CPD-Prothom Alo-The Daily Star dialogue in Chittagong

Reforms far away from implementation

Staff Correspondent, from Chittagong
27 April, 2003

A range of reforms in the financial sector could not bring the desired result because of various problems, discussants at a dialogue yesterday observed. They said amendments to a raft of laws were made for effective enforcement of banking regulations, fixation of interest rate of commercial banks, rescheduling and writing off loans, merger of losing bank branches and formulation of large loan policy. Despite the efforts, they said, the default loan culture continued to present a drag on the national economy as the outstanding loans soared to Tk 24,000 crore.

They were addressing the second session of the dialogue, organised by the Center for Policy Dialogue (CPD), the Prothom Alo and The Daily Star at Chittagong Stock Exchange (CSE) yesterday. The session was dedicated to the banking sector.

The dialogue initiated a fresh round of consultations to review the recommendations made by 16 task forces formed prior to the October 2001 ballot. Chaired by Dr Moinul Islam, economist and former president of Bangladesh Economic Association, the session was also addressed by Ali Ahmad, former president of Chittagong Chamber of Commerce and Industry (CCCI), as chief guest.

Dr Toufique Ahmed Chowdhury, professor and director of Bangladesh Institute of Bank Management (BIBM), presented the keynote paper.
The speakers stressed the need for political will, transparency and discipline to salvage the crisis-torn sector. Monzurul Amin Chowdhury, vice-president of CCCI, criticised the procrastination of banks in sanctioning loans to aspirant entrepreneurs. "One has to overcome so many hurdles before getting loan," he said.

Chief Executive of Chittagong Stock Exchange (CSE) Maruf Matin said the share market should be properly valued as it is one of the key components of economy. Highlighting the viability and benefit from investing in share market, he said despite the unprecedented scam in 1996, the bourses rose from ashes in recent times. In less than one and a half years, 13 new IPOs (initial public offerings) have come up to fetch Tk.33.80 crore whereas they got an investment of Tk.194.88 crore from the public, six times higher than what they expected.

The CSE chief executive said if shares were sold for larger projects like Jamuna Multi-purpose Bridge, the country could have saved billions of taka in foreign currency. CPD Executive Director Dr Debapriya Bhattachariya intervened at this stage and differed on the role and state of the capital market.

"Competence and accountability of self-regulatory bodies like CSE must be there, otherwise they would not be able to provide benefit in true sense," he said. "It may sound great what was said here about the 13 IPOs, but the desired dynamism has not been seen in the primary markets," he continued. Dr Debapriya alleged many companies did not hold annual general meetings (AGMs) regularly or declare dividends. "Rather they play foul and manipulate audit reports. Besides, we are yet to see the much talked-about Central Depository System (CDS) in action," he said.

Dr Fasiul Alam, professor of management at Chittagong University (CU), feared that the Debt Collection Unit (DCU), proposed by a task force in every banks, could be used as a tool of harassment. "To check this, cautionary measures should be adopted," he said.

He suggested fixing of ceilings for loans. "It is needed to know which sectors or parties actually deserve the loans." Dr. Fasiul said chaos cropped up in the financial sector due to political influence and illegal interference by trade unions in the last 30 years.

Professor Sikander Khan of economics department of CU called for strengthening supervisory role of the central bank. "I am, however, sceptical about the implementation of the recommendations, as the bank managing board itself is not free from politics," he said. Professor Ahmad Nabi of CU finance department urged for decentralisation of the banking sector and creation of an atmosphere for even competition among stakeholders.

Bangladesh Garment Manufacturers and Exporters Association (BGMEA) leader SM Nurul Haq said many sick industries would find their feet if simple interest system for rescheduling of loan was introduced. He also criticised bureaucracy in approval of loans for new projects. "I had a bitter experience a few months ago and I had to go to the minister to get the nod," he said.

Dr Shanti Ranjan Das, dean of CU commerce faculty, said an evaluation by the banks concerned was badly required for awarding loans. "Thorough scrutiny and examination of existing default loans should be there to bring order and stop indiscipline in the financial sector," he said.

Abdul Awal, managing director of Bengal Shipping, suggested incorporation of the insurance sector in the task force report. The chief guest of the session thanked Dr Toufique Ahmed Chowdhury and other member of the task force for presenting the keynote paper. "The recommendations of the task force can be termed as successful considering its aspects. Sixty per cent of the recommendations have been implemented or at least taken into cognisance," he said.

Ali Ahmad said proper law or measures are needed to convert borrowings into assets. "Our banking sector has already shown some signs of improvement as some measures were taken."He suggested drastic reduction in the interest of savings. "The savings are causing a problem in financial sector."

The chair of the dialogue, Professor Moinul Islam, said loan rescheduling in Bangladesh grew as cancer and the banking sector thrived as a hotbed of corruption. He stressed the need for introduction of a tribunal like the 'Special Tribunal Court' to shed existing anomalies in the sector.