The utilisation of capital market, through government's budgetary measures, can mobilise funds to execute Public-Private Partnership (PPP) projects, experts have recommended.

The government may earmark around Tk 3,500 crore in the 2009-10 fiscal year budget for such projects. The projects will cover education and health services and infrastructure development such as power, energy, ports, roads, highways, expressways and elevated expressways.

The PPP, which will be introduced from the next financial year, aims at ensuring more participation of people in project implementation.

According to market operators, share offloading of PPP projects will help make the stock market vibrant.

Such a move will also lessen government's dependency on foreign aid or bank borrowing, they said.

The suggestion also came from the premier bourse, Dhaka Stock Exchange.

"The government should involve the stock market in raising funds for the projects to be implemented under PPP. Stock market is the best place to mobilise funds, instead of foreign aids," Rakibur Rahman, DSE president, told journalists recently.

He strongly advocated that the government should give up its tendency of bank-based financing.

However, some are opposed to any stock market fund raising before implementation of any uplift projects by the government. Dhaka University finance professor Salahuddin Ahmed Khan said, “The government should layout some terms and conditions in the PPP guidelines so that the projects offload shares in the market after a certain period.”

This should be directed in the national budget, Khan added.

Yawer Sayeed, managing director of AIMS of Bangladesh, an asset management company, echoed Khan's views.

He said the PPP is a welcoming move by the government and any involvement of PPP projects with the stock market will not only meet the demand for quality shares but also put a long-term impact on the market.

“But there should be some conditions that after a certain period the projects under the PPP will offload a portion of shares on to the market,” he said.

As per a common practice, banks and non-banking financial institutions (NBFIs) have to list on bourses after a certain period.

“Because of the prevalence of no such conditions, profitable mobile phone operators are yet to be listed on bourses,” Sayeed said.

Meanwhile, the Dhaka and Chittagong bourses suggested a number of other fiscal measures to revitalise and stabilise the stock market.

Their proposals include among others lowering income tax for listed bank, insurance and NBFIs to 35 percent from the existing 45 percent. This step will increase the capacity of the listed companies to offer cash dividends, the two stock exchanges opined.

They also sought a cut in tax on dividends offered by the listed companies from 20 percent to 15 percent.

The withdrawal of double taxation policy and raising tax-free investment ceiling from the existing Tk 0.5 million to Tk 1 million are their other demands.

The bourses also suggested the government allow investment of undisclosed money, bringing a huge amount of such money in the formal economy.

The Securities and Exchange Commission condition that bars mobile phone operators from offloading shares should also be lifted, they said. The SEC condition says that these companies are not entitled to tax rebate after such offloading, if those do not offload 10 percent of their paid up capital.

The DSE and CSE also proposed the government raise a portion of funds from the capital market for its large projects, including Padma Bridge and Jamuna Multipurpose Bridge.

sarwar