The New Nation - Internet Edition

Staff Reporter

Bangladesh Capital Market needs to undergo reforms to meet international standards and establish guidelines for participants in the securities business, said the ADB Country Director Hua Du.

"Deficiency in financial disclosure, weak corporate governance and lack of investors confidence in fixed-income securities, are among the major constraints, deterring the growth of a vibrant capital market," she said while addressing the concluding session of the Citi-ADB workshop on Capital Market Development yesterday at a local hotel.

According to her, despite having vast growth potential, Bangladesh capital market remained beneath a small market capitalisation, contributed by a small group of companies.

"A sound capital market not only provides financial securities for the entrepreneurs but also helps to reduce risk and liquidity mismatch in the banking sector," she said while emphasising the importance of transparent capital market. Measures of significant reform could take the market to the height of international standard, added the Country Manager of ADB.

Supporting her reform proposals, Chairman of Securities and Exchange Commission (SEC) Faruq Ahmad Siddiqui reiterated his optimism on the future of over Bangladesh capital market as well as the national economy.

"As more public sector companies, particularly those of the power and energy sector are listing themselves with the capital market, I see a bright future ahead," he said while addressing the closing session of the seminar as chief guest.

Besides, listing of some major telecommunication companies are expected soon, he informed. "If those larger sectors enter into the capital business, our market will reach to the top," he said.

The Chairman SEC also urged the government to offload more shares of the state-owned enterprises (SOEs) through the capital market for private participation in their management.

"If the private investors are allowed to join the management of the SOEs, it will improve their efficiency and bring operational transparency," he said.

Meanwhile, he also has expressed his disappointment over the low private sector involvements in the capital market.

According to him, SEC is to take more initiatives to build confidence among the private companies. As their involvement would benefit them as well as the country's economy in addition, the Chairman SEC added.

He, however, has expected more private company's participation in the market. "SEC will provide every lawful support to them," he ended.

In terms of Market reforms, the ADB Country Director Hua Do have proposed some policies to be implemented on immediate basis.

"SEC should take immediate step to enhance market capitalisation, by enlisting more public and private companies," she suggested. However, present 10 billion local market capitalisation, which is 14 per cent of total GDP, is much lower than neighboring India (68 per cent) and Pakistan (41 per cent), she stated.

Index growth in Bangladesh Capital Market is mostly demand-driven, which is somehow risky, she also said. "Such growth must have to be backed up by quality shares with strong economic fundamentals," she added.

She also suggested raising foreign portfolio investments and debt market listing in terms of market reform.

Beside that, the ADB Country Director appreciated privatisation policy of Bangladesh Government, which is likely to involve larger public companies in capital business.

"Direct listing of power and petroleum companies to increase share supply in the market. This would help the privatisation process by freeing companies from government ownership," she added.

Managing Director of Citi Bank, Mamun Rashid and experts from the ADB addressed the seminar and presented their papers on the occasion.