Experts push for reforms to deepen capital market

Market stakeholders and analysts on Sunday called for sweeping structural reforms to transform the stock market into a major source of long-term financing, reducing the economy's heavy reliance on bank loans.

Building a deeper, more transparent capital and bond market is essential to address persistent imbalances in the country's financial system and ensure sustainable economic growth, they said.

The experts made the call at a seminar titled 'Challenges and way forward for the new government in the stock market' held at a city hotel, with Rashed Al Mahmud Titumir, finance and planning adviser to the prime minister, as the chief guest.

Khondoker Rashed Maqsood, chairman of the Bangladesh Securities and Exchange Commission (BSEC), and Abdur Rahman Khan, chairman of the National Board of Revenue, were present as special guests. Capital Market Journalists' Forum (CMJF) organised the event. 

Call for reforms and overseas investment

Speaking at the seminar, Finance adviser Titumir said the government is planning structural reforms in the capital market, aimed at broadening ownership, attracting foreign investment and strengthening regulatory oversight.

"To enhance participation in the capital market, the government is considering a dedicated investment gateway for expatriate Bangladeshis to make it easier for them to invest in the domestic market," he added.

He also noted the country's potential to expand Islamic finance instruments to attract investors from Muslim-majority countries.

The adviser warned that Bangladesh's economy is not sustainable as a debt-dependent economy is never sustainable.

"Our goal is to achieve a $1 trillion economy by 2034," he said, noting that stock market capitalisation currently stands at around 12 per cent of GDP -- much lower than in neighbouring countries.

He added that the authorities are exploring the use of advanced information technology and blockchain systems to improve transparency and security in market operations.

The adviser also said the government is set to promote ownership-based industrialisation in a move to reduce the economy's reliance on debt. To implement the plan, a series of transformation and reform measures will be included in the budget for the upcoming fiscal year.

The proposed steps are expected to encourage greater participation in the capital market while easing pressure on the banking sector, he added.

The adviser also stressed ensuring accountability among auditors, asset valuation firms and credit rating agencies whose reports play a crucial role in shaping investor decisions.

"If those reports misrepresent a company's financial condition, it undermines trust in the entire market," he said, adding that regulatory institutions -- including the finance ministry, the Financial Reporting Council and the BSEC -- would be strengthened to improve oversight.

Stronger enforcement by regulator

BSEC Chairman Maqsood highlighted intensified enforcement by the regulator over the past 18 months during his tenure.

He said the commission conducted 126 investigations during the period and imposed fines totalling Tk 14.88 billion (about $136 million), although only Tk 52.3 million has been recovered so far as some cases remain tied up in legal proceedings.

Regulatory weakness main barrier

NBR chairman Abdur Rahman Khan said the key obstacle to developing the capital market lies in weak implementation of existing regulations rather than tax policy.

"We have many laws, but they are not implemented," he said, noting that tax incentives offered during previous market crashes did not significantly improve market performance.

"Tax incentives alone cannot guarantee a healthy market," he said, adding that companies unable to pay dividends would not be allowed to list in the future.

Stakeholders highlight challenges

Md Moniruzzaman, senior vice president of the DSE Brokers Association identified three major problems in Bangladesh's financial system -- liquidity shortage in the stock market, pressure in the banking sector and low tax collection, saying these reflect deeper structural imbalances in savings and capital allocation

DSE chairman Mominul Islam said the stock market had received little attention over the past 15 years but the current government has been focusing more on it.

CSE chairman AKM Habibur Rahman said a strong stock market requires a stable banking system, a stable economy and the rule of law.

Sumit Podder, secretary general of Bangladesh Merchant Bankers Association, noted that no new company has entered the stock market in the past two years and called for incentives to attract quality IPOs.

CMJF president Md Munir Hossain presided over the seminar, while its general secretary Ahsan Habib conducted the event. 

babulfexpress@gmail.com