Suspension criticised
The suspension of trade in the country's two bourses yesterday drew criticism from experts who consider the move as a means of forcing the government to allow civil servants in stock business.
“The trade suspension reflects an attempt from the bourses to pressurise the government to allow public employees to invest in stockmarket,” said Toufic Ahmad Choudhury, general secretary of Bangladesh Economic Association.
Stock exchanges had earlier exerted pressure on the government to allow undisclosed money into the market, said Toufic Ahmad, also a member of Ibrahim Khaled-led probe team that suggested a bar on government employees' investment in stocks.
The cabinet on Monday decided to remind public employees about service rules that prohibit involvement in profit-making activities, including stock business, without prior permission.
The Dhaka Stock Exchange halted trading, fearing a negative impact of the decision on the market. Later, Chittagong Stock Exchange (CSE) followed suit.
One hour after the suspension, DSE Chief Executive Musharraf M Hussain at a press briefing demanded the government allow public employees' investment in share business.
The bourses plea comes at a time when many government employees already have investments in stockmarket either in their own name or proxy names. The DSE could not provide any detail of how much investment or how many Beneficiary Owners (BOs) are linked with public servants.
Mirza Azizul Islam, a former finance adviser, said the bar on investment by government officials is not new. "The government has just given a reminder to officials about the bar."
Azizul said the cabinet also took a number of decisions favourable for capital market.
These include a 10 percent tax rebate facility for stock investment, reduction of tax on brokerage commission and withdrawal of 10 percent tax on income by mutual funds.
"So there should not be any impact on the stockmarket," he said.
He opposed the plea of DSE for allowing investment of government officials in stockmarket. "I don't support it. The government should not bow down to such pressure."
Faruq Ahmad Siddiqi, a former chairman of the Securities and Exchange Commission, did not find any logic behind the trade suspension.
“May be it was a means of creating pressure on the government,” he said, “But the trade suspension may cause panic among the investors and destabilise the market further.”
Mahmood Osman Imam, who teaches finance at Dhaka University, said as per law the bourse cannot suspend trading.
"If the trading was suspended with share prices nosediving, then it's good. But if it was taken as a weapon to put pressure on the government, it's not right," he said.
He, however, said the trading halt offered investors some time to think before taking any investment decision. "Trading suspension may provide scope to heal the market."
The DU professor said the government employees, who do not work in positions and agencies where conflict of interests can arise, should be allowed investing in the share market.
"If the government does not want to allow investment [from its staff], it could have issued the directive internally instead of making it public," he said.
Khondaker Golam Moazzem, senior research fellow of Centre for Policy Dialogue, said as per the 1979 service rules government employees are not allowed to engage in speculative investment.
"The initiative is good to ensure transparency in stockmarket," he said. "Stock exchanges should cooperate with the government in this regard."
"The government should offer time, say for six months, so that they can gradually withdraw their investments," he said.
Reaz Islam, chief executive of LR Global Bangladesh, said public servants may be allowed to invest via an intermediary such as merchant bank that has discretion over the account.
"It is not constructive to discourage participation from such a large segment since our market is still small and lacks depth. However, controls can be put in place to avoid conflicts similar to practices in more developed countries," he said.
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