Salman F Rahman, private industry and investment adviser to the Prime Minister, yesterday urged stakeholders to find a means for long-term financing for the benefit of the local capital market and economic growth. He also emphasised the importance of restoring the confidence of stakeholders in the country's capital market. Salman was speaking as the chief guest at an international conference titled ‘Local capital market infrastructure financing’, jointly arranged by the Dhaka Chamber of Commerce and Industry (DCCI) and GuarantCo, at a hotel in the capital.
Describing the biggest problems in financial system, Salman said: “We have identified one of the biggest structural problems in our financial system: we"re completely dependent on commercial banks to finance long-term projects. However, banks are not supposed to finance something for a long term.”
Previously some initiatives were taken for resolving the topic of long-term finance, but they were not effective. “So, we need a strong bond market to facilitate long-term finance for the industry and the infrastructure,” he added.
He said commercial banks are doing short-term deposits to make long-term loans. This is fundamentally a serious mismatch, he added. He also said fluctuations are common in the stock market. “For a vibrant bond market, we must have an effective stock market. We"re in the transition period of the fourth industrial revolution. The private sector must be ready to efficiently meet the challenges associated with this technological advancement,” he added.
While delivering the welcome address, Osama Taseer, president of Dhaka Chamber of Commerce and Industry (DCCI), said a robust financial ecosystem is required to support huge financing needs for infrastructure development. “We feel the capital market can play a pivotal role to reduce the infrastructure investment gap in Bangladesh,” he added. “However, our capital market is underdeveloped and private bond market inactive,” he noted.
Considering the urgency of bond-led financing, Taseer said the corporate bond market accounts for 73 per cent of the GDP in South Korea, 46 per cent in Malaysia and 16 per cent India, while it"s below 0.20 per cent for Bangladesh. “We need to leverage our financing by reducing the dependence on the national budget and engaging private sector for infrastructure development. We also need to develop the capital market and the bond market, which will allow savers, corporates, and individuals to bridge the gap of infrastructure financing,” he added.
The conference was arranged to bring out new ideas on how to equip and utilise the local capital market and bond market for mobilising the required financing for infrastructure projects.
Andrew Bainbridge, chair of The Private Infrastructure Development Group, said capital markets, especially bond markets, have been the dominant source of finance for infrastructure projects in mature and developed markets. “With GuarantCo"s, a PIDG company, we hope that we will soon see some path-breaking work in developing the bond market of Bangladesh as an important source of funding for infrastructure projects,” he added.