Term paper On Consequences of interference by TCB on commodity market in Bangladesh Course no. MGT-301 Macroeconomics Prepared for: Md. Thoufiqul Islam Assistant professor, Department of Management Studies University of Dhaka Prepared by: Brain Gain Nazim Uddin ID-106 Md. Sohag sarder ID-151 Fatema Rajani ID- 153 Syed Faisul Islam ID-214 Zahirul islam ID-219 13 th batch Department of Management Studies University of Dhaka Page 1 of 35
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Term paperOn
Consequences of interference by TCB on commodity market in Bangladesh
Course no. MGT-301Macroeconomics
Prepared for:Md. Thoufiqul IslamAssistant professor,
Department of Management StudiesUniversity of Dhaka
Prepared by: Brain Gain
Nazim Uddin ID-106 Md. Sohag sarder ID-151 Fatema Rajani ID- 153 Syed Faisul Islam ID-214
Zahirul islam ID-219
13th batchDepartment of Management Studies
University of Dhaka
Submission date: March, 22, 2010.
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A C K N O W L E D G E M E N T
The number of persons to whom we owe thanks for their contributions to the development of this
paper defines enumeration. Of particular help in this project were the suggestions & advice
offered to us by our most respected course instructor Mr. Mohammad Thoufiqul Islam, lecturer
department of Management Studies, University of Dhaka.
We would like to give thanks our entire respondent who provided us information. Also thanks to
Mr. Serajul Islam Khandaker, P.S. to chairman and public relation officer of TCB.
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PREFACE
It is our pleasure to submit our term paper on “consequences on interference by TCB on commodity market in Bangladesh.” While preparing this term paper, we have tried to gather as much information as possible to enrich it. We believe that it was a challenging job to work with this type of topic which is highly sensitive for our economy.
The present term paper is not free from limitations. There might have problems regarding lack & limitations in some aspects & also some minor mistakes.
Regard,
Nazim Uddin ID-106Md. Sohag sarder ID-151Fatema Rajani ID- 153Hasib Redwan Khan ID-174 Syed Faisul Islam ID-214Zahirul Islam ID-219
13th batchDepartment of Management StudiesUniversity of Dhaka
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Letter of Transmittal
March 22, 2010
Mohammad Thoufiqul IslamCourse Teacher,MacroeconomicsDepartment of Management StudiesUniversity of Dhaka
Subject: Submission of Term Paper
Sir, Here is a term paper about “Consequences of interference by TCB on commodity market in
Bangladesh” for your kind evaluation. To prepare this term paper, we have given our best effort
that would enhance our efficiency.
We would be very grateful if you accept this term paper.
Sincerely Yours,
Nazim Uddin ID-106Md. Sohag sarder ID-151Fatema Rajani ID- 153Hasib Redwan Khan ID-174Syed Faisul Islam ID-214Zahirul Islam ID-219
13th batchDepartment of Management StudiesUniversity of Dhaka
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Table of Contents
Sl.No. Title Page No.
01. Abstract 0602. Introduction 0703. Objective of the study 0804. Methodology 0805. Limitations of the study 0906. Role of TCB 10-1407. Market study and research 1508. Profit and loss of TCB 1609. Present function of TCB 1610. Earnings from seized goods 1711. Performance of TCB 17-1912. SWOT analysis 19-2013. Findings of the study 20-2114. Discussions of the findings 21-2315. Recommendations 2416. Conclusion 2517. Reference 26
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ABSTRACT
The purpose of this research is to observe the consequences of TCB in commodity market. This organization is the national trading house under the ministry of commerce. Data have been taken from many direct and indirect sources. These are used to address the purpose of the research. At present the activities of TCB are directing the market to some extent compared to the past.TCB has a great potential to control and influence in commodity market. But this organization is now in a position, suffering from various deficiencies because of its being a government organization. So, most of the time the authority to take decision and actions are influenced by political leaders. The manpower of TCB is not sufficient to run the activities of the organization properly. in Bangladesh it is more important to activate and utilize the potential of TCB effectively. The market price of major commodities in Bangladesh is going beyond the capabilities of consumers and imbalance exists between demand and supply of consumer goods. Many market analysts and specialists think that TCB can play the vital role in commodity market. To do so, the support of government is required directly.
KEY WORDS:
1. Import & Export by TCB
2. Market condition
3. Performance of TCB
4. Impact in the commodity market
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INTRODUCTION
In the backdrop of scarcities of essential consumer items and industrial rawMaterials after the liberation of Bangladesh in 1971, the Trading Corporation ofBangladesh (TCB) was established under President’s Order No. 68 of 1972. The main objective behind the creation of TCB as the state trading organization was to ensure steady supply of essential consumer goods and industrial raw materials and to make them easily available to the consumers at reasonable prices.The main functions of the corporation are: 1. To carry on the business of imports and exports in accordance with the policy of theGovernment.2. To arrange for the sale and distribution of the imported goods and to appointDealers/agents etc. for this purpose as per Government directives.3. To do all other acts and things connected with or ancillary thereto.And4. Monitoring of prices of essential commodities in the local market vis-a-vis prices in theInternational market.Ever since its inception, TCB did perform a commendable joy by ensuring steady inflow of a large number of essential commodities in the market which provided succor to the common people of the country. Over the years, TCB has developed expertise and is now manned with a group of professionals who are highly skilled in import, export, shipping, clearing and movement, marketing, distributing, banking and all other ancillary activities that go with a national export-import house. Though originally set up as an import-export house, TCB has in recent years been playing an increasingly important role in the field of exports. TCB is now exploring worldwide market for Bangladeshi products and is supplementing the efforts of the sector corporations and the private sector in boosting up exports from Bangladesh. Besides, introducing new items and exploring new markets, it has been promoting the sale of different to sell non-traditional items. As a sequel to the privatization policy and market economy drive to the Govt. TCB’s import activity is now confined to some essential consumer items like cement, milk powder, pulses, spices, salt and few industrial raw materials etc. on intervention basis in order to help stabilize the market prices by equitable distribution through its country wide network.
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OBJECTIVE OF THE STUDY
1. To find out the activities done by TCB. 2. To find out the role of TCB in commodity market in Bangladesh. 3. To find out the impact on the commodity market by the interference of TCB. . 4. To find out how many products TCB import and export to fulfill the demand of the
market. 5. To find out how political government affect the activities of TCB6. To find out the importance of TCB for controlling the commodity market.
METHODOLOGY
Sampling:
The survey was carried out in Trading Corporation of Bangladesh (TCB) in the central of Dhaka city. All their activities were investigated to identify whether the impact in the commodity market exists or not.
Data collection:
For the purpose of the survey based on ‘consequences of interference by TCB on commodity market’ a modified structured English version questionnaire was prepared. The questionnaire was translated into Bangla.
The questionnaire had three parts:
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Part-1 had the introductory information. Part-2 had objective and main functions of TCB. Part-3 had the information how TCB interferes in the commodity market. The questionnaire with a request letter was delivered to the PO to chairman and public relations officer of TCB. The letter contained statements of request to cooperate the study, study rationale, study objectives and instructions for proper filling up the questionnaire. One week later our questionnaire was returned after filling up the paper.
Data analysis:
Data obtained in the baseline survey were analyzed to identify the consequences of interference by TCB on commodity market. We also read many articles of magazines, columns of different newspapers and visited some other organizations to collect information and that information is analyzed to fulfill our objectives.
.
Limitations of the study
1. Nowadays TCB do not perform their activities actively. So it is not possible to know appropriately what TCB perform.
2. There is no appropriate information about market to TCB.
3. Employees of TCB were not as cooperative as it was needed to do our research.
4. We did not have enough time to do the research as it was related to our whole Economy.
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ROLE OF TCB
The main functions of the corporation are to carry on the business of imports and exports in accordance with the policy of the Government.
Export:
TCB started export activities from its very inception. During the year of 1973-92, TCB signed a good number of special trading agreement (STA) / counter trading agreement (CTA) with multinational business houses for mobilizing faster growth of export, specially no-traditional items. TCB saved hard-earned foreign currency through importation of certain essential items against export of goods under special trading agreement (STA) / counter trading agreement (CTA).
TCB was the pioneer in export of readymade garments from Bangladesh for the first time in 1975 which has now become the main export item of the country. In the context of present free market economy and having no product of its own, TCB’s volume of export has decreased. However, TCB has been continuing its export activities.
14. Molasses 15. Hard board 16. Ginger 17. Frog legs 18. Partex 19. Ready-made 20. Garments etc.
Export since 1972 (as on 08-06-2009)
(Fig. in crore TK)
Year Taka Year Taka Year Taka 1972-73 4.73 1984-85 66.95 1996-97 10.311973-74 7.51 1985-86 131.45 1997-98 12.851974-75 10.31 1986-87 154.71 1998-99 11.44
TCB played a vital and significant role in the import trade during the initial years after liberation. By importing a good number of essential consumer goods and industrial raw materials, it stabilized the prices in the market, as well as provided a great relief to the general consumers and small industrial units by supplying goods at reasonable prices.
During the period of 1972-77 TCB used to import as many as 70 commodities such as cement, milk food, C.I. sheet, drugs and medicine, textile, yarn, soda ash, auto rickshaw, salt, sugar, onion, M.S Billets Al, Ingot, pig-iron, zinc ingot, arms and cartridges, timber etc. but due to introduction of free market economy, TCB’s role in the field of import has become very limited. As a result, functions and activities of TCB have largely been squeezed.
Since fair trade has yet to be started, TCB’s role is significant to control the market. In fact, TCB’s intervention role can never be denied. Whenever there has been any short-fall in the supply of any essential consumer goods in the market, TCB has, on the advice of the Government, made arrangement for the emergency import of the said items in order to ensure adequate supply and to stabilize the market price. During 2005-06, in view of unusual price situation of some essential commodities in the local market, TCB imported red lentils and procured onion and gram (chhola) from local market and sugar from BSFIC for direct sale at a fair price. The program is still continuing.
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Year Item Quantity C&F value1981-82 Cement
G.C.I. sheet Milk food M.S. billets Pig iron Al. ingot Zinc ingot Arms Cartridges Razor blade Drugs & medicine
Consequent upon abolishment of the dept. of pricing and market intelligence (PMI) with effect from 31-12-89, TCB started to discharge the functions of market intelligence from January 1990 as per instruction of the ministry of commerce vide their letter no. 5(15)/89-Ad-3/448 dt. 24.12.89. After collecting the retail prices of daily essential commodities from different markets of Dhaka city, TCB prepares a good number of statements & reports and send the same daily to different ministries/offices/agencies.
To bring dynamism in monitoring, TCB as per approval of the ministry of commerce, has formed market study and research cell. From the year 2001-02, the officials of this cell has been visiting different markets of Dhaka city and collecting the retail and international prices of essential commodities and preparing reports and being distributed to the office of the honorable prime minister, different ministries / offices / Agencies every day.
Moreover, this cell, after examining market prices, sends reports to the ministry of commerce. Concerned officials of the cell, are contacting with the directorate of agriculture marketing under ministry of Agriculture, Bangladesh Bank, producers, importers and traders of different items, NBR, sea and land ports, collect information on demand, supply, production, shortage, international prices, import necessity etc. and send comments and suggestions to the ministry of commerce for necessary action.
A. Market intelligence : 1. To sell essential commodities like masur Dal, sugar direct to the consumers by open truck
and through OMS dealers & some selected sale centers within the capital city & some other divisional towns.
2. Daily market price monitoring of essential commodities of Dhaka city. 3. Collection of information regarding comparative statement of last 3 year’s demand,
production, supply, stock, and market position of goods. 4. Daily price monitoring of international market price. 5. Daily collection of information retailing to import, clearance, custom duties, VAT on
various goods coming through Chittagong port and monitoring price of essential commodities of Chittagong, Khulna & Rajshahi city.
6. Daily price monitoring of essential commodities of Khulna city and collection of information retailing to import, clearance, custom duties, VAT on essential goods coming through Benapole land port & Rajshahi commissariat.
B. Selling of seized goods : Sale of confiscated goods (sugar and salt) through tender. TCB earned TK. 9.48 crore since 1998-2006 by selling of seized goods.
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Earning from seized goods (1997-98 To 2007- as on June ’08) Fig. in Lac. TK.
1. TCB owns 42.50 bighas of land including 2 office buildings in Dhaka and another 2 in Chittagong and Khulna.
2. Self-financed organization with 4 regional offices in old divisional towns. 3. TCB owns 3 godowns in Dhaka with 8850 MT storage capacity. 4. Total bank deposit and value of goods in stock TK. 97.83 crore.
Weaknesses:
1. Absence of experienced and skilled manpower. 2. Approval of organogram showing 225 manpower still under process (PARC
recommended for 523 manpower). 3. Very weak board of directors (only two members). 4. Recruitment and promotion under existing service rules is difficult. 5. Storage capacity is quite insufficient. 6. Procurement of commodities following PPR-2008 is time consuming. Tenderers feel
disinterested to participate in tender giving 10% PG. 7. Very weak distribution network (only 5 sale-centers and 76 dealers throughout the
country. 8. Due to procurement problem, dealers cannot be given saleable items on regular interval. 9. Import in bulk quantity is not possible.
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Opportunities:
1. As a state owned organization, TCB has enough scope to intervene the market price.
2. Vacant lands of TCB can be used to increase storage capacity and oil refinery. 3. Vacant lands of TCB at Uttara (Dhaka) can be utilized to provide housing facility
for TCB employees.
Threats:
1. TCB is not well-equipped to face the challenges of market economy. 2. To survive as a commercial organization competing the private sector (as per provision of
PO.08). 3. Procurement of commodities cannot be done, as tenderers quote price higher than the
market price.
Findings of the study
1. TCB cannot play the vital role to interfere in the commodity market.
2. Commodity market is centralized to some businessmen.
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3. Most of the time businessmen do not respond to the invitation for tender by TCB.
4. Some businessman wants to run their business with the government through the collection of goods by TCB.
5. Most businessmen do not believe in TCB because of its incompetence.
6. At present they serve goods in the market purchasing from the businessman. .
7. TCB cannot import so many goods compared to the demand. But sometimes their impact exists in the market.
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Discussion of the findings
TCB was established to influence in the commodity market in Bangladesh by controlling the price of essential goods and importing and storing the goods that will be demanded in the market. In the context of Bangladesh, this organization has become a inactive organization because of its inefficiency and lack of government support.
Though the organization is doing some operations, it is not enough to meet the market demand. It has done the activities including collecting sugar, oil, chhola etc. in current year which cannot meet the demand of people of Dhaka city for one day. Sometimes it purchases goods more than the market price.
Thus, it has failed to control the local market. If TCB wants to provide some goods in the market, it is to depend on other businessman. So, these businessmen, not TCB, are controlling the market.
The manpower of TCB is not enough to inspect the market regularly for taking decisions about the steps to be taken.
In many occasions, TCB decides to stabilize market by supplying their stored products. But lack of sufficient stock and cooperation of businessman, it fails to achieve its objectives.
TCB invited tender for the first time for importing sugar on the 17 th April, 2007. It was estimated to import 10000 ton sugar but TCB did not know that it was not possible to ship less than 12000 ton sugar. The lowest bidder did not permit to do the work. Not only sugar, there was not any other product at TCB. TCB gave the responsibility to import soybean oil to two local companies although TCB invited international tender.
TCB invited tender to import 100 ton chhola and onion on the 27 th July, 2007. But there was not any definite information to TCB when these goods would come. TCB had failed to import red lentil for three years. It imported 3061 ton red lentil in the fiscal year 2006-07 for the last time. After that no business person responded to TCB’s tender.
TCB did not import any good in the fiscal year 2007-08. So far, TCB has bought 500 ton sugar, at the rate of 33 TK. per KG, from Bangladesh sugar and food Education Corporation, 500 ton soybean oil and 500 ton red lentil from the local market. That’s all about TCB’s collection from the local market so far. It is very little compared to the demand. Like, 500 ton sugar can be sold in Dhaka city within half a day.
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Not TCB, only the business persons can stabilize the price in the market. The commodity market is centralized to few businessmen. Most businessmen do not believe in TCB because of the incompetence of TCB. Most businessmen do not respond to the invitation of tender by TCB. The activities of TCB were shrunk in 1989 by the excuse of open market economy. After that TCB gradually became weaker to weaker. Now TCB do not have any capability of importing goods by its own effort. At present they serve goods in the market purchasing from the businessman.
Some businessman does not want TCB to serve many goods in the market importing them. Some businessman wants to run their business with the government through the collection of goods by TCB. In these circumstances TCB cannot run their job actively.
TCB decided to sell 5 types of goods through dealer for the month of Ramadan. Wholesale price of these goods were fixed in the following way-
The demand for sugar in our country is approximately 12 to 13 lac ton. The sugar mills of our country produced 79 thousands ton of sugar in the fiscal year 2008-09.
It is said from the last 7 months that TCB will import sufficient goods to stabilize the market. But we confused about the capability of TCB. In fact, TCB is dependent on out sourcing.
We agreed from the beginning that it would be possible to make TCB strong. The activities of TCB should be done in this way so that it can influence the market supplying products in the market. Now we see that TCB could not be able to import such products.
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Recommendation
1. Manpower of TCB needs to be increased and rationalized. 2. At present TCB board consists of chairman & one director. To make it more functional
at least two more directors need to be incorporated. Trading corporation of Bangladesh order, 1972 (po no. 68 of 1972) to be amended.
3. Provision of taking approval for export or import from ministry of commerce need to be exempted.
4. Since TCB has to compete with the private business entrepreneurs, some provisions of PPR-2008 regarding procurement procedure need to be relaxed.
5. To increase the network of TCB abroad, the commercial counselors posted in foreign embassies of Bangladesh can be entrusted to provide all trade related information to TCB.
6. State trading with different countries through TCB can be starred. 7. Procurement of some seasonal crops like potato, maize etc. can be done as per price
fixed by the government. During price hike those can be sold at subscribed rate to control price hike.
8. Training facilities both home and abroad for the TCB officials need to be created. 9. Special preference / facility has to be given to TCB for import of selected essential
commodities. 10. Total storage capacity of TCB need to be increased. 11. One oil refinery & one cold storage may be installed for TCB. 12. Public administration reforms commission’s (PARC) recommendations can be
implemented. 13. These problems will be solved when the government of Bangladesh will be able to
interfere in the market effectively. To interfere in the market the government must have the institutional capability and competence. It is the most important thing to keep the latest information about the supply, demand and stock of commodities in the country observing the local and international market regularly.
14. Whatever the debate regarding TCB, there is no alternative to increase its capability and competence for the government. In these circumstances, the stock and supply of the government will be made up even though it is limited. If there is any instability found in the market, the government will be able to stabilize the market easily supplying from the stock. Businessmen will know that the government has the ability to interfere in the market. (Asaduzzaman Kibria, journalist)
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Conclusion
Although TCB is not able to fulfill its objectives entirely, sometimes this organization plays a vital role in critical moments like during the period of Ramadan, flood etc. government should support and take care to accomplish its activities. Businessmen should follow the rules and be cooperative to implement the objective of TCB.It is necessary to determine whether government wants to use TCB as a commercial organization or to intervene the market price. If government decides to use TCB as a commercial organization it should be turned into a public limited company. On the other hand, if the government want to use TCB to intervene market, the loss of TCB has to be borne by the government like the Directorate of Food.
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References
1. Analysis from Center for Policy Dialogue, Dhaka (2007). Available at www.cpd-bangladesh.org (access date: 1, December 2007)..