Towards a healthy capital market
Friday, 14 September 2007
THE Bangladesh economy, which is yet to fully grow out of its pre-capitalistic trappings, lacks many of the market fundamentals. In consequence, most of the business organisations here are not willing to go public. The reasons behind this are many. First, it is ignorance and then the fear born from it. Old habits die hard. Businesses run on proprietorship, partnership or as family-owned limited companies are afraid to go public fearing that they might lose control of their business. The truth is by floating their shares in the stock market they not only get the scope of drawing on the resources of the capital market but also can avoid many risks that non-transparent business practices pose. Therefore, the argument makes sense that there should be a move to make the business community aware of the benefits of joining the capital market.
The finance and planning adviser recently advised the Dhaka Stock Exchange (DSE) to encourage the non-listed public limited companies to go public. The good news on this score is that some large state-owned companies including those dealing in oil, telecommunications, energy, aviation and so on are poised to offload their shares in the stock market. This is certainly a very encouraging development for the capital market. Listing of those government-owned ventures with the stock market will go a long way in ensuring transparency and accountability in the business practices of these entities. It will also contribute towards expanding the size of the stock market.
Notwithstanding such prospects before the stock market, the finance adviser, by pointing to the need for injecting quality shares in the capital market, warned that such participation of the government-run entities in the capital market was not a sufficient condition that it would grow in a healthy fashion. What was emphasised in this connection was that the stock market was in need of quality shares that the government-owned companies do not satisfy. The predicaments faced by the state-owned limited companies are not different from those in the private sector, which are shy about joining the capital market. Here it is the bureaucracy that harbours the fear that they would lose control of those companies if they join the capital market. Such wrong perception about the capital market has already deprived the private sector of the growth that was due to it since long.
There is another misconception in the public mind about limited companies that needs to be dispelled, too. As for example, the news of Biman Bangladesh Airline's turning into a limited company got a lot of publicity in the media. Unfortunately, a mere change in the ownership pattern of this jinxed national flag carrier has hardly changed the reality that it is still a hundred per cent state-controlled entity. Therefore, there is no guarantee that the Biman will turn into a profitable company by just becoming a limited company. That is not going to happen until Biman goes public by offloading its shares in the capital market. Once a company thus goes public, it then automatically allows the investors to have some say or control in the affairs of the company. And it is exactly here that the root of all the fears lie.
Therefore, whether one is talking about the private or the public sector, the common syndrome that has been stalling its growth is more or less the same. Such self-defeating mindset needs to be changed. Against this backdrop, it is imperative that the ignorance, fear or inertia that is coming in the way of the enterprises and business houses in the public and private sector is blown away through an awareness raising campaign. For this is the only way to hook up the economy with the best practices in the global marketplace within the shortest possible time.
The finance and planning adviser recently advised the Dhaka Stock Exchange (DSE) to encourage the non-listed public limited companies to go public. The good news on this score is that some large state-owned companies including those dealing in oil, telecommunications, energy, aviation and so on are poised to offload their shares in the stock market. This is certainly a very encouraging development for the capital market. Listing of those government-owned ventures with the stock market will go a long way in ensuring transparency and accountability in the business practices of these entities. It will also contribute towards expanding the size of the stock market.
Notwithstanding such prospects before the stock market, the finance adviser, by pointing to the need for injecting quality shares in the capital market, warned that such participation of the government-run entities in the capital market was not a sufficient condition that it would grow in a healthy fashion. What was emphasised in this connection was that the stock market was in need of quality shares that the government-owned companies do not satisfy. The predicaments faced by the state-owned limited companies are not different from those in the private sector, which are shy about joining the capital market. Here it is the bureaucracy that harbours the fear that they would lose control of those companies if they join the capital market. Such wrong perception about the capital market has already deprived the private sector of the growth that was due to it since long.
There is another misconception in the public mind about limited companies that needs to be dispelled, too. As for example, the news of Biman Bangladesh Airline's turning into a limited company got a lot of publicity in the media. Unfortunately, a mere change in the ownership pattern of this jinxed national flag carrier has hardly changed the reality that it is still a hundred per cent state-controlled entity. Therefore, there is no guarantee that the Biman will turn into a profitable company by just becoming a limited company. That is not going to happen until Biman goes public by offloading its shares in the capital market. Once a company thus goes public, it then automatically allows the investors to have some say or control in the affairs of the company. And it is exactly here that the root of all the fears lie.
Therefore, whether one is talking about the private or the public sector, the common syndrome that has been stalling its growth is more or less the same. Such self-defeating mindset needs to be changed. Against this backdrop, it is imperative that the ignorance, fear or inertia that is coming in the way of the enterprises and business houses in the public and private sector is blown away through an awareness raising campaign. For this is the only way to hook up the economy with the best practices in the global marketplace within the shortest possible time.