Funding projects through stock market

Dhaka,  Wed,  26 October 2016
Published : 19 Oct 2016, 20:26:25

Funding projects through stock market

Abu Ahmed
It is frustrating to find that money could not be organised from within for financing the second Meghna Bridge and another bridge at Daudkandi over the river Gumuti on the Dhaka-Chittagong highway. The government now looks for funds for building these bridges to the JICA, which had originally funded the two old bridges over the rivers Meghna and Gumuti. These two bridges were built in late 80s and beginning of the 90s of the last century when traffic volumes over those bridges were only a fraction of what are now. Building of the 4-lane Dhaka-Chittagong highway will only increase traffic volume in the coming days. The roads were made 4-lane but those old bridges remained single-lane allowing only one vehicle to cross those bridges at a time from one direction. The result is that daily traffic jam builds up at the entry points of those bridges from both the directions. Normal practice should have been that by this time, these two bridges also should have been broadened, or parallel new bridges should have been constructed. 

What did really prevent the government from constructing new bridges over the two rivers? Was it its failure to foresee the future, or was it because of lack of knowledge, or was it shortage of funds? We guess the latter was true. The government could not collect money for these two bridges for broadening or for constructing new ones alongside the old bridges.

We had been hearing since last few years that the Japanese aid agency JICA (Japan International Cooperation Agency) was being courted for funds for constructing the two new bridges alongside the old ones and as per our information, the JICA agreed to fund the constructing works. How much money would have been needed for those two bridges? We are not good estimators, but we can guess that the cost would not have been more than Tk.10 billion per bridge. Could not the government provide the money from within?  It is very much possible but there is no will. The government agencies are inept in sourcing money for project financing from within. 

The government agencies never seriously think of using market for funds for financing government-sponsored projects. The agencies are used to ask for money either from the government's budgetary allocation or from outside sources like the JICA, the World Bank or the Asian Development Bank (ADB) for such financing. If the government leaves sourcing of money for its projects under the Roads and Highways to its executives or even to the concerned ministry, which are not used to seeking money from the sources other than these old traditional agencies, they will not be able to seek any. Because, the government functionaries in these places do not know how to procure funds from alternative sources. That is why, whatever infrastructural projects were built so far by the government, those were financed either by the government's budgetary allocation directly or by external lending agencies like the JICA, the ADB and the World Bank. 

Projects, if commercially viable, like bridges over highways or power plants fuelled by cheap fuels or the flyovers over the city roads, could have easily been funded by taking finance from Bangladesh's capital market. But the truth is, this option has never been explored by the government. It is not that the government tried and failed; the government has never tried for it. For example, the government could have put Meghna and Gumuti bridges under an entity by forming a public limited company and after determining the equity base of the said company, it could ask for a certain percentage of the equity to be subscribed by the public or the intending stock investors. The people or investors would have loved to subscribe such offer as these types of companies hold out huge opportunities in terms of profit. Only thing to be done is to form a company or companies on bridges or other infrastructures that are commercially viable, then ask for regulatory permission to raise capital and go for public issue.

If the issue of raising capital is entrusted with the engineers of the Roads & Highways or to the concerned executives of the ministries, things will never happen. If the government wants to raise money from the stock market or so to say, wants to make the people owners of the government-owned projects, then a policy guideline has to be framed in this respect by the top. The government should clearly tell its bureaucracy that it is its decision that it will raise a part of money for its projects from the stock market. Projects, if financed by the stock market, would not meet anybody's purpose but these will serve the greater interest of the entire nation. Such financing will be economic and more transparent. Money is always there for commercially viable projects, be it under public sector or private sector. Money does not flow to the projects on its own; suitable mechanism is to be evolved for making money flow for project financing. That mechanism can be selling equity to the public and make the public owners of the projects. All over the world, one project is sold to the public and the money collected from such sale is used to construct another project.

The writer is Professor of Economics, University of Dhaka.

Editor : A.H.M Moazzem Hossain
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