Finance ministry calls for improved governance in capital market 

Finance Minister AHM Mustafa Kamal has asked the securities regulator to ensure good governance in the capital market to make it vibrant. 

After a meeting with the Bangladesh Securities and Exchange Commission (BSEC) and the Dhaka Stock Exchange (DSE) at his office on Thursday, the finance minister told reporters, "Governance in the capital market is a bit weak so I told them to improve it."  

"I told the BSEC chairman to strengthen compliance. Strict implementation of existing laws, rules and regulations is a must for that. If they feel there is a need for stronger laws, we will provide them with that too."

The meeting sought by the board of directors of the premier bourse was arranged to discuss the capital market situation and help the market revive. 

"We discussed ways to make the capital market more dynamic and to find a way out of the existing gloomy situation."

The finance minister also claimed that pessimistic rumors are hindering the stock market turnaround. "Relevant laws must be strictly enforced to fight such rumors."

The DSE board members have again sought government attention for the expansion and development of the country's capital market. 

"We placed 11 suggestions before the minister. These, if implemented, will help the market become vibrant and effective over the long run," said Minhaz Mannan Emon, a director of the DSE. 

The bourse also urged the government to take measures that will make the capital market a good source of long term financing, expedite listing of fundamentally strong state owned enterprises and multinational businesses, and revive the secondary market for treasury bills.

They also called for a faster solution to the ongoing dispute between Grameenphone and the telecom regulator, more steps to ensure the transparency of audited financial reports, specialised public-private partnerships in the infrastructure sector and their listing in the capital market, active and high level coordination committee for long term capital market development planning and its implementation. 

The DSE also demanded a reduction of Advance Income Tax on securities trading which is 2.5 to 18 times higher in Bangladesh when compared to peer countries. The finance minister also assured them of considering their proposals for the sake of market liquidity and supporting the struggling brokerage industry. 

The DSE board also demanded government measures for an increased fund flow to the capital market.

We have sought a soft loan for stock dealers from the government that will be utilised for investment in the capital market only, DSE Director Rakibur Rahman told The Business Standard after the meeting.  

"Any business entity can borrow from the banking system, and stock market intermediaries are no exception. I suggested they borrow on the basis of banker-client relationship," Finance Minister AHM Mustafa Kamal told the media. 

"They demanded some ease and concessions. We will take them into consideration. Capital market businessmen are good in terms of repaying government funds," he added, without clarifying the ministry's stance on soft loans. 

The minister, who is also a businessman with a chartered accountancy background, is believed to be a bit skeptical about financial incentives for the stock market.

Last year he questioned the idea of pumping money to revive the stock market without ensuring structural efficiency and good governance. 

Sources said that in the closed door meeting, Md Ashadul Islam, senior secretary to the Financial Institutions Division, also emphasised improving governance and compliance at all levels in capital market, including the regulatory body.   

The stock market in Bangladesh suffered a 29 percent fall over the last two years, which put thousands of individual and institutional investors to a tough time. 

Experts and market professionals blame a deteriorated investors' confidence for the fall, which they claim is a result of a lack of compliance and an absence of good governance.  

No currency devaluation
The finance minister also reiterated the government's stance on not devaluing the taka. 

In December alone, remittance witnessed a record 40 percent growth. It was not because of the exchange rate; it was rather a positive result of the incentive against inward remittance through banking channel. 

"There is a rumour that Bangladesh may devalue its currency" and that caused a sell-off in the stock market by some foreign investors.