DHAKA: Despite different facilities declared by the government to rope in foreign investors, country’s capital market does not see targeted inflow of investment nor are the capital gains from the foreigners’ current investments reinvested here.     

The dilemma was divulged through a latest reckoning done by the Securities and Exchange Commission. The SEC found that out of the country’s total investment, the capital market has only 2.5 percent foreign investment.

The stock-market regulator does not get a good response, although the central bank has partly simplified its policy for the foreign investors on opening account in local and foreign currencies.

Market specialists opined that with making foreign investment in the capital market in any country, the foreign investors receive a positive message and gain confidence.

On the other hand, a negative impact may be cast on the capital market if a trend of withdrawing foreign investments is reported.

The local investors, however, think lesser foreign investment is better if reinvestment from the profits could not be confirmed.

According to Dhaka Stock Exchange (DSE), investment of about Tk 4,206 crore was made in the country’s capital market in last five years from 2004-05 to 2008-09.

Of the total amount, Tk 41.96 crore was invested in 2004-05 fiscal while Tk 68.56 crore in 2005-06, Tk 989.53 crore in 2006-07, Tk 1,922.42 crore in 2007-08 and Tk 1,183.92 crore in the 2008-09 fiscal.

On the other hand, Tk 1,372.74 crore was invested in last 10 months of the last fiscal (2009-10).

During the period, the foreign investors took out Tk 2,200 crore from the capital market. Of the amount, the investors withdrew Tk 1,100 crore from the capital market in 2007-08 and 2008-09 fiscal years in fear of economic recession.

As per the ‘Foreign Private Investment Law’ (Promotion and Protection), investors can take the benefit from the capital market after investing money. But, they cannot sell out their shares in a certain period if they invest in pre-IPO venture of a company.

Rakibur Rahman, former DSE president, told banglanews24.com.bd, “Preferential shares of reputed government organizations will have to be released to attract foreign investment in the country’s capital market.”

He also laid emphasis on introducing Internet-based online trading so that foreign investors can transact trade from their own countries.
 
He also favoured introducing one-year lock-in system to keep foreign investment and imposing a precondition of reinvesting 50 percent from their profits.

BDST 1532 HRS, JULY 3, 2010