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Tuesday, February 3, 2009

Re: [ALOCHONA] Perfect storm is coming to Bangladesh

Mr. Chowdhury:
 
I really appreciate your clarification, and I see what and where I misunderstood. My apologies. I disagree with your statement that the fundamentals of "supply and demand" have been proven wrong. Everything in life is about supply and demand. It's not economics, it's a philosophy. :o)
 
Disclaimer: I AM NOT AN ECONOMIST. ("I did however stay in Holiday Inn last week")
 
Speculation itself is a financial bet on possible future demand. Speculators around the world anticipated tightening of oil supply beginning in 2007, as well as increasing tension between U.S. and Iran, Venezuela, and other oil producing countries, including Canada. Did you know that U.S. imports most of its oil from Canada? It was only after the election of Harper in Canada that relationship eased. Beginning in 2007, speculators started betting on this, and the market reacted. Other investors felt that pressure and followed the speculators, began to invest heavily in oil futures, sending a signal to the market that something is about to happen to the market. OPEC meanwhile cut production, and the price of oil per barrel sky rocketed. Meanwhile, U.S. China and India were demanding more oil for their industrial machines and OPEC just decided not to increase production. So, there you have it...a combination of excess demand and shortage of supply.
 
As far as U.S. housing market is concerned, there is an excess demand for affordable housing. Starting in the late 90s and early part of this decade, noticing this excess demand for housing, mortgage companies began to flood the market with risky papers. They were selling million dollar mortgages to people with no income at some point!! Anyways, we all know about predatory lending. What happened afterward is interesting, and that's where the demand and supply issue become obvious. So, mortgage companies started selling very risky loans to people, and these loans were taken from the banks. At the end of the year, many banks had too much risky loans. So, some genius figured out that if they can package good and bad loans together and selling the debt to other companies, then they can simply shift the burden to someone else. Companies like Lehman Brothers took that bet, and bought so much of CDO and CMO that a large portion of their net worth was just mortgage backed securities. You don't see the excess supply of bad loans and excess demand for CMO and CDO in this picture? Anyways, the house of cards crumbled when consumer confidence began to tumble. People found out that it was getting difficult to get loans (there is only so much money to go around), businesses were closing down because they couldn't meet payrolls, and so on....and suddenly, we were entering the door with "Recession" stamped on our forehead. The story, going forward is well-known..
 
On a separate note, I am not a pharma professional, nor do I have a copy of any pharma book. You are the industry expert between the two of us. What I don't understand is that how an emerging industry can be "recession proof" in market that is dogged with double digit inflation, unemployment, abysmal consumer confidence, among other economic indicators? Are you suggesting that the economic conditions that affect every industry does not affect the pharma industry? This should be an interesting research topic for the economists out there.
 
If "Bangladesh legally can manufacture anything they want", that means they are going to have to copy from foreign pharmas, pay them huge patent fees, and reproduce the same med for the loal market. That sounds like enormous operating cost to me. Would it not be beneficial if pharmas in BD invested in R&D instead of paying patent fees? Since you are a phama industry expert, I am sure you know that patent fees constitute the most expenses, right?
 
I would love to hear more about your experience with the pharma industry in BD. What are the obstacles? What are the opportunities? Keep us posted about the present and future of the pharma industry in BD.
 
Thanks again for your clarification.
 
Cheers,
Cyrus

From: M. M. Chowdhury (Mithu) <cgmpservices@yahoo.com>
To: alochona@yahoogroups.com
Cc: thoughtocrat@yahoo.com
Sent: Tuesday, February 3, 2009 9:12:03 AM
Subject: Re: [ALOCHONA] Perfect storm is coming to Bangladesh

Mr. Cyrus,
 
I do appreciate your healthy and constructive criticism or lack of understanding of my write-up.  Let's see if I can explain what I have meant:
 
1)  In my article I never used word "NRBs are corrupt or has corrupt money".  This is your own invention.  I have said that NRBs and corrupt money have created the bubble in the Real Estate Market in Bangladesh.  Corrupt money means money earned by corrupt people in Bangladesh who bought multiple Apts, land with high price and created an atmosphere to sky rocket price in Bangladesh.
 
I personally believe that NRBs are the most honest human being on the earth.  They earn  their hard working money and obey their host countries rules and regulation.  Now I have said that last 5-6 years boom in USA or other countries,  NRBs were able to make some money with Real Estate and they heavily bought land and Apts with high price in Bangladesh.  Plus few good business men have earned good money in the last 5-6 years and did not hesitate to pay high price to buy land and or Apts in Dhaka.
 
Supply and Demand is a stupid idea as it has proved now.  Where is the supply and demand gone for Oil price of $147/barrel?  Where is the supply and demand gone in USA Real Estate?  This is a man made dream created by few speculators in the world including Bangladesh.  If middle class can not buy land or Apts with high price, there is no supply and demand equation exist.  So the bottom line is that  just watch within year what happen in the Real Estate market in Bangladesh.  I am not immune in this hyper market with having multiple apts and lands in Bangladesh.
 
2) Pharmaceuticals is receason proof in Bangladesh because Bangladesh Pharmaceutical market is not matured yet,  there are lots of growth opportunity.  You may have copy what you have said from USA Pharmaceuticals playbook.  FYI, Bangladesh pharmaceutical companies can copy and produce medicine legally under WTO regulation until 2016.  Bangladesh legally can manufacture anything they want and there is an opportunity for Bangladesh Pharmaceutical companies to increase export market with this given opportunity by WTO.
 
What I have talked about Pharmaceuticals industries is that Bangladesh should build more APIs plant to manufacture APIs in Bangladesh rather than importing from foreign countries.  Bangladesh only have 4-5 Pharmaceuticals companies who are capable to export and to attract foreign buyers.  Rest of 170 pharmaceutical companies are like mom and pop shops who do not have enough money or technology to produce quality medicines.  Just having pharmaceutical companies does not mean anything unless it can produce quality medicines under cGMP rules and regulation with written and testing proof.  So there are lots to learn for Bangladesh Pharmaceuticals industries with bringing foreign or NRBs expertise in Bangladesh.
 
3) People in Bangladesh do not have luxury like other rich countries who will survive without Govt help.  I support your idea Capitalism and self correctness in the market but Bangladesh is totally different playing field as far as population, poverty and lack of jobs opportunity are concern.  So my advice to Govt is based on these few principals. 
 
Perfect storm means that a clear and obvious storm that will make upside down with financial misery of 150 Million people lives in Bangladesh.
 
I hope that I was able to answer your concern and comments.  I believe that we Bangladeshi should communicate with creative criticism which will lead to a healthy discussion like ours.
 
Thanks,
M. M. Chowdhury (Mithu), Virginia, USA
 
 


--- On Tue, 2/3/09, Cyrus <thoughtocrat@yahoo.com> wrote:
From: Cyrus <thoughtocrat@yahoo.com>
Subject: Re: [ALOCHONA] Perect storm is coming to Bangladesh
To: alochona@yahoogroups.com
Date: Tuesday, February 3, 2009, 12:54 AM

Mr. M.M. Chowdhury:
 
I read your posting twice, but I am having difficulty defining or connecting the dots. What exactly is the "economic perfect storm" that you are referring to? Is it the meltdown of our hyper-inflated housing market? or are you asking NRBs to adopt to a certain lifestyle for the betterment of the so-called "greater good"? I await your explanation. Meanwhile, following is my assessment of your predictions:
 
1. Again, I am not sure what "perfect storm" you are referring to. But contrary to what you might have read or heard, prominent U.S. economists actually predicted the financial meltdown and world-wide depression as far back as 2004. Even the Federal Reserve Bank of NY published a series of articles on the hyper-inflated CDOs (collateralized debt obligations) and CMOs (collateralized mortgage-backed obligations) and how a collapse in the housing market would drag down federal interest rate, affect the insurance industry, and suddenly make yield-free and risk-free instruments (i.e. T bills and bonds) very attractive to investors. Several economists, hedge fund managers, and international economic scholars also predicted the same thing. The problem is that the Bush administration decided not to take any action and regulate the mortgage industry. The whole world is watching, and I know that several Bangladeshi economists have already studied this ad nauseum. Hopefully, our govt. is taking note.
 
2. and 3. Are you talking about emergency planning system for the coming tropical storm season? or is this some kind of a metaphor? Regardless, I hope BD does not become a Welfare State. Instead, I hope that the govt. creates opportunities for its citizens so that they can feed themselves. But of course, this is a more intense sociological and ideological debate, which I want to avoid for now.
 
4. There is no "real estate bubble" in Bangladesh. I think you are confusing massive urbanization and demand for urban housing with an artificial demand for housing. The demand for housing in a densely populated country is not a real estate bubble. It's simply excess demand. The supply of real-estate grade land, and tightening access to capital and mortgage may have given you the impression that there is an artificial demand, but it is simply a faulty assumption.
 
Take Dhaka for example. If you adjust for inflation, then the average price of a 2,000 sq.ft. apartment in Dhaka has actually decreased, relative to 2000 or before. One reason is that since 2000 Dhaka city has actually expanded in size. Previously arable land has been commissioned as urban development area (See the Urban Development Plan 2001-2005, and 2005 - 2010 by RAJUK). At the same time, population in Dhaka has increased by almost 40% during this decade alone. More people means more demand, but that does not mean an artificial demand.
 
Secondly, it is rather naive to vilify NRBs. Your comment suggests that NRBs are responsible for the high price of housing and real estate in BD, and they send this money in BD to "legalize" their corrupt money. Too many NRBs work very hard, send money back home for their families, so that they can have an address, a shelter, a place for retirement. A few, however, steal money, cheat others and send their money in BD. Either way, the foreign currency reserve in BD increases. But it is irresponsible and asinine to state that NRBs are responsible for the hyper inflated housing market and vilify millions of Bangladeshis who make a decent and honest living.
 
5. Mr. Chowdhury, your unequivocal support for the pharmaceutical makes me wonder the worst. I would like to know how you established the fact that phama industry is the safest industry for investment. Either way, I would not recommend anyone to invest in the pharmaceutical industry unless they are industry experts. Why? Well, according to U.S. and international standards, phama companies need licenses and patents to test, launch, sell, or market any medicine anywhere. If phama companies are found to have marketed or tested unpatented meds in the market, they are exposed to criminal and civil proceedings from FDA (if phama is U.S. based) and EMEA (if company is EU based). Too often, FDA and EMEA do not approve licenses and patents, and even if they do, they require phama companies to submit results of years of clinical trials and controlled studies. If a person is investing in the pharma industry that is waiting for licenses and patents on many of its medicines, then the investor should also realize that the company may not get those licenses at all. Remember how Martha Stewart went to jail and how she got insider info from a phama bio-tech company that was turned down by FDA after seven years of trial studies?
 
The phama companies that mostly operate in BD are either foreign companies or their subsidiaries (joint ventures or other types of partnerships) . That also means that they rely on the licenses and patents from either U.S. or EU. If you are invested in the phama company, and hoping that the company would soon market a wonder drug that would cure cancer, feed the poor, stop global warming, and help our BD cricket team to win the world cup, then you are sadly mistaken. See their outstanding patents and comparable medicines in the market, and you will find out if such an investment is safe or not.
 
6. I agree that everyone should avoid excesses and invest for the future. Most importantly, we should always think about sensible investment in BD so that more jobs are created and people are better off. But let's not mix responsible investing for our future with our charitability.
 
Just my two cents,
Cyrus

 
From: M. M. Chowdhury (Mithu) <cgmpservices@ yahoo.com>
To: cgmpservices@ yahoo.com
Sent: Friday, January 30, 2009 2:08:28 PM
Subject: [ALOCHONA] Perect storm is coming to Bangladesh

Dear All,
 
You may wonder what kind of storm I am talking about.  It's  economical storm that Bangladesh never experienced before.  I am little bit worried that economists and present Minsters in Bangladesh are not paying much attention about this storm.  Well the problem is that if you do not know a Storm is coming, then you won't be prepared for it.  There will be a situation that we will start blame game, he or she didn't tell me, I didn't know, nobody even PM didn't say this.  Well then listen from me please.
 
My conservative estimate is that economical storm in the world will exist until 2012,  if you can ride on this storm, then you will survive, if you can't then good luck.  I like to provide few strategic outlines what to do in this perfect economical storm in Bangladesh.
 
1) Current Govt should recognize that a perfect storm is coming.  If USA could recognize this storm in 2006,  USA won't be in this position now.
 
2) Put resources in place so Govt can take care its people and feed them trough out the storm period.
 
3) Stop biased or favoritism in Bangladesh.  Once I am hungry,  I won't say I am AL or BNP,  all I will say give me food and job to survive.  So based on basis of human rights,  its current Govt duty to help people regardless his or her party affiliations.
 
4) Bangladesh Real Estate bubble will be burst within year and so, so Govt should be prepared with huge layoff in that sector as well as other sectors.  Most of the Real Estate bubble in Bangladesh were created by NRB and corrupted money in Bangladesh.  NRB is real squeeze in financial aspect and won't be able to continue support the sky rocket price of land and apartments in Bangladesh.
 
5) Pharmaceuticals is the only sector which is recession proved in Bangladesh.  I have asked BNP Govt in 2005 to modernize this sector, CTG in 2007 and I am asking AL Govt in 2009 to pay attention and use NRBs expertise to develop this sector.  This is the only sector that you have no choice but to bring experts NRBs in Bangladesh to develop this sector for future growth.
 
6) NRBs and people in Bangladesh should lower their life style to ride on this storm.  Excessive waste will bring up other people's misery.
 
God Bless Bangladesh and help her 150 Million poor people in this coming perfect Storm.
 
Note:  My advise is not to direct any individuals or parties or NRBs, but to reach out to them and what we can do for the people during this bad economical  times.
 
Regards,
M. M. Chowdhury (Mithu), USA
Director, Political and Economical Development in Bangladesh
Change Bangladesh organization, USA
www.changebanglades h.org

--- On Tue, 1/20/09, M. M. Chowdhury (Mithu) <cgmpservices@ yahoo.com> wrote:
From: M. M. Chowdhury (Mithu) <cgmpservices@ yahoo.com>
Subject: [khabor.com] Why USA won't able to get out of this financial mess
To: cgmpservices@ yahoo.com
Date: Tuesday, January 20, 2009, 12:41 PM

Dear All,
 
I think and believe that we in USA are concern like any others about financial impact in USA and rest of the world and where this will lead us in the next 8 years.  I congratulate President Obama for taking the USA leadership but I am cautious like others even though I have campaign for Obama among Bangladeshi Community in USA.
 
Let's see the scenario why USA is in this position which is very different than 1930's and what steps should be taken for the incremental improvement.
 
Reasons for this mess
 
1) More than $20T, start with Trillion dollars of investors money has been lost in the last 12 months including personal 401K money. So the people confidence in companies is lower than ever.
 
2) More than 500,000 jobs have been cut per month by companies in USA, if it's continue then at the end of 2009 total 6 million jobs will be lost.  Adding 2 million jobs already have been lost in the last 24 months.  This is creating a nightmare for the consumers to spend  discretionary money.
 
3) Two third of the economy are depended on consumer spending,  when consumer stopped buying like before,  companies can not make money, their stocks goes down and companies start laying off to make baseline profit for the company.  This is called a cycle of uncertainty.
 
4) Biggest problem is that USA consumers has borrowed two times of their house worth for the last 5 years.  For example, if a house price is $100K in 1999, it went up to $300K in 2006, so extra $200K was borrowed from foreign countries to mortgage people's houses in USA.  Therefore, deficit went over the roof.  If this is continued,  few wealthy countries might not be interested to invest in USA like before because losing confidence into USA economy and their investment returns.
 
5) Once people lost jobs, they can not afford to pay high mortgage which they could not afford at the first place.  US Govt can not pay everybody extra interest for the mortgage they owe to banks.  This might come over $10T, start with Trillion.
 
6) Once companies make less money, the Govt tax collection also becomes low.  So more deficit for USA.  Intake is higher than delivery.
 
7) USA does not have leadership of many technologies like before, so USA has more competitors than before i.e. China and India.
 
8) More liability for baby boomers in years ahead, means need more money to take care her citizens like Social Security and Medicare.
 
9) Iraq war alone costs USA close to $1T and need another $1.2T to take care veterans health and financial liabilities.
 
10) Dollar might go down compare to others currency once foreign countries start withdraw their investment or stopped new investment in USA, i.e.  stop buying USA Bond.
 
Options to way of of this mess:
 
So what do USA have now?  President Obama's sweet talks might not bring much fruits unless he can show leadership and put new policies in place very quickly, so situation does not get out of control.  I personally think that President Obama should do the following for the love of this country.
 
1)  President Obama should provide executive order to cut military budget of $465B to only $50B.  Bring all military installation back home unless foreign countries provide the bill.
 
2) Provide middle class incentives as soon as possible.
 
3) Stop giving big money to banks but give direct loan to consumers from Govt Treasure.  I know it does not sound Capitalist,  but US Govt does not have any other option.  For example,  If I know that this consumer will not able to pay back my money,  I won't make loan to him even I get pressured from Govt unless Govt takes all the toxic assets.  Same situation, Banks are not lending even they got US Govt money.  Banks know consumers do not have enough money or may lose job soon whichever is first.
 
4) Provide stimulate money if there is any Corrective and Preventive Action (CAPA) in place for the new projects which will create jobs.
 
I hope and pray US gets out of this mess but I am very pessimistic now based on the scenario I have presented you here, unless miracle happens in USA.
 
God bless USA and her people.
 
Regards,
M. M. Chowdhury (Mithu), Virginia, USA
 


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