Ominous signs on Rupali horizon
Wednesday, 18 July 2007
Shamsul Huq Zahid
The government's last hope for striking the final deal with Saudi tycoon-Prince Bandar Bin Mohamed Abdulrahman Al-Saud-on the transfer of the Rupali Bank seems to be over.
The second deadline set by the government unilaterally with the hope to rope in the Saudi buyer and enrich the forex kitty went barren last Sunday as happened in case of the first deadline, May 31 last.
Gripped by frustration the government, reportedly, is contemplating forfeiture of $100,000 worth security deposit of the Prince. The amount is 0.02 per cent of the sum ($458 millon) the government was supposed to fetch from the deal. And the Saudi prince won't mind losing such a poor amount that could be just his pocket money!
But the failure of the government to strike the deal after raising so much of expectation is bound to create a few unsettling effects on its privatisation programme for public sector banks and future foreign investment flow. Multilateral donors have been taking considerable interest in the divestment of the bank that is an integral part of the government's financial sector reform programme. However, the donors would find it hard to blame the government for its failure to transfer the bank to private management, local or foreign, because of the last minute retreat by its highest bidder.
The privatisation commission which was entrusted with the responsibility of divesting the bank, apparently, did its best to woo buyers. It arranged a number of road-shows both at home and abroad at the cost of national exchequer. But the commission, it seems, might have overlooked the need for knowing in details the track record of the would-be buyer and the people around him. A genuine investor rarely backs out from a final deal agreed upon after months' of hard negotiations and bargaining.
Is there any linkage between the change of mind on the part of the Saudi buyer and the recent political developments in Bangladesh? Or was the Saudi prince just a proxy for some Bangladeshis who amassed wealth through corruption and abuse of power in recent years and wanted to take over the bank?
However, both the questions are inter-linked. If the suspicion that the Saudi prince acted as a proxy turns out to be true then the recent political developments, for obvious reasons, would make him withdraw from the deal. However, these all are guesses. There is no way of knowing the inside story, if there is any.
The government being still hopeful about striking the final deal, known as the sale and purchase agreement (SPA), with the Saudi buyer, reportedly, is yet to embark upon any future plan for the bank.
If the ongoing efforts to divest the bank remained unsuccessful-the probability of happening so is very high-- the government might either offer the shares held by it to the members of the public through the local stock market or invite fresh international bids. In case of first option, the mobilisation of revenue could be far less than what had been offered by the Saudi buyer. And the second option that involves yet another lengthy process of road shows, bidding, negotiations etc., might produce frustrating results.
Meanwhile, the Rupali Bank, which is billed as the worst performer among the public sector banks, is in a state of disarray amidst developments surrounding its divestment. Deep frustration has gripped the officials and employees at all levels. Since the signing of the memorandum of understanding (MoU) between the government and the Saudi buyer, the entire workforce of the bank started worrying about their future. In accordance with the negotiations with the would-be buyer, the bank management started preparing a voluntary retirement scheme for the officials and employees. However, the latest uncertainty over the final deal has rather compounded their worries. This kind of situation is not at all conducive to normal and healthy operation of any organisation. It is found to be more damaging if it was a financial institution.
Another section of people who have suffered financially because of the uncertainty over Rupali Bank privatisation are small investors. They bought stocks of the bank at high prices when the transfer of the bank to its would-be buyer became almost certain. But when the Saudi Prince started to drag his feet over the final deal, the prices of the bank's stock started falling. The price of the same has declined by about 50 per cent over the last couple of months. Fortunately, the number of shares held by the public is not that big. General shareholders own only 6.0 per cent of the bank's total stocks. Not many small investors are likely to be affected by the decline in the prices of its shares.
The government's last hope for striking the final deal with Saudi tycoon-Prince Bandar Bin Mohamed Abdulrahman Al-Saud-on the transfer of the Rupali Bank seems to be over.
The second deadline set by the government unilaterally with the hope to rope in the Saudi buyer and enrich the forex kitty went barren last Sunday as happened in case of the first deadline, May 31 last.
Gripped by frustration the government, reportedly, is contemplating forfeiture of $100,000 worth security deposit of the Prince. The amount is 0.02 per cent of the sum ($458 millon) the government was supposed to fetch from the deal. And the Saudi prince won't mind losing such a poor amount that could be just his pocket money!
But the failure of the government to strike the deal after raising so much of expectation is bound to create a few unsettling effects on its privatisation programme for public sector banks and future foreign investment flow. Multilateral donors have been taking considerable interest in the divestment of the bank that is an integral part of the government's financial sector reform programme. However, the donors would find it hard to blame the government for its failure to transfer the bank to private management, local or foreign, because of the last minute retreat by its highest bidder.
The privatisation commission which was entrusted with the responsibility of divesting the bank, apparently, did its best to woo buyers. It arranged a number of road-shows both at home and abroad at the cost of national exchequer. But the commission, it seems, might have overlooked the need for knowing in details the track record of the would-be buyer and the people around him. A genuine investor rarely backs out from a final deal agreed upon after months' of hard negotiations and bargaining.
Is there any linkage between the change of mind on the part of the Saudi buyer and the recent political developments in Bangladesh? Or was the Saudi prince just a proxy for some Bangladeshis who amassed wealth through corruption and abuse of power in recent years and wanted to take over the bank?
However, both the questions are inter-linked. If the suspicion that the Saudi prince acted as a proxy turns out to be true then the recent political developments, for obvious reasons, would make him withdraw from the deal. However, these all are guesses. There is no way of knowing the inside story, if there is any.
The government being still hopeful about striking the final deal, known as the sale and purchase agreement (SPA), with the Saudi buyer, reportedly, is yet to embark upon any future plan for the bank.
If the ongoing efforts to divest the bank remained unsuccessful-the probability of happening so is very high-- the government might either offer the shares held by it to the members of the public through the local stock market or invite fresh international bids. In case of first option, the mobilisation of revenue could be far less than what had been offered by the Saudi buyer. And the second option that involves yet another lengthy process of road shows, bidding, negotiations etc., might produce frustrating results.
Meanwhile, the Rupali Bank, which is billed as the worst performer among the public sector banks, is in a state of disarray amidst developments surrounding its divestment. Deep frustration has gripped the officials and employees at all levels. Since the signing of the memorandum of understanding (MoU) between the government and the Saudi buyer, the entire workforce of the bank started worrying about their future. In accordance with the negotiations with the would-be buyer, the bank management started preparing a voluntary retirement scheme for the officials and employees. However, the latest uncertainty over the final deal has rather compounded their worries. This kind of situation is not at all conducive to normal and healthy operation of any organisation. It is found to be more damaging if it was a financial institution.
Another section of people who have suffered financially because of the uncertainty over Rupali Bank privatisation are small investors. They bought stocks of the bank at high prices when the transfer of the bank to its would-be buyer became almost certain. But when the Saudi Prince started to drag his feet over the final deal, the prices of the bank's stock started falling. The price of the same has declined by about 50 per cent over the last couple of months. Fortunately, the number of shares held by the public is not that big. General shareholders own only 6.0 per cent of the bank's total stocks. Not many small investors are likely to be affected by the decline in the prices of its shares.