List multinationals on bourses: MCCI
The Metropolitan Chamber of Commerce and Industry (MCCI) asked the government to increase the supply of securities and list multinational companies operating in Bangladesh to help stabilise the volatile stock market.
The supply side can be improved by offloading shares of profitable state-owned enterprises and private entities and by offloading a bigger percentage of shares by the already-listed large companies, observed MCCI in its latest review of the Bangladesh economy in the third quarter (January-March).
The quarterly review report incorporates an analysis on the past quarter's economic performance and forecasts on the macro-economy, as well as trends in the financial markets.
The country's leading business body said the condition of physical infrastructure remains weak, which together with the crisis in the power and gas sectors, acts as a bottleneck to achieving the targeted 6.7 percent rate of economic growth. It identified soaring inflation as another major challenge.
The analysis found the overall performance of the economy mixed, with traces of successes and failures.
Buoyant farm output, an increase in industrial investment and SME loans, robust export growth and record revenue collections are some of the successes during the reporting period. Declining remittance growth, deteriorating balance of payment and foreign exchange reserves, rising inflationary pressures, poor public investment, rising interest rates and volatility in the capital market were identified as the failures.
MCCI observed that the stockmarket needs to shed itself of speculative elements, and that can only happen once market valuations come back to fundamental levels. It said the government should institute a thorough reform of the system and establish some short, mid and long-term rules and regulations after consultation with all stakeholders.
The premier chamber body suggested the government should ask multinational companies to get enlisted. “Such listings are compulsory in the neighbouring countries,” said the report.
The chamber also feels, to boost supply and meet growing demand, quick offloading of the shares of state enterprises, enlistment of more private issues and persuading big listed companies to offload more shares could help.
“Strengthening the regulatory mechanism and making it more transparent and accountable is crucially important to increase public confidence in the stockmarket,” said the report.
It said brokerage houses and merchant banks could do a lot to instil confidence among investors, especially uninformed ones, at a time when the markets have witnessed sharp ups and downs.
Like the farm sector, the chamber review said, all industrial sub-sectors that suffered declines during the recession began to recover. The manufacturing sector picked up after strong growth of domestic demand and exports. But it said small and medium industries performed poorly, largely for power and energy shortages.
Despite the installation of some additional generation capacity and some increase in power production, the situation did not improve much in the third quarter, as the production of power has lagged behind growing demand. “A shortage of energy, in fact, now poses the biggest threat to growth,” said MCCI.
Banks are reported to charge 3-4 percent higher interest rates on loans following the withdrawal of the lending cap by the central bank, said the business body.
The chamber said revenue collection improved greatly in the quarter. In July-February, revenues were higher by 28.12 percent than the same time last year.
Contrary to good revenue performance, the implementation of the public investment programmes has been poor. The government implemented only 37 percent of the annual development programme during the first eight months of fiscal 2011, two percentage points lower than the same period last fiscal year.
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