SoEs' divestment looks uncertain

The move to divest five state firms' stakes on the stock market is unlikely to see daylight anytime soon as those are mired in deep financial trouble, a senior official said.
The ministry of industries tapped Chittagong Dry Dock Ltd, Pragoti Industries Ltd, Bangladesh Insulator and Sanitary Ware Factory Ltd, Karnaphuli Paper Mills Ltd, and Chhatak Cement Company Ltd to make them profitable and eventually offload their shares.
A recent meeting intended to prepare an action plan for making the companies under the ministry of industries profitable concluded that the enterprises are passing through multiple problems and there is little chance that those can turn to a profit shortly.
A committee, headed by additional secretary of the ministry of industries Enamul Hoque, was formed to make recommendations for making the state-owned ventures profitable. The decision was taken last year at a meeting, chaired by finance minister AMA Muhith.
The meeting had decided that state-run industrial units have to be made profitable to supply good shares on the country's stock market. Unless a company is a profitable concern, their shares cannot be offloaded.
Officials said the country's stock markets suffer from lack of good shares thus people show less interest in investing on the capital market.
They said that stock market can be developed as main source for long-term financing provided good profit-making ventures, including multinational companies, offload shares there.
Talking to the FE Friday, Mr Hoque said he saw no immediate possibility of offloading shares of the five companies.
He said after handing over the operations of Chittagong Dry Dock Ltd to Bangladesh Navy the company recorded profit in fiscal year 2016-17.
But the company has Tk 4.0 billion outstanding loans. Once the loan is repaid and the company makes significant profit, its shares can be offloaded, he said.
Mr Hoque said Pragoti assembles vehicles under a joint venture with Mitsubishi Corporation of Japan. It is a profitable concern and the company's profit reached Tk 835 million in fiscal 2015-16.
However, due to a condition set by the Mitsubishi Corporation, the Pragoti Industries is unable to offload its shares on the stock market. The Mitsubishi Corporation said it would no longer be with Pragoti Industries if the latter moves to divests share.
He also said that the Bangladesh Insulator and Sanitary Ware Factory is a loss-making concern and there is a plan to shift its factory to Gazipur district from its present location in Mirpur.
The factory needs to be re-established with modern equipment, which may take four to five years, he noted.
Mr Hoque said a new project had been taken to modernise the Chhatak cement factory. If the project can be implemented the company could become a profit-earning entity.
The shares of the company then can be divested, he added.
Regarding Karnaphuli Paper Mills, Mr Hoque said the company was looking for foreign investors to expand.
"With the present machinery and raw materials, the venture cannot be made profitable," he said.
He said that a large volume of bamboos and canes are needed as raw materials of the factory, which are not readily available.
"We need to import raw materials for the factory to raise its production," he added.

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