Developing Bangladesh’s Capital Markets to Provide an Engine for Investment, Jobs and Growth

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Robert Chatterton Dickson

September 23, 2021, 2:20 PM

Last modification: September 23, 2021, 4:25 PM

File image Robert Chatterton Dickson

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File image Robert Chatterton Dickson

Since independence 50 years ago, Bangladesh has enjoyed remarkable economic success, building on prudent government policy choices and a vibrant private sector, especially over the past two decades.

The country has shown that it can leverage its comparative advantage in labor-intensive production to exploit global market opportunities and expand the export base.

For two decades before the pandemic, annual GDP growth averaged over 6%, the rate of extreme poverty halved, infant mortality fell by 60%, life expectancy increased by seven years and per capita income has almost doubled and is now higher than some of its neighbors.

As a result of these achievements, Bangladesh is on track to graduate from the Least Developed Countries (LDCs) group in 2026. This is an important milestone, but the long journey to prosperity continues and needs substantial. of social and economic development remain. The development of new investment channels will stimulate business growth and job creation. The Government of Bangladesh’s Forward Plan 2021-41 sets the ambitious goal of becoming an upper middle income country by 2031 and a high income country by 2041. Private sector growth driven by investment is vital for these goals to be achieved.

Achieving this will require continued investment and better access to private capital. But Bangladesh’s capital markets are underdeveloped to meet the scale of investment required. Markets must seize the opportunity to modernize to meet the country’s long-term financing needs by providing long-term financing through bonds and other financial instruments.

Private investment can help start-ups grow and established businesses grow, generating exports and creating quality jobs, much needed by the young Bangladeshi population. The deepening and widening of Bangladesh’s capital markets is essential in this regard. Lack of capital market development will not only hamper low-cost, long-term financing and hamper investment, but will also hamper skills development, technology transfer, and economic diversification, all of which are essential for sustaining business. Bangladesh’s impressive economic growth trajectory.

For local capital markets to thrive, it is necessary to attract both local investors, such as pension funds who need long-term assets and can provide patient capital, and international investors who bring low cost financing and global know-how. Bangladesh currently has significant untapped absorption capacity to mobilize foreign savings, given its low level of external debt. Low international interest rates make this even more attractive. This could be a win-win scenario, with Bangladesh meeting its financing needs and international investors benefiting from the growth, diversification and returns that Bangladesh can offer their portfolios.

To highlight the potential of the capital market and the importance of capital market reforms, we at the UK High Commission hosted a webinar titled “Bangladesh Capital Markets: A New Frontier” on September 15, 2021. Honorable Minister of Planning, MA Mannan, MP, and the British Prime Minister’s Trade Envoy for Bangladesh, Rushanara Ali MP, were among the speakers, and we also heard from the Chairman of the Bangladesh Securities and Exchange Commission, senior government officials and leaders of public and private sector organizations in Bangladesh. The webinar explored the financing needs of the private sector, the ambitions and plans of the Government of Bangladesh to support the broadening and deepening of the country’s capital market, and the UK’s commitment to working with policymakers. , regulators and the private sector to carry out reforms.

The UK can bring together a range of expertise to help Bangladesh. A range of UK capabilities are available, including: CDC, the UK’s development finance institution; GuarantCo, which is funded by the UK, IFC and other donors and provides innovative local currency lending solutions to banks and bond investors; UK Export Finance (UKEF), which provides finance and insurance to UK exporters; financial education providers; and, most importantly, the cutting edge resources and expertise of the City of London’s private sector.

The City of London operates at the heart of global capital markets and can play a key role in closing Bangladesh’s investment gap, estimated at around $ 20 billion per year for the next twenty years. London is a leading market for local currency bond listings from emerging and frontier markets. The City of London can also share its knowledge and expertise on market regulation, legal frameworks and prudent supervision.

The successful issuance of the first Bangladesh Taka “Bangla” bond on the London Stock Exchange for the PRAN group in November 2019 was a milestone and a good indication of what can be achieved. With the path now established, I hope more shows will follow. A sovereign bond would be an important benchmark and support future corporate bond listings. Governments and companies around the world have chosen to list their bonds on the London Stock Exchange, recognizing it as a preeminent gateway to financial markets and global investors.

However, the availability of funding is only one side of the equation. Bangladeshi and international companies need to invest on a large scale. Research shows that Bangladesh has a tough business environment. The UK is the second largest cumulative investor in Bangladesh. UK companies, both operating in the country and keen to enter, point to challenges related to the investment climate and the business environment. UK development assistance over the past decade has contributed to investment climate reforms. We hope to see this support extended to reform and modernize capital markets.

As the Honorable Minister of Planning and others have made clear, the Government of Bangladesh recognizes the need to develop a more sophisticated capital market and attract private sector investment to build on its track record of impressive growth and provide greater resilience to the economy. The UK welcomes this ambition and stands ready to support a new economic relationship between the UK and modernized Bangladesh.

The relationship between the UK and Bangladesh has been strong since the nation’s birth 50 years ago. This deep historic relationship now includes trade, investment, defense, security and common political goals to address global challenges like climate change. We will continue to work together to strengthen this partnership in new ways as Bangladesh strives to achieve its development ambitions.


Robert Chatterton Dickson is the British High Commissioner to Bangladesh

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