister also said the onus of initiating such merger proposals would be on the boards of the banks. Local ratings agency CRISIL, a unit of Standard & Poor's, said the new mechanism was an important first step towards kick-starting the consolidation process. While analysts and investors have hailed the government's plan to have fewer but nimbler banks, they are sceptical of the benefits of merging two or more weak banks or a weak bank with a stronger bank that could strain the stronger entity. Bank employee unions have also opposed merger proposals over concerns they could lead to job losses. A million bank workers observed a one-day strike on Tuesday opposing bank mergers. Nine of the 21 state-run banks reported a net loss for the last financial year ended March. Thirteen had posted losses the previous financial year. Non-performing loans in the state banking sector have more than doubled in the past two years and were 12.5 percent of their total loans at the end of March. Including restructured loans, total stressed assets were more than 15 percent, central bank data shows. State-run banks as a group had a negative return on assets at the end of March, the central bank said. State lenders' shares rose after the cabinet approval with the Nifty state bank index closing 2.1 percent higher in the Mumbai market that gained 0.9 percent. Punjab National Bank, the second-biggest government-owned lender by assets, gained 3.4 percent, while No.3 Bank of Baroda added 1.2 percent. Canara Bank rose 2.9 percent. Source: 14 P a g e