The state-owned Investment Corporation of Bangladesh (ICB) has made a set of recommendations to the government including offering the money whitening facility for the stock business and creation of a Tk5,000 crore 'market support fund' to revive the ailing capital market.
In the proposals, sent to the finance ministry last week, the ICB sought special incentive for multi-national companies so that they are attracted to get listed with bourses.
The proposals were made in the wake of free fall of indices as prime bourse Dhaka Stock Exchange shed more than 500 points in the last three months, triggering investors to take to the streets and demand resignations of top officials of the securities commission.
The Corporation urged the ministry for its role in relaxing for ICB the ‘single party exposure limit’ set by the Bangladesh Bank so that it can borrow beyond the limit from the scheduled banks to intervene in the market with huge cash.
“Undisclosed money can be given opportunity to invest in share/bond in the capital market,” the ICB proposal said.
In 2014-15 fiscal budget, the government scrapped the money whitening facility applicable to capital market, flats and lands that had been in place in the previous fiscal year, as many multilateral agencies, corruption and money laundering watchdogs put pressures to revoke the controversial provision.
ICB managing director Kazi Sanaul Hoq told the Dhaka Tribune: “We put forward a number of proposals including the budgetary measures to bring back untaxed and undisclosed money to the capital market,”
On the proposed ‘market support fund’, he said the ICB needed fresh fund from the government to intervene in the market, when necessary.
The ICB top boss said they had successfully intervene in the market with adequate fund aftermath of market crash in 1996 and 2010.
“So, we need the fund very badly,”he reiterated.
He also said steps needed to be taken to bring good stocks in the market, including those of multinational companies and local big shots.
The ICB proposal said the Corporation would invest in the market from the proposed support fund at flexible conditions and low interest rate for the overall development of the stock market.
“The capital market would see an immediate positive impact, if the proposed Tk5,000 crore was sanctioned,” said the ICB proposal.
Besides, the ICB has sought another Tk900 crore fund which was earlier disbursed under the refinancing scheme of the capital market. The corporation has sought the fund to provide 'instant' support to the capital market which recently witnessed continuous correction amid lack of confidence.
The ICB managing director said the corporation had sought the Tk900 crore fund at lower interest rate considering the ongoing market situation.
In 2013, the ICB received Tk900 crore from the central bank in three installments under the capital market refinancing scheme. The government provided the fund to reduce the suffering of small investors during the 2010-11 stock market debacle.
The ICB recently floated a Tk2,000 crore bond. Of the amount, Tk1,390 crore was subscribed. The ICB in its proposals sought the government intervention in selling the remaining units of the bond.
The ICB senior officials said they were keen to reinvest at least 75% or Tk1,500 crore from the issuance of bonds in the capital market.
The corporation said branches of ICB should be opened at district level for communication with investors. The ICB also proposed to introduce specific bonds for insurance companies.
Furthermore, the ICB proposed to form a high-level steering committee comprising representatives from the finance ministry, Bangladesh Bank, Bangladesh Securities and Exchange Commission (BSEC), Stock Exchanges and ICB for prompt actions in case of market emergency.
It recommended reducing the registration fee for all types of bonds to 2% to help create an effective bond market in the economy.