Rapid upgradation in accounting, disclosure practices a must, says BB Governor

Bangladesh Bank Governor Atiur Rahman Tuesday said deficiencies in accounting and financial disclosure practices are keeping big companies at bay.
"Because of deficiencies in accounting and financial disclosure practices still prevalent in business environments of many developing economies like Bangladesh, few real sector businesses earn good enough credit rating to raise debts from capital markets affordably; the situation is somewhat better though in financial sector businesses," the BB Governor said while addressing a session about Capital Market Development at the 'Asia-Pacific Outreach Meeting on Sustainable Development Financing' in Jakarta.  
UNESCAP and Ministry of Finance, Republic of Indonesia arranged the event, said a BB statement.
Accounting and disclosure practices in real sector businesses need to be upgraded rapidly to international best practice standards, for success in bringing vibrancy in domestic debt markets of developing economies, the BB Governor said.
The session explored ways to financial intermediation through efficient and robust capital markets at national  level,  focusing  on  how  to  create  appropriate  regulatory  frameworks  for  equity  and  bond markets, as well as to introduce innovation in the financial system deepening for positively impacting the real economy. Providing assistance to LDCs for the development of capital market institutions and regulatory framework is of particular importance. The program is opened by Indonesian Finance Minister Muhammad Chatib Basri.
In another session, Bangladesh state minister of finance Mr. M.A. Mannan also talked about reforms being made by GOB on domestic resource mobilization. BB Governor intervened in the session on capital market development which was chaired by governor of central bank of Solomon Islands and participated by governors from Bhutan, Vanuatu and representatives from World Bank, Goldman Sachs, etc.
The BB Governor said capital markets are under-performing in fund raising efficiency in many Asia Pacific developing economies including Bangladesh, for various reasons including incompleteness of market infrastructure and macroeconomic imbalances at national, regional and global levels; keeping equity markets unstable and prone to booms and busts, and also keeping yields on fixed income securities less attractive than from real estate and commodity markets.
Completion of capital market infrastructures and sustained macroeconomic and financial stability at national, regional and global levels are requisites for optimally efficient performance of capital markets in the Asia Pacific region and elsewhere.
On the supply side, in many developing economies like Bangladesh there is only thin presence of institutional investors like life insurers, pension/provident funds, mutual funds etc. with long term liabilities to be covered by savings of matching long tenors. In Bangladesh pension/provident funds in the public sector are largely unfunded, and largely nonexistent in the small formal private sector. No provident/pension fund scheme exists yet for the self employed and others in the large informal sector; life insurance penetration is also very low (premium income equivalent to only 0.2 percent of GDP). This picture has to change for the markets to be able to mobilize substantial long term savings.
Fuller utilization of the Asia Pacific region's savings in infrastructure and other real sector investments within the region will require region-wide fuller integration of capital, credit and bond markets; in turn requiring fuller openness to intraregional capital flows, harmonization of regulations and practices across the region to the extent feasible, hastening completeness of capital market infrastructures wherever these are deficient. This need not mean that all economies in the region will have to open up to the same extent and in the same way.
 The intraregional capital flows will necessarily be asymmetric, from surplus areas to deficient ones. Smaller economies like Bangladesh will need to maintain buffers against destabilizing footloose inflow surges of short term funds into their domestic markets.
Foreign Portfolio Investment flows being of such nature will need especially careful monitoring and prompt corrective steps by capital market regulators to stem early on any incipient instability, Dr Atiur said.