Nine months on, capital market reform taskforce shows no progress: CPD

Despite the formation of a taskforce to implement capital market reforms after the interim government assumed office in August last year, there has been little to no visible progress in the past nine months, according to Fahmida Khatun, Executive Director of the Centre for Policy Dialogue (CPD).

At a press conference in the capital today (27 May), where CPD presented its third quarterly review of Bangladesh's economy, Fahmida said investors have suffered losses due to negligence and market manipulation, and the crisis continues. Over the past 16 years, the real value of the capital market has declined by 38%.

The Bangladesh Securities and Exchange Commission (BSEC) formed a five-member taskforce in October last year to recommend reforms in the capital market.

Presenting the keynote paper, Fahmida identified five major challenges facing the capital market: low-quality IPOs, irregularities in financial reporting, lack of transparency in BO accounts, questionable behaviour of institutional investors, and manipulation in the secondary market. She stressed that these issues must be addressed.

"Over the past nine months, we have seen fluctuations in various indices on the country's main bourse, DSE, with the index consistently on a downward trend. It dropped below 5,000 points very quickly. Manipulation in internal trading continues, and small investors are also suffering losses," she continued.

The CPD executive director said that due to weak oversight, lack of technological adoption, and failure to bring perpetrators to justice, the capital market is not becoming stronger.

In its presentation, titled "State of the Bangladesh Economy in FY25," the CPD observed that during the first nine months of the interim government, the capital market's performance fell short of expectations. This underperformance is likely due to a combination of ongoing corrective measures across various sectors and the lingering effects of previous market irregularities. 

Despite the passage of nine months since the new government assumed office, no new initial public offerings (IPOs) have been introduced, while continued political uncertainty has further limited the prospects for fresh listings.

Although several strategic decisions have been made to reform the capital market during this period, the implementation process appears to be hindered by bureaucratic inertia and administrative complexities within the Bangladesh Securities and Exchange Commission (BSEC), according to CPD.

CPD recommendations for stock market

In this context, CPD emphasised the need for BSEC to accelerate and streamline its administrative decision-making process and to ensure the timely submission and implementation of the capital market reform task force's forthcoming recommendations.

Furthermore, CPD recommended establishing a clear timeline, assigning institutional accountability, and setting up effective follow-up mechanisms to advance the IPO enlistment initiative, including progress on the 38 firms identified by the Investment Corporation of Bangladesh (ICB). 

Periodic reviews should be conducted to monitor developments and address challenges in execution. CPD also urged BSEC to introduce an Investor Protection Fund to shield retail investors from losses arising from fraud or market manipulation.

The new commission, led by Khondoker Rashed Maqsood under the interim government, formed a committee and a focus group to initiate capital market reforms. 

Simultaneously, the Financial Institutions Division established a separate committee, headed by Anisuzzaman Chowdhury, special assistant to the chief adviser, with a mandate to develop and strengthen the market.

According to the Dhaka Stock Exchange, the benchmark index DSEX has declined by 1,337 points, or 22%, since the interim government assumed office. During the same period, the equity market capitalisation shrank by Tk 1.10 lakh crore.