At present, Bangladesh's development efforts are zeroed in on joining the club of middle income economies by 2026 and the developed ones by 2041. For obvious reasons, huge investments would have to be mobilised for the purpose. According to the Sydney-based Global Infrastructure Hub (GI Hub), Bangladesh will require a cumulative amount of US$600 billion to finance the ongoing and future infrastructure projects (between 2016 and 2041) alone. Even if it is assumed that financing for the projects at its current rate will continue, there will still be a gap of US$200 billion in terms of long-term finance.
Where would that big finance come from? Since the commercial banks of the country are geared to short-term lending, the functioning of a sound financial sector with a thriving bond market can well be an answer for this long-felt need of long-term financing. Bonds are equally beneficial for both their issuers and the investors. Moreover, flexibly structured bonds with a good repayment arrangement are supportive of investment and can ensure cash flow for long-term projects. At the same time, they contribute to expanding the capital market markedly. With its 8.0 per cent share of the GDP, Bangladesh's bond market is lagging behind many of its neighbours including India (at 16 per cent), Thailand (at 59 per cent),China (at 60 per cent), Malaysia (at 60 per cent) and Vietnam (at 26 per cent). One wonders why Bangladeshi investors are yet to develop their interest in the bond market which is so successful in the those economies! If there is any trust deficit in this regard among the investors that should be duly addressed. The government as well as the corporate bond issuers should work together to that end.
Alongside such efforts, awareness about the bonds as lucrative, long-term saving instruments should be built among the public as those can be bought from or sold in the bond market without much hassle. In a similar vein, the prospective investors in the bond market, should also be provided with the basic knowledge of handling bonds, calculating their yields and so on. As reported in this paper on Wednesday (October 12) quoting a keynote speaker at a recently held high-profile discussion in the city on bond market, currently, the country's total debt market is valued at US$70 billion. Of this market, 52 per cent is comprised of the government bonds. The corporate bonds, on the other hand, worth US$3 billion, make up the rest of the debt market, it added. To supplement this shortfall, the country's corporate sector should come forward and help the local bond market grow and prosper.
The recent recessionary trends in the global financial market have led to uncertainties centring around sourcing of development finance among the least developed and developing economies. Bangladesh is not an exception either. So, to widen the sources of funds, stimulating the bond market's growth has now become an imperative. On this score, it is a good augury that last Tuesday (October 11) marked the starting of trading of some 253 government bonds in the market. In this connection, the capital market regulators will be required to ease the process of scrutiny prior to approval of private bonds issued. To further and promote the fledgling bond market's growth, the government, like many other countries, should actively consider making investment in bonds tax-free.
