Policy Research Institute - PRI Bangladesh

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Govt urged to open up corporate entities to foreign financing

News Published: Monday, Jul 08, 2013

Govt urged to open up corporate entities to foreign financing

Published: Monday, 08 July 2013

FE Report

FE_news_image_2013-07-08_26096Speakers at a seminar called upon the government Sunday to open up the local corporate entities to international financing, as, they said, it would trigger a competition among the local banks in reducing the rate of interest.

They also urged the government to immediately introduce all regulatory measures on both international lending to the private sector and investment by Bangladeshi companies abroad. When the political situation would stabilise, a great demand for international fund would be created, they said.

"The Bangladeshi banks are charging the highest rate of interest which implies that we have a shortage of capital. We need to keep the financing option open for the local corporate entities, which will definitely help reduce the bank rate," Mr Ahsan H Mansur, Executive Director of the Policy Research Institute (PRI), said.

The PRI organised the seminar on 'International Financing for the Private Sector' in association with the Asian Tiger Capital at a city hotel.

Former Finance Minister M. Syeduzzaman, Summit Group Chairman Muhammed Aziz Khan, Grameenphone Chief Financial Officer Fridtjof Rusten, chief economist of Bangladesh Bank Dr. Hassan Zaman, Managing Partner of AT Capital Ifty Islam and PRI Chairman Zaidi Sattar, among others, spoke on the occasion.

Speaking on the occasion, Bangladesh Bank Governor Atiur Rahman said realising the growth aspirations would require more investment resources than available as domestic savings and the public and private sectors would need adequate access to external financing at affordable costs.

"Bangladesh's approach in this regard is 'highly cautious'. That approach has served well in making steady, stable economic progress avoiding the slippery slopes of debt default and the balance of payment crisis from excessive external debts," the BB governor said.

Mr Atiur Rahman also said mobilising investment resources on this growth path would require accessing global capital flows by integration of the country's financial sector with international financial markets.

"Bangladesh has already embarked on this path, widening external exposure gradually in line with gains in credit standing and external sector viability," the governor said.

Mr Mirza Azizul Islam, former adviser to the last caretaker government, advised the government to follow a conditional approach as he said international financing to the private sector involves maturity and currency mismatch.

He said if the financing is borrowed by corporations for a short term and if they don't have exports, such companies may experience these problems.

Mr Ahsan H Mansur and Ifty Islam in their joint keynote paper on 'A Roadmap for International Financing for the Private Sector' presented at the seminar said this is a good time to allow the foreign currency account as the country's external balance is in a better shape and exports and the remittance flow are strong.

"Bangladesh needs major investments in both export earning sector and infrastructure. Increasing foreign currency borrowing will enhance both economic growth potential and overseas earnings' reserves," the paper said.

Bangladesh Bank chief economist Hassan Zaman said the government needs to be careful and judicious in allowing foreign debts and overseas investments by local companies.

"We should not present the situation as overblown. External debt is only one option of financing, there are many other options including capital market financing," Mr Zaman said.

Mr Aziz Khan said the present time is the right time to allow the local corporate entities to go for international debts as the country's corporations want to flourish further.

"Private sector is a tool that is connecting the local economy with the international economies. International private debt is the least-costly fund which will help local corporate entities be more efficient," he said.

Pran Group DMD Ahsan Khan Chowdhury and former DCCI president Ashif Ibrahim also spoke on that point.