Dr Abul Barkat

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Volume 10 |Issue 16 | April 22, 2011 |
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Interview
Rifat Munim
Dr Abul Barkat +ro#essor and chair. *conomics De+artment. /niversit! o#
Dhaka. is re(arded as one o# the most re+uted +olitical economists in the
countr!0 his research interest. thou(hts and $ritin(s cover a $ide ran(e o#
develo+ment discourses includin( economic develo+ment. human develo+ment.
human ri(hts and $omen1s ri(hts. land and $ater ri(hts. +olic! research in
health2+o+ulation. electricit! and +overt! reduction. $el#are economics. ri(ht to
develo+ment o# the reli(ious minorities and indi(enous +eo+les3 -ith numerous
research books. and 4ournal articles to his credit. most o# his +ublications are
marked b! an un+arallel commitment to the cause o# the have2nots3 In recent
!ears he has been a leadin( ex+onent o# the #i(ht a(ainst reli(ious
#undamentalism3 At +resent. he is also the +resident o# Ban(ladesh *conomic
Association and the chie# advisor o# &uman Develo+ment ,esearch Centre3 Dr
Barkat shares his vie$s about the #actors behind the share market debacle and
$hat should be done to +ut an end to it3
By now we all know about the quantum leap that the premium bourse made
from December 2009 to December 2010, resulting eventually in the biggest
slump in the capital market since 199! "lthough speculations on what had
brought about such a catastrophic fall were widespread following the disaster, it
was with the stock market probe report that we came to know about the
unprecedented scam involving the regulators, business magnates with political
clout, merchant banks, brokerage houses and so on! #hat is your take on the
underhand deal between the stakeholders$
%he trend o# a stee+ rise in the share market #ollo$ed b! a similar. stee+ #all is an obvious si(n that the market is
in a 1crash mode13 I# all the #undamentals o# the market $ere in +lace. then a situation such as this $ould not
arise3 It is 5uite +redictable that a number o# ma4or +la!ers $ere behind this as has +artl! been im+licated in the
+robe re+ort3
%he #irst thin( to consider here is ho$ more and more common +eo+le $ere attracted to the ca+ital market
ex+ectin( 5uite a 4usti#iable return over the last decade $hich is a ver! +ositive si(n3 In 6778 there $ere onl!
three lakh B" 9Bene#iciar! o$ner: account holders $hereas toda! the number stands at an astonishin( ;< lakh
holders3 =inet! +ercent o# the +resent investors are small investors. and not onl! do a lar(e number o# investors.
but also their #amilies rel! heavil! #or their livin( on the u+s and do$ns o# the market3 +eakin( mathematicall!.
i# a household has #ive members on an avera(e. then $hat !ou (et multi+l!in( ;< lakh b! #ive is no less than one
crore and >< lakh3 But s+eakin( #rom an economic +oint o# vie$. the number $ill double since an economist must
take into consideration the socio2cultural dimensions o# the re(ion $hereb! a lar(e sum o# mone! in a #amil! is
o#ten +roduced not in a strictl! individualistic $a! like *uro+e. rather in a 4oint2#amil! structure3 )or exam+le. ma!
be throu(h !our B" account. !ou have invested !our uncle1s or brother1s mone!3 o $ith onl! one account is
intert$ined the #ate o# man! in a ver! com+licated $a!3 And the reason I1m sa!in( all these is to +in+oint that
$hen the market (oes throu(h the 1crash mode1. these are the +eo+le $ho are a##ected most and rendered
+enniless3
o the +la!ers $ho $ere behind this (ar(antuan mani+ulation should be (iven exem+lar! +unishment so that
such corru+t +ractices are not re+eated and lives o# common are never badl! a##ected a(ain3
"lthough the probe report has pointed out several factors, how do you think the whole thing had come to the
stage where it is now$
%o be(in $ith. the +olic!makers es+eciall! those concerned $ith the #inancial and #iscal +olicies dealt $ith the
$hole a##air in an uncoordinated manner. +rovidin( the scamsters am+le o++ortunities to take thin(s to their
bene#it3 And the scamsters did not seem to be as uncoordinated as the +olic!makers3
-hen other (overnment bodies such as the Ban(ladesh Bank came u+ $ith some +re2em+tive measures. the!
$ere 4ust as uncoordinated3 %he decision o# credit ti(htenin( inevitabl! tri((ered the ne(ative momentum2 the
time 4ust be#ore the 1crash mode12$hich $as am+li#ied b! drainin( o# li5uidit! into t$o lar(e IP"s 9initial +ublic
o##erin(. an event $hereb! a com+an! o##ers its shares #or sale to investors:2'obil ?amuna and 'I Cement3 As a
::: Star Weekend Magazine ::: http://archive.thedailystar.net/magazine/2011/04/04/interview.htm
1 o ! 0!"#ct"14 10:$% &M
result. %k @.AAA crore $as drained out o# the market #or a month. (ivin( rise to a #ull2blo$n investor +anic3
Corrective measures in the #orm o# monetar! +olic! ti(htenin( are a common +ractice3 But it ou(ht not to have
been #ollo$ed b! drainin( o# such a hu(e li5uid amount3 It could have been dealt in a relativel! easier $a!
throu(h coordinated bu! actions b! institutions3 %races o# this mismana(ement are mentioned in the +robe re+ort
as $ell3
%hen there are the influential business tycoons and institutions that &oined hands with a section of the
'()*'ecurities and (+change )ommission,, D'(*Dhaka 'tock (+change, and )'( *)hittagong 'tock (+change,
officials, and manipulated the market price by misusing book building process and offering lucrative dividends for
the share holders! #hat is your observation on this$
As I told earlier. the +la!ers are #ar more intelli(ent than our +olic!makers3 -ith the hel+ o# the brokera(e houses
and the ratin( com+anies. the! mani+ulated the book buildin( +rocess 9it1s an o##2market +ublic event $hereb!
demand and value o# a com+an! is discovered and +rices o# its shares are #ixed:. and (ot throu(h to undul!
over+rice their share3 As the *C didn1t monitor +ro+erl!. the com+an! that sank dee+ into loss and $as sellin(
its share at a +rice o# %k 6AA. $as able throu(h this +rocess to unreasonabl! #ix its +rice at %k 68AA3 A (ood
number o# the business institutions that over+riced their shares in this $a! have been mentioned in the re+ort3
%he probe committee has also mentioned the negative role of pre-./0 placement and has suggested that pre-./0
placement be either stopped completely or restricted to 21 percent of the ./0! #hat do you think about this$
Pre2IP" +lacement is one o# the ma4or reasons #or the debacle3 Consider the rules and re(ulations o# +re2IP"
+lacement $hich has to be di##erentiated #rom IP" $here the o##er is made +ublic3 As it is a non2+ublic event
ha++enin( be#ore the IP". !ou make the o##er +rivatel! to !our near or dear ones or to those $ith $hom !ou
have stron( business links3 And a lot o# +eo+le literall! vie #or bu!in( these +lacements since +rices #urther
increase $hen shares are made +ublic3 As it involves a select #e$ havin( crores o# taka. it remains #ar be!ond the
reach o# common +eo+le3 %he more demand the concerned com+an! has. the more corru+tion it sees3 o I think
#or the bene#it o# common +eo+le. +re2IP" +lacement should be strictl! controlled b! re(ulator! bodies3
o all these #actors had led to the crash3 -hen such a share market crash 1un$inds1. it $ill threaten the stabilit!
o# the #inancial s!stem3 I believe that re(ulators have #ailed to understand the (ravit! o# the $hole situation3 o i#
immediate measures are not taken. it $on1t be +ossible #or the (overnment to contain the social as $ell as
+olitical unrest that ma! ensue3
2ow let us shed some light on the political affiliation of the scamsters! %he report has made it quite clear that
political high-ups or businessmen affiliated with both political parties were involved with the debacle! #hat do you
think are the implications of this$
In Dhaka alone. there are B@C brokera(e houses3 I# the! have +olitical alle(iance to both +olitical +arties. then I
believe that the anti2liberation #orces are takin( the lead3 It is 5uite natural since the countr!. ever since its
inde+endence. $as ruled b! anti2liberation #orces3 It $as durin( those times that the brokera(e houses $ere
#ormed3 %hus economic a##airs are +oliticall! connected3 At the same time $e should not i(nore the #act that a
number o# +ro2A$ami Lea(ue businessmen $ere also +roved to be activel! involved $ith the scam3 o the
+resent (overnment should be ver! $ar! o# both +arties and take immediate measures to +ut an end to such
volatilities3
3nder these circumstances, what do you think are the measures that should be taken immediately by the
regulators and other governing bodies to rein in the capital market and ensure security to the small investors in
the long run$
In order to turn the ca+ital market around. $e need to take certain +reventive measures3 But this re5uires ver!
care#ul s!nchronised ste+s on the +art o# the re(ulators and other (overnment bodies. and stron( +olitical $ill3
In #act. I have $orked out a ten2ste+ +acka(e strate(!3 A+art #rom those ste+s. book buildin( must be sto++ed
and should not be reintroduced $ithout intricate critical anal!sis3 %he IP" +rocess should be conducted in a
shorter +eriod o# time. so that more shares can enter the market3
In addition to $hat *C o##icials do accordin( to the +robe re+ort. the! are ver! ine##icient at $hat the! do3 %heir
surveillance s!stem is also ver! +oor3 o the *C should be stren(thened3 %hen all the state2o$ned banks
includin( ICB 9Investment Cor+oration o# Ban(ladesh: should +la! an active role in the ca+ital market3
333333333333333333333333333333333333333333333333333333333333333333333333333333333333333333333333333333333333333333333333333333333333333333333333333333333333333
The Ten!oint Mar"et Sta#ilisation Strate$% re&ommended #% 'r (ar"at
Dr Barkat has $orked out a ten2ste+ +acka(e strate(! $hich i# im+lemented. he believes. $ill be ver! e##ective in
stabilisin( the market3 But #ra(mented im+lementation. he cautions. $ill do more dama(e than (ood3
63 Det si(ned o## #or im+lementin( the $hole +acka(e at the hi(hest level and kee+ markets closed till all the
#ollo$in( measures are +ut in +lace3 %hen kee+ those individuals. $ho $ere involved $ith market mani+ulations.
a$a! #rom the market #or at least ;A da!s3
B3 Limit all ne(ative +ublic statements re(ardin( the market debacle because the! #urther demoralise investors
about the market3 tatements #rom ministers. advisors and re(ulators should be ver! limited and onl! +ositive3
;3 Create a Eca+ital market crisis control centreF3 A centre com+risin( a small. select (rou+ $ith im+lementation
and monitorin( +o$ers should be #ormed immediatel! to $ork as the central co2ordination bod!3 It should be
entrusted $ith the res+onsibilit! to monitor *C. D* and C*3 It should also maintain secrec! and
con#identialit!3
::: Star Weekend Magazine ::: http://archive.thedailystar.net/magazine/2011/04/04/interview.htm
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@3 Create a consortium o# bu!ers21the institutional consortium13 %he market needs massive bu!in( su++ort at this
sta(e3 A broad set o# institutions includin( banks. =B)Is 9non2bankin( #inancial institutions:. insurance
com+anies. merchant banks. and lar(e +rivate com+anies that +ro#ited #rom the market in the last #e$ !ears must
#orm a consortium o# bu!ers to collectivel! +rovide stabilit!3 And the consortium members must re+ort all bu!Gsell
activities on a dail! basis to the monitorin( committee3
<3 Create a centralised market stabilisation #und3 %he siHe o# the #und should at least be %k B.AAA crore3 Pooled
#rom (overnment #unds that are alread! allocated but remain unused 9**). BI)):. and #rom institutions and
individuals that +ro#ited in the last three !ears. the #und can +rovide 5uick and d!namic su++ort to the market
$hen needed3 It $ill bu! #rom the 1bu! list1 and selectivel! #rom outside 9IP"s and #ixed income: i# necessar!3 It
$ill also +rovide bu!in( su++ort to a list o# shares under a certain +rice #loor 9#or exam+le. +revent DP shares
#rom #allin( belo$ %k 6><:3
83 Create E+osition o# ca+ital market stabilisation CHarF3 uch a +osition $ith authorit! to #ormulate +olic! and
solicit coo+eration #rom *C. Ban(ladesh Bank and )inance 'inistr! $ill +revent in2#i(htin( bet$een di##erent
+olitical and civil service 5uarters3
>3 Create a 1bu! list1 +rioritisin( hi(h25ualit!. hi(hest im+act shares3 It $ill hel+ channel the bu!in( +ressure into
shares that have the hi(hest +ositive im+act on the index3 =o shares outside this list $ill be allo$ed #or the #irst
t$o $eeks3 %he list $ill contain shares that minimise s+eculation and re$ard com+anies $ith (ood #undamentals3
uch a +ractice $ill 1teach1 investors the im+ortance o# investin( in #undamentall! solid com+anies and in #unds
mana(ed b! +ro#essionals3
C3 Im+lement con#idential 1s$itch2o##1 #or to+2BA sell terminals3 %his ste+ $ill selectivel! shut do$n terminals #rom
$hich a((ressive sell +ressures are +laced3 %hus sell +ressure. and as such unreasonable over+ricin( can be
checked3
73 At brokera(e level. limit sell order siHe3 B! limitin( the lot siHe #or sell orders 9ho$ much can be sold +er
trade:. the sell +ressure $ill be s+read out over the da! and not #lood the s!stem all at once3
6A3 Im+ose a uni2directional 1automatic1 circuit breaker3 It $ill +revent do$n$ard s+iral in the market. and (ive
re(ulators time to come u+ $ith and im+lement additional measures and hel+ calm investors3 But it should not be
arbitrar!. in $hich case. it ma! am+li#! +anic3

)op%ri$ht *R+ thedail%star,net 2011
::: Star Weekend Magazine ::: http://archive.thedailystar.net/magazine/2011/04/04/interview.htm
! o ! 0!"#ct"14 10:$% &M