Standard Chartered official ‘bullish’ on B’desh
Bank seeking to mobilise funds for power sector
A Z M Anas
Bangladesh will see a surge in capital from advanced and emerging economies in the next five years, lured by cheaper stocks and tax incentives, a senior Standard Chartered Bank official says.
Harinder Singh, a managing director of the UK-based but emerging markets-focused bank, has said institutional investors, mutual funds, private equity firms, and wealth management groups from the Organisation for Economic Cooperation and Development (OECD) countries would come to Bangladesh in droves to invest.
OECD is a 34-member bloc of the world’s most advanced and emerging economies.
“This is a time of great opportunity,” said the Mumbai-based banker, even if he is aware of the risks associated with euro-zone crisis and a stuttering global recovery. He has no estimates of the potential flow.
His comments came as the average stock price-to-earnings ratio in the capital market hovered below 15 while the government waived a 10 per cent tax on income from mutual funds.
Although Dhaka Stock Exchange, the premier bourse, is one of the worst-performers in Asia this year, its market capitalisation is still as high as $33 billion.
Cheaper stocks have provided rooms for bargain hunting by foreign portfolio investors whose participation in Bangladesh’s equity market is negligible.
Mr Singh said his bank is also seeking to mobilise funds for Bangladesh’s power sector, which requires an investment of US$9.0 billion to produce 9,426 megawatts of electricity by 2015.
“We’re trying to raise Bangladesh’s profile abroad. Investments will be flowing in power and telecommunications sectors,” he said.
Foreign direct investment climbed by 30 per cent in 2010 to US$913.32 million, up from $700.16 million a year ago, the United Nations Conference Trade and Development (UNCTAD) data showed.
Mr. Singh, whose career with Standard Chartered spans as long as 17 years, said international capital should be harnessed in a way, making sure that it adds maximum value and trickles in useful and productive sectors.
Although liquidity crisis has engulfed the local banking industry, he said Bangladesh operations of Standard Chartered remain unscathed, because “we’re disciplined in balance sheets.”
However, the bank’s profit after tax plunged by Tk 350 million to Tk 4.5 billion in 2010, down from Tk 4.8 billion the year before, according to figures available with the bank.
Mr Singh, a business graduate of Delhi University, said positive demographics and domestic demand would propel Bangladesh’s growth in the coming years.
“We’re bullish about (Bangladesh’s) prospects,” he said, insisting that young people who make up two-thirds of Bangladesh’s 160 million population would prop up growth.
The country’s internal demand is driven mainly by its 3.0 million-odd middle class with considerable spending habit, say economists.
Despite the debt crisis in the euro-zone and US economic woes, the Bangladesh economy expanded at 6.6 per cent in the last financial year, its highest since the early 1970s.
“Lots of countries wouldn’t have growth at all during the time,” Mr Singh said.
He didn’t say whether it was a “right step” to allow more private banks to operate in the country — a move that has already sparked nationwide controversy.
But he said market forces would determine whether it is good or bad to issue new licenses for private lenders in what is otherwise Bangladesh’s crowded banking sector.
Excluding state banks, a total of 39 private banks are operating in Bangladesh and the central bank is now reviewing applications of 37 sponsors who are seeking new banking licenses.
Mr Singh noted that attracting clients would be the biggest hurdle for new banks, making it challenging for them to stay afloat.
The depreciation of Bangladesh Taka doesn’t worry the banking professional who said India’s Rupee declined by 16 per cent this year — the worst performing currency in Asia in 2011.
Asked whether his bank planned to be listed in Bangladesh’s stock markets in near future, Mr Singh said he is not aware of any such move.
“Bangladesh is a key market for us. We feel that we’re a local bank and we bring in cross-border expertise,” he said. “We’re here for 107 years and not focused on short-term profitability.”