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On a sustainable development trajectory -- Mohammed Farashuddin Steering the economy in 2010 -- Professor Mustafizur Rahman Food Prices and Security Exploding myths, highlighting lessons -- Rizwanul Islam Rising inequality takes shine off growth --M M Akash Rural financing ~ the innovative way -- Khondkar Ibrahim Khaled Participation and representation key to pro-poor planning -- Fahmida Khatun Why list on a stock exchange? -- A.F.M. Mainul Ahsan Pushing agriculture forward -- Dr. Quazi Shahabuddin Policy choices in the FDI domain -- Syeed Ahamed Capital market window to faster growth -- Abu Ahmed Regional Connectivity-Indo-Bangla initiative -- Dr. M. Rahmatullah Foreign banks' lively role -- Mamun Rashid Why regulatory reforms? -- Zahid Hossain Energy management issues -- M. Tamim Jute bubble, lest it bursts! -- Khaled Rab Climate Change Policy Negotiations-Can Bangladesh play a leading role? -- Dr. Saleemul Huq Copenhagen and beyond --Dr. Atiq Rahman Save Bangladesh, save humanity -- Dr A. M. Choudhury For a human rights-based approach -- Dr Abdullah Al Faruque Gender dimension to policy on disaster management -- Mahbuba Nasreen Rainwater harvesting -- Dr. Manoranjan Mondal Environmental degradation and security -- Dilara Choudhury Climatic impact on agriculture and food security -- Prof Zahurul Karim PhD Monoculture destroys coast and forests --Philip Gain Towards a strong adaptation strategy -- Md. Asadullah Khan Biodiversity conservation: Challenge and opportunity -- Mohammed Solaiman Haider Grameen Shakti's renewable energy role -- Abser Kamal
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Capital market window to faster growth Abu Ahmed
Bangladesh economy is said to be receiving a low investment, and hence an expected lower economic growth for the FY2009-2010. But this declining trend in investment is not that much because of global recession, but because of factors affecting the Bangladesh economy internally. Entrepreneurs simply are not ready to undertake any further investment in the face of acute shortages of some inputs like gas and electricity. The unabated extortion and tampering with the work tenders are also holding back investment. For many years the interest rates in the economy had also remained above the ones expected by the businessmen. We consistently urged our policymakers to lower the interest rate, but failed to prevail upon them. Only recently, the Bangladesh Bank has been asking the commercial banks to lower interest rates, but, banks are responding very slowly. Banks lowered the interest rates by 2-3 percent, on the other hand upped the other rates, thereby cancelling any benefit of lower interest rates. In this scenario, I see only the stock market option as the better one for the businessmen as far as their catering to long-term capital need is concerned. Our businessmen at present are not ready yet to take the capital market option because of their easy access to bank' credit. The high rate of non-performing credit with the banking companies that accumulated over time can be attributed to the business men's borrowing of the permanent capital from the banks. Now that option has been squeezed to an extent with the taking over of banking business by the private commercial banks, approximately 75 percent of the total deposits are now being received by the local private and foreign commercial banks; the scenario was just the opposite only a decade ago. The surplus money in the banking companies is also being borrowed by the leasing companies by offering higher interest rates. So, the businessmen and entrepreneurs have very little option as to how to raise the permanent capital at a lower cost and with easy conditions. However, they have another easy route for raising capital, and that route is the capital market one. Bangladesh capital market has remained rather disappointedly small. It remains small not because it does not have the potentiality to grow but because it does not receive proper attention from the policymakers. However, investors, especially small ones, pushed it higher, and now has made it into a market of $20 billion. Entrepreneurs were slow in availing themselves of the opportunity of raising capital from this market, and most of the times demanded high premium for selling their equities. That posed a threat to the long-term interest of the investors and also put the regulator in an awkward position with respect to the pricing of the initial public offering. Recently, a market based IPO pricing known as the book-building method has been introduced by the regulator and hope entrepreneurs will have no further complaint. In the recent months stock market has spread to the district and upazila levels, bringing additional investors to the market, and till now, 2.6 million investors have come under trading networks of the bourses. Every day, new investors are coming in this market, creating extra demands for equities which are in short supply at this moment. The surge of the investors has put the whole market on an overvalued tone, but the government. seems to hardly see it. The speculative investment all over the world acted as a catalyst in putting the economies on a higher growth path, but Bangladesh policymakers failed to understand this miserably. Any extra investment this economy needs to go on a higher economic growth path can easily be had from the present over-hyped capital market. Had the market been used properly, it would have given our middle class a better opportunity of owning industrial assets. Through capital market, Bangladesh could have achieved the dream of a participatory growth in a better way. The author is Professor of Economics, University of Dhaka. |
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