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The country's secondary market is still at its nascent stage, bearing fallout of "political economy" that has overwhelmingly favoured the banking sector over the equity market in national policy framing, said experts.
The remark was made and reinforced by participants at a discussion titled 'Capital market in Bangladesh's political discourse: philosophy and practice' organised by the DSE Brokers Association (DBA) at DSE Bhaban in Nikunja in the capital.
"…an unsustainable and adverse financial structure developed since the beginning of the country's privatisation in the 1980s" said Dr. Masrur Reaz, chairman of Policy Exchange Bangladesh (PEB).
Banks are ideally not expected to do long-term or even the midterm financing across the world, he said. But banks in Bangladesh have lent aggressively, gradually pushing the stock market, which should have been the only source of long-term financing, into a tight corner, added Mr Reaz.
Currently, investments in the private sector are around 23 per cent of the country's GDP (gross domestic product) and there is a target of raising the figure to 36 per cent by 2040 when the size of the GDP will turn $2 trillion.
To attain this target, additional private-sector investments worth $3.5-4 billion will be needed.
Investment in infrastructure is now around 3 per cent of the GDP and an additional investment will be needed to increase it to 7-8 per cent of the GDP by 2040. Moreover, the country's SME financing has a shortfall of $2.8 billion as of now.
Citing the data, Mr Reaz said the trouble-hit banking sector has no capacity to make additional investments required to achieve the targets. "So, the capital market has to be prepared to achieve the target."
Dr. Debapriya Bhattacharya, a distinguished fellow of the Centre for Policy Dialogue, presented a keynote paper at the programme attended by former commerce minister Amir Khasru Mahmud Chowdhury, among others.
To revive the ailing capital market, Mr Bhattacharya insisted that there should be a clear message from the government for the market's development.
Expressing dissatisfaction, he raised the question whether the government would come up with any package in the upcoming budget and implement it.
Apart from facilitating foreign investments, incentives are required for local companies and investors. Referring to the recent directives from the Chief Advisor, tied to the secondary market, Mr Bhattacharya lamented that two weeks had passed since the issuance of the directives but there were no follow-up actions on them.
The CA instructions included taking measures to facilitate offloading of shares of profitable state-run entities (SoEs) and multinational companies where the government has stakes.
"Decisions are taken but remain not implemented," said Mr Bhattacharya, adding that stakeholders had been excluded in the decision making for market development.
He said he had asked an official of the securities regulator about the progress in the implementation of recent decisions intended to help the market rebound but the official could not come up with an answer.
Giving references to the CA's suggestion to involve foreign experts in addressing problems that the market is dealing with, Mr Bhattacharya said such "quick-fix" measures would not benefit the market.
On market scams, he said the failure of ensuring punishments of fraudsters, who were behind the 1996 and 2010 stock market debacles, was one of the major factors that hindered the market's growth.
Many of those, who had committed frauds in the market, are now in jail but not for their role in the market crash. "Those people could not be brought to book," said Mr Bhattacharya.
In his speech, former commerce minister Amir Khasru Mahmud Chowdhury said the country's capital market had become a "casino" market where "profits are deposited into the basket of casino owners".
He put the blame on the absence of political ownership.
"Had there been any political ownership in the capital market, it would have been considered seriously while taking monetary and fiscal policies," said Mr Chowdhury, also a member of the standing committee of the Bangladesh National Party (BNP).
The capital market does not seem to be part of the economy, he said, adding, "We need investments. The more we can invest without borrowing the higher the potential will be of the investment."
Mr Chowdhury said the concept of capital has changed globally and the capital market is the only source that can meet the demands for capital both in the private and public sectors.
The country's market-cap-to-GDP ratio is only 9 per cent whereas the ratio is 110 per cent in neighbouring India.
"This ratio indicates that our capital market is totally detached from the economy," said Mr Chowdhury.
Md. Mohsin Chowdhury, a BSEC commissioner, Prof Sayema Haque Bidisha, pro-vice chancellor of Dhaka University, and Mominul Islam, DSE chairman, among others, spoke at the programme moderated by Md. Saifuddin, managing director of IDLC Securities.
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