10 May, 2007
Foreign investors urged to tap opportunities in capital market
CSE-DSE-CitiBank Confce for investors begins
As the first-ever international investors' conference began in Dhaka yesterday,
speakers at the inaugural session urged foreign institutional investors to avail
of the opportunities lying in Bangladesh capital market. The potential contribution of capital market to financing development is yet
to be realized here and this is evident by the fact that market capitalization
is only 5.2 percent of GDP, Bangladesh Bank (BB) Governor Dr Salehuddin Ahmed
said inaugurating the two-day conference.
"Given the size of the population of Bangladesh and steady growth of its
GDP, there exists significant opportunities for utilising the capital market
as a vehicle for raising long-term investment fund," he said. Aiming to promote foreign investment in Bangladesh and to showcase the country's
potentiality to the foreign investors, globally acclaimed financial services
company Citigroup and Dhaka and Chittagong stock exchanges are jointly organising
the conference titled 'Bangladesh - The New Investment Frontier' in the Ballroom
of Dhaka Sheraton Hotel. Along with local participants, managers in charge of billions of dollars of
investment are attending the conference to learn about the Bangladesh's economy
and its potential capital market.
Emphasising an efficient information system in the stock markets for a well
functioning equity market, the central bank governor said informational inefficiency
cannot ensure the fair price of stock for the investor, and may create an opportunity
for the speculator to have an above average abnormal return.
"Ensuring the proper rating can play a vital role in this regard in order
to reduce the asymmetric information, which eventually helps the capital market
to become more efficient," he said. Dr Salehuddin said the regulatory bodies like Bangladesh Bank, Security and
Exchange Commission, Board of Investment, Bangladesh Telecommunication Regulatory
Commission, Energy Regulatory Commission are expected to be more responsive,
proactive and quick in giving directives about foreign investment proposals.
The Board of Investment should set up a 'one stop service centre' so that the
investors can get directives about all issues relating to investment from this
center, he suggested, adding that a conductive legal environment framework has
been established through enacting enabling laws.
"Investment in Bangladesh is now well protected by law, fiscal, monetary,
trade, industrial and foreign exchange policies," the BB chief observed.
He said apart from continuation of these policies, reforms undertaken by the
government would ensure a strong conducive environment.
He, however, said a hidden cost that is often resulted from corruption and delay
in procedural matters may also raise the cost of production, which must be removed.
The governor said as the reforms and development of financial market is an ongoing
process, the country should take quick and bold measures to accelerate reforms
for banks, leasing companies and capital market. He said due to the domestic political situation and some policy constraints,
the amount of foreign direct investment (FDI) in the current year is low.
He also pointed to some major problems that investors are facing, such as political
instability and policy discontinuity, bureaucratic red-tapism, corruption, underdeveloped
infrastructure, poor port management and shortcomings in legal system. Securities and Exchange Commission Chairman Faruq Ahmad Siddiqi said the securities
market is still very small. "However, the structural changes and trends
for the last few years are, perhaps, indicative that the market is in a transitional
stage getting prepared for a take off."
Bangladesh's economy is in the 'junction of massive economic transformation',
said Jeremy Amias, managing director and head of Asia Pacific Fixed Income,
Currency and Commodities of Citigroup.
Focusing on the country's economic fundamentals such as exports and strong remittances,
he stressed the need for significant private sector investment in major infrastructure
projects in power, telecommunications, port facilities, roads, railway and airline
sectors as well as in the export-oriented sectors such as textiles, pharmaceuticals,
IT and natural resource exploration. "We are very glad that we have received positive responses from the international
institutional investors and also from the leading corporate houses, regulators,
market intermediaries and other important stakeholders," he said. He hoped that the conference will create opportunity for leading equity and
fixed income investors from across the globe to hear about the strength of Bangladesh's
economy, capital market's potential and key policy measures taken by the government.
Some 40 foreign institutional investors and around 200 local institutions are
taking part in the conference. Greg Rybalov, representative of Smith Management LLCI, said, "I expect
to share prospect for economic growth in the country and expect to share what
short reforms have been undertaken and which companies are coming to the capital
market through IPOs".
Terming Bangladesh a very good destination for foreign investors, he said: "I
would like to see more companies listing in the market like power, infrastructure
and telecommunication sectors." Among others, presidents of Dhaka and Chittagong stock exchanges Abdullah Bokhari
and MKM Mohiuddin spoke at the function.
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