The failed divestment move takes a heavy toll
Wednesday, 12 March 2008
Shamsul Huq Zahid
The move to privatise the largely state-owned Rupali Bank has bitten the dust.
The Bank which was placed under the Privatisation Commission (PC) for transfer to Saudi Prince Bander Bin Mohamad Bin Abdulrahman Al-Saud, who had emerged as the highest bidder for taking over the majority stake of the Bank, is again back under the control of the finance ministry.
That the Saudi Prince was no more interested in the Rupali Bank became quite clear some months back when he had stopped responding to repeated written communications from the PC. Yet the government took quite a bit of time to get over the embarrassment before announcing the postponement of its privatisation bid last Monday.
However, the abortive attempt on the part of the PC has taken a heavy toll on the national exchequer, investors and the Bank in question. More importantly, the government might find it rather difficult to restart the privatisation move soon, even under intense pressure from the multilateral donors.
The PC, reportedly, spent Tk. 350 million on the privatisation bid, including Tk. 180 million on foreign consultants and Tk. 170 million on foreign tours by the PC and government officials and road-shows organised in some major cities in the world, including London, Dubai, Kuala Lumpur and Bombay.
The expenses were met from the $257 million Enterprise Growth and Modernisation Programme (EGMP) funded by the World Bank (WB). The government will have to repay the money thus spent, though over a long period with a nominal rate of interest.
The worst-affected by the failed divestment bid are the investors who purchased the Rupali Bank shares at prices as high as Tk 3000 apiece when the Saudi Prince's takeover became almost certain. Otherwise, there was no earthly reason for the investors to become crazy about the shares of a Bank having negative net asset value (NAV). The Dhaka Stock Exchange, under instruction from the Securities and Exchange Commission (SEC), had suspended trading a couple of months back when the Rupali share prices skyrocketed. The embargo on transactions of shares of the bank is still in force.
The trading of Rupali shares is likely to resume soon and one can expect a huge fall in their prices because of the setback the privatisation move has suffered. True, the government cannot be held responsible for the loss that the investors would be incurring. But the fact remains that all the information that the government made available, from time to time, on the sale of the Rupali Bank to the Saudi bidder, heightened speculative investment in the market.
The Bank, too, is a victim of the failed bid. There was marked improvement in the performance of the Bank in recent years. The net asset value per share of the Bank increased to Tk 26.29 compared to that of minus 163 taka in the year 2000. With the start of the privatisation process, a sizeable number of its employees and officers left the bank cashing in on the opportunities offered under the voluntary retirement scheme (VRS).
A large number of branches of the Bank, being highly understaffed, are now facing serious difficulties in carrying out their normal operations.
Another issue deserves attention from the authorities concerned. When indications about the Saudi bidder's reluctance to take over the bank became strong, many people started asking questions about the paltry amount of security deposit taken by the PC from the bidders, only 100,000 dollar each. The PC has not yet given its reply to such questions.
What still remains a mystery to many is as to why the Saudi Prince in the first place offered $ 458 million for 94 per cent stake of the Bank. Some people who have inside information about the Bank were surprised by the Prince's offer. However, at one stage, he backed out from his original offer and brought it down to $ 185 million, alleging that information concerning the real health of the Bank were earlier concealed. This is a serious allegation that needs to be investigated thoroughly. There should also be investigation into the money spent on hiring of foreign consultants, foreign tours and road-shows abroad.
The government, if it wants so, can drag the Saudi bidder to court, local and international, for his actions. But the government in all likelihood would avoid such an action for reasons, diplomatic or otherwise. Besides, the final outcome in most cases it has so far fought in the international court of arbitration has not been that palatable.
The move to privatise the largely state-owned Rupali Bank has bitten the dust.
The Bank which was placed under the Privatisation Commission (PC) for transfer to Saudi Prince Bander Bin Mohamad Bin Abdulrahman Al-Saud, who had emerged as the highest bidder for taking over the majority stake of the Bank, is again back under the control of the finance ministry.
That the Saudi Prince was no more interested in the Rupali Bank became quite clear some months back when he had stopped responding to repeated written communications from the PC. Yet the government took quite a bit of time to get over the embarrassment before announcing the postponement of its privatisation bid last Monday.
However, the abortive attempt on the part of the PC has taken a heavy toll on the national exchequer, investors and the Bank in question. More importantly, the government might find it rather difficult to restart the privatisation move soon, even under intense pressure from the multilateral donors.
The PC, reportedly, spent Tk. 350 million on the privatisation bid, including Tk. 180 million on foreign consultants and Tk. 170 million on foreign tours by the PC and government officials and road-shows organised in some major cities in the world, including London, Dubai, Kuala Lumpur and Bombay.
The expenses were met from the $257 million Enterprise Growth and Modernisation Programme (EGMP) funded by the World Bank (WB). The government will have to repay the money thus spent, though over a long period with a nominal rate of interest.
The worst-affected by the failed divestment bid are the investors who purchased the Rupali Bank shares at prices as high as Tk 3000 apiece when the Saudi Prince's takeover became almost certain. Otherwise, there was no earthly reason for the investors to become crazy about the shares of a Bank having negative net asset value (NAV). The Dhaka Stock Exchange, under instruction from the Securities and Exchange Commission (SEC), had suspended trading a couple of months back when the Rupali share prices skyrocketed. The embargo on transactions of shares of the bank is still in force.
The trading of Rupali shares is likely to resume soon and one can expect a huge fall in their prices because of the setback the privatisation move has suffered. True, the government cannot be held responsible for the loss that the investors would be incurring. But the fact remains that all the information that the government made available, from time to time, on the sale of the Rupali Bank to the Saudi bidder, heightened speculative investment in the market.
The Bank, too, is a victim of the failed bid. There was marked improvement in the performance of the Bank in recent years. The net asset value per share of the Bank increased to Tk 26.29 compared to that of minus 163 taka in the year 2000. With the start of the privatisation process, a sizeable number of its employees and officers left the bank cashing in on the opportunities offered under the voluntary retirement scheme (VRS).
A large number of branches of the Bank, being highly understaffed, are now facing serious difficulties in carrying out their normal operations.
Another issue deserves attention from the authorities concerned. When indications about the Saudi bidder's reluctance to take over the bank became strong, many people started asking questions about the paltry amount of security deposit taken by the PC from the bidders, only 100,000 dollar each. The PC has not yet given its reply to such questions.
What still remains a mystery to many is as to why the Saudi Prince in the first place offered $ 458 million for 94 per cent stake of the Bank. Some people who have inside information about the Bank were surprised by the Prince's offer. However, at one stage, he backed out from his original offer and brought it down to $ 185 million, alleging that information concerning the real health of the Bank were earlier concealed. This is a serious allegation that needs to be investigated thoroughly. There should also be investigation into the money spent on hiring of foreign consultants, foreign tours and road-shows abroad.
The government, if it wants so, can drag the Saudi bidder to court, local and international, for his actions. But the government in all likelihood would avoid such an action for reasons, diplomatic or otherwise. Besides, the final outcome in most cases it has so far fought in the international court of arbitration has not been that palatable.