The two-way problem
Tuesday, 18 September 2007
Operational problems, particularly relating to financial transactions, facing the big business houses whose owners are either detained or on the run following the interim administration's anti-corruption drive have not been addressed by the relevant authorities until now. It is up to the courts to decide the fate of the detained or absconding businessmen accused of corruption and other irregularities, financial or otherwise. But the fact remains that the companies owned by them have been playing a role in the economy either through import substitution or exports, in addition to employing thousands of people. Closure of these profit-making companies would add to the problems of the economy and spell disaster for the people employed in those establishments.
This important issue was raised by the chief executive officers (CEOs) of the commercial banks at a meeting with the central bank governor last Sunday and they sought the central bank's intervention in the backdrop of sharply rising number of loan defaults in view of the failure of the companies concerned to service their debts. The problem has cropped up because the failure of the detained or absconding owners to operate the bank accounts of their respective companies. The share of the non-performing loans in the total outstanding bank loans increased to 13.96 per cent in June last from 13.15 per cent in December last year. One daily quoting some bankers said the amount of default loans of the companies owned by detained or fugitive owners would stand at Tk 5.0 to Tk. 6.0 billion by December next.
The central bank governor advised the banks to deal with the problem in accordance with the usual bank-client relationship and help keep those profit-making companies afloat. The central bank, even if it desires so, cannot take a decision arbitrarily as far as the operations of the bank accounts of the companies concerned. It has to get some guideline from the government in this respect. The finance ministry, according to a newspaper report, on the basis of a letter sent by the central bank highlighting the problem, would very soon release a guideline on how the banks should deal with the companies in question.
However, this particular issue has brought to the fore the management problem of some big business houses that prefer individual or family control to corporate culture. For instance, the owner of the Basundhara Group, who has gone into hiding to avoid arrest, reportedly sent letters to banks concerned saying that he had authorised none to operate the bank accounts of his company. The group owes more than Tk 10 billion to different banks. In such a situation, how can the units under the group run smoothly? One of the major weaknesses of Bangladesh businesses is that they are prone to maintaining their individual or family control over their companies and abhor the delegation of authority to professionals who actually run the show. This is true even in the case of some corporate houses where some sponsor directors want to maintain their grip on the companies by fair or foul means. The companies having their owners detained or on the run to avoid arrest would not have faced problems in operating their bank accounts had those been truly corporate entities. The corporate culture, however, does not develop overnight. It does require a change in the outlook of the entire business community and incentives offered officially to the corporate firms with the expectation that they would be transparent and accountable in their operations. Meanwhile, the government is expected to do the needful to keep the normal operations of the companies in question going for the greater interest of the economy and the people employed there in.
This important issue was raised by the chief executive officers (CEOs) of the commercial banks at a meeting with the central bank governor last Sunday and they sought the central bank's intervention in the backdrop of sharply rising number of loan defaults in view of the failure of the companies concerned to service their debts. The problem has cropped up because the failure of the detained or absconding owners to operate the bank accounts of their respective companies. The share of the non-performing loans in the total outstanding bank loans increased to 13.96 per cent in June last from 13.15 per cent in December last year. One daily quoting some bankers said the amount of default loans of the companies owned by detained or fugitive owners would stand at Tk 5.0 to Tk. 6.0 billion by December next.
The central bank governor advised the banks to deal with the problem in accordance with the usual bank-client relationship and help keep those profit-making companies afloat. The central bank, even if it desires so, cannot take a decision arbitrarily as far as the operations of the bank accounts of the companies concerned. It has to get some guideline from the government in this respect. The finance ministry, according to a newspaper report, on the basis of a letter sent by the central bank highlighting the problem, would very soon release a guideline on how the banks should deal with the companies in question.
However, this particular issue has brought to the fore the management problem of some big business houses that prefer individual or family control to corporate culture. For instance, the owner of the Basundhara Group, who has gone into hiding to avoid arrest, reportedly sent letters to banks concerned saying that he had authorised none to operate the bank accounts of his company. The group owes more than Tk 10 billion to different banks. In such a situation, how can the units under the group run smoothly? One of the major weaknesses of Bangladesh businesses is that they are prone to maintaining their individual or family control over their companies and abhor the delegation of authority to professionals who actually run the show. This is true even in the case of some corporate houses where some sponsor directors want to maintain their grip on the companies by fair or foul means. The companies having their owners detained or on the run to avoid arrest would not have faced problems in operating their bank accounts had those been truly corporate entities. The corporate culture, however, does not develop overnight. It does require a change in the outlook of the entire business community and incentives offered officially to the corporate firms with the expectation that they would be transparent and accountable in their operations. Meanwhile, the government is expected to do the needful to keep the normal operations of the companies in question going for the greater interest of the economy and the people employed there in.