Stock market begins new fiscal

year on high note

Sadat Sayem
The country’s stock market begins the new fiscal year today on a high note on the
back of a bullish trend seen in the second half of the 2006-07 fiscal year that ended
Saturday.
Share prices rallied and turnover rewrote its own records in January-June period,
shrugging off political concerns.
In the just-ended financial year, the general index of Dhaka Stock Exchange
gained 809.8 points or 60.45 per cent to close at 2149.32 on June 28, while its blue
chips index, DSE20, advanced by 571.23 points or 43.58 per cent to close at
1882.09.
Political volatility took its toll on the stock market towards the end of the calendar
year 2006 as it did on other sectors of the economy.
But stock prices bounced back with the beginning of 2007.
Analysts and market players said the market recovered from a prolonged bearish
trend after the promulgation of the state of emergency in mid January that put to an
end to the political violence.
From January 14 to June 28, the DSE general index gained 567.33 points. The
benchmark crossed 2000-point mark for the first time on May 31.
Increased participation of institutional, retail and foreign portfolio investors pushed
up the market during the period and helped it overcome the steep plunge in prices
seen from the mid February to late April after the interim government launched a
crackdown against corruption suspects.
Market sources said surplus liquidity in the banking
system also influenced the stock market rally in recent
time.
DSE turnover set its highest ever record at Tk 234.44
crore on June 26. On January 21, the market indicator hitting Tk 110.90 crore
surpassed the previous highest turnover record of Tk 106 crore reached on
November 13, 1996, ahead of the capital market bubble burst.
During April-June, 2007, the fourth quarter of the just-concluded fiscal, the daily
average turnover at the DSE was Tk 110.78 crore, up from Tk 84.93 crore in the
third quarter. The amount was Tk 44.45 crore in the first quarter and Tk 36.23 crore
during October-December, 2006.
DSE market capitalisation rose to its all time high of Tk 47,724 crore on June 26,
while it was Tk 21,545 crore on July 2, 2006, first trading of the last fiscal year.
The rally and arrival of new issues in the last fiscal year contributed to the growth
of market capitalisation at the bourse, analysts said.
Some of them, however, expressed concern recently over a possible overheating of
the market due to much higher demand for shares than the supply of securities in
the market.
If the shares of the state-owned enterprises including banks and private sector
telecom service providers are floated in the market, the supply side constraints
would be removed to a great extent, they said.
The new budget has taken up some measures to encourage private mobile phone
operators to offload their shares and investors to enter into the bond market. It has
also pledged that a number of state-owned companies would offload their shares in
the 2007-08 fiscal year.
Tannery owners demand soft loan
for shifting factories to Savar
Staff Correspondent
The tannery owners on Saturday demanded compensation and soft loan for shifting
their factories to the Savar Leather Industry Estate from Hazaribagh of the capital.
Their demand came at a seminar organised by the Federation of Bangladesh
Chambers of Commerce and Industry in the city. They said the Tk 250 crore fund
that has already been provided for this purpose was inadequate.
The discussants at the seminar with FBCCI vice-president Dewan Sultan Ahmed in
the chair, underscored the need for short-term financing facilities, technical training,
modern machinery and marketing strategy for the country’s leather sector.
They opined that the leather units should be treated as small and medium
enterprises and facilities provided accordingly.
‘The tannery owners need at least Tk 2000 crore fund from the government for
shifting the factories from Hazaribagh to Savar,’ said president of Bangladesh
Finished Leather and Leather-goods and Footwear Exporters Association Tipu Sultan.
He said that Tk Tk 4,500 crore is required as cost for shifting of 200 tannery units
while the owners don’t have capacity to spend over Tk 2,500 crore. The BFLLFEA
president demanded soft loan at three per cent interest rate for leather industry.
Leather sector has potentials to raise export earning to Tk 12,000 crore from the
existing Tk 2,800 crore annually and create 0.4 million employments raising from the
less than 0.1 million, he said.
Mohammad Abdul Mazid, member of Planning Commission, stressed the proper
technical know how and adequate infrastructure for booming the leather sector.
‘Leather industry stakeholders should come up with an integrated strategy for
development of the sector,’ he suggested.
Dewan Sultan Ahmed said producing 86 million square feet of fine quality raw
leather Bangladesh’s export earning from the sector is around 300 million dollar
while Vietnam earns more than 2 billion dollar per annum producing the same
quantity of raw leather. Vietnam exports raw leather less, finished products mainly.

A case for E-governance

Unless we move with change,
we will become its victims
Share Shah
Last week our Finance Minister said that "The Hon'ble Prime Minster has meanwhile declared
Information & Communication Technology (ICT) as the thrust sector considering its importance for
the socio economic development of the country. E-governance has been introduced in various
ministries and divisions to facilitate easier on-line service to public."
A partial survey reveals that the above statement is not entirely true. The truth is indeed that
some organizations now have web sites which definitely helps people get basic information. No
more no less because the on-line service does not exist.
The prefix "E" whether commerce or governance means a mode of communication which is
paperless and without signatures as we know it. The western world uses digital signatures to
authenticate such electronic messages. There are many ways to safeguard messages and by itself
this is a very specialized area in the field of information technology. As we know it handwritten
signatures serve to indicate the signer's intent. But signatures in an electronic environment typically
serve three critical purposes for the parties engaged in an e- transaction - to identify the sender, to
indicate the sender's intent and to ensure the integrity of the document signed.
Three legal issues arise when parties to a transaction use electronic records to replace paper,
employ an electronic medium as the mode of communication, and use electronic signatures to
authenticate their transactions. Firstly, is it legal? Our law requires that transactions be documented
in writing and be signed. Thus electronic communications do not meet appropriate legal
requirements for writing and signature and cannot be enforceable. Secondly, can one trust an
electronic message? The Internet is not safe. Messages can be falsified. But the entire objective of
e-commerce or governance is speed, efficiency, and economy, which cannot be achieved without
reliance on messages received. Reliability that usually accompanies paper-based communications is
missing in electronic transactions. Moreover, the ease with which digital documents can be altered
without detection increases the risk of fraud for electronic transactions. Thirdly while our ministers
and business leaders are talking about the advantages of e-governance they are yet to talk about a
rules of conduct. As with any legal transactions, the parties should know the rules of the game. For
example, what is the liability of a certification authority or a trusted third party for inaccurate
identification? What is the liability of the signer of a message who loses the electronic signature
authentication device? What is required for cross-border recognition of electronic messages?
Therefore e-governance does not work in the business environment of government agencies. In
order to catch up with the rest of the world, we should make it legal, which is the most
fundamental, because it involves questions regarding the enforceability of electronic transactions.
This issue raises concerns about whether electronic records and electronic signatures meet legal
formalities such as the writing and signature requirements imposed by a variety of statutes and
regulations; whether an electronic record constitutes an "original" for evidentiary purposes; whether
electronic records and electronic signatures will be denied admissibility because of their electronic
form; whether records can be maintained solely in an electronic form; and whether the record
keeper can establish the authenticity and integrity of such records.
A glaring case of misuse of authority and corruption is the office of the registrar of Joint Stock
Companies. An organization which is fundamental to our industrial and economic development does
not move unless the palms are greased. Under the law this office is merely a registrar but customer
invariably face 'technical' advice from the functionaries. This office has a web site but no online
service. While in the rest of the world records are deposited via a CD, this is not possible in
Bangladesh. With large share holders' base, listed companies along with central depository records,
still have to make hard copies on outdated forms. In rest of the world certified copies of documents,
deeds and debentures are given on the spot, in our market protracted negotiations are made for the
'fees' to do this normal task!
If our government wishes to achieve economic growth through e-governance, than it must
address and recognize the need for legislation to encourage it. In evaluating the merits of electronic
signature legislative initiatives, there would be a need to distinguish between regulatory legislation,
which often dictates restrictive standards and conditions, and enabling or facilitating legislation,
which can be used to support freedom of contract and increase predictability and certainty in online
transactions. It must also be realized that e-commerce is not risk-free. But when law moves with
the change in business practice, law can actually have its most stabilizing effect and facilitate
economic growth. One thing is certain- great change predominates the electronic world, and unless
we move with the change, we will become its victims.

Search of leadership for good

corporate governance
Imtiyaz Husain
Philosophers have long debated on qualities of leadership, which has largely been the domain of
state and politics. Since ancient times the three major types of governments have been kingship,
dictatorships or oligarchies and democracies. These in term have been credited for advantages or
otherwise. Even today governments have retained some or other forms of these basic concepts.
These systems in turn are the reciprocal of leadership and nature of men who may act honestly or
otherwise. The nature of leadership is an interesting study, which in turn defines the style of
government. Interest in leadership studies have increased since early part of the twentieth century.
Early theories focused on what qualities distinguished between leaders and followers, while
subsequent theories looked at other variables such as situational factors and skill level. Many
different leadership theories have emerged but all are perhaps not relevant to the corporate world.
The mainstream theories examine the emerging leader or a great man or a person who emerges
to lead the nation in some crisis. Someone who is just the right person to manage the situation in
hand. Our country has seen the emergence of such leadership. But the need of the corporate world
is not to have such leaders because business operates differently from government. Today there is
a greater need to work in an environment of governance and compliance.
Among the prominent theories on leadership, behavioural school's key belief is that great leaders
are made, not born. This theory focuses on the actions of leaders, not on mental qualities or
internal states. According to this theory, people can learn to become leaders through teaching and
observation. Another approach, which is more relevant today, is the participative leadership
theories that suggest that the ideal leadership style is one that takes the input of others into
account. These leaders encourage participation and contributions from group members and help
group members feel more relevant and committed to the decision-making process. In participative
theories, however, the leader retains the right to allow the input of others. Drawing on the above
ideas management theories have converged on the role of supervision, organization, and group
performance. These theories base leadership on a system of reward and punishment; while
Relationship theories focus upon the connections formed between leaders and followers. These
leaders motivate and inspire people by helping group members see the importance and higher good
of the task. Such leaders focus on the performance of group members, but also want each person to
fulfill his potential. These leaders often have high ethical and moral standards.
If one were to synthesize the knowledge from various theories briefly discussed above, one may
surmise the common denominator for leadership in the corporate world today. The key ingredients
that emerge are high level of skill and knowledge, participatory nature of the leader whose
approach is not wholly dictatorial but more based on running and operating a team. Such leaders
have high esteem and regard for ethics and law. And thereby one may infer that a good leader will
be a good manager and thus there will be good governance. Perhaps this conclusion is too
straightforward to be assimilated readily. One must therefore examine the history of the corporate
world-its strength and weaknesses.
The spirit of entrepreneurship led to the accumulation of capital. From proprietorship evolved
partnerships till it become impossible to manage the increasing number of partners. Eventually,
royal charter in United Kingdom created the concept of a judicial person during the 15th century.
These corporate bodies were limited liability and right to sue and be sued. After the South Sea
debacle the parliament put a stop to the formation of such companies. Almost a hundred years later
a form of company's law was tabled which stipulated the conditions for the formation and operation
of companies. Over the centuries the Companies Law was structured, roles were defined and actions
and responsibilities detailed.
What emerged during the turn of the last century and is recognized today as the precursor of the
Companies Act of 1913. This law was clear about responsibilities by drafting requirement and
responsibilities of the management to the shareholders. The law was further revised and today
there is the Companies Law of 1994. The structure that has emerged over the century is not unlike
that of the government. In companies one has a board of directors elected by the shareholder, an
executive officer referred to as the Chief Executive Officer, who may either be a major shareholder
or a professional. There are other line and staff executives involved in various functional activities of
the company. However a key role is given to the Auditors who are elected by the shareholders. The
function of the auditor is to independently ascertain that the accounts are in order and the interest
of shareholders is protected.
The initial requirement of accountability and transparency under the Companies Law are simple.
The shareholders must be sent annual audited account and the matter is resolved in an annual
general meeting of the shareholders. Unlike partnerships both the responsibility and rights are very
limited because it is expected that the CEO has the capacity to manage the firm. If otherwise, he
may be removed including various other directors. The main responsibility therefore vests in the
CEO along with the oversight of the Board of Directors who approves every major decision of a firm.
Therefore, one may infer that leadership of the company vests in the CEO.
The regulatory environment today has become more complex and a firm is required to comply
with the requirement e.g. stock exchanges, securities regulatory body, tax authority, environmental
regulations, zoning laws, factories act etc. The matter is further complicated by requirements which
are sometimes are in contradiction with other regulatory bodies. The firm requires not only a
capable CEO but also a team with understanding of the major issues that need to be performed
independently. One may note from a cross cultural study of the evolutionary process of corporate
law, that over the years various countries took into account the need to have requirements on
paper as it emerged. In recent times this led to the legislation of the Sarbanes-Oxley law in the USA
wherein the CEO is required to fully certify the correctness of the accounts and reports. The
corporate scandals in the American capital market initiated the need to have oversight through
Accounting Boards. The need to have a totally independent director heading the audit committees of
public companies emerged for having proper disclosure. Some of the requirements have been
adopted in Bangladesh by an order of the Securities & Exchange Commission.
 In Bangladesh, the capital market one has often seen in the past has had a total disregard for the
spirit of the law. Often the dictatorial will and malice of the CEO and the directors have stalled the
rights of the shareholders. Many times legal cover is introduced to delay and subterfuge the basics
from the public. Like most learned behaviors such acts are also a result of what the private sector
saw the public sector do. One may point to the total decimation of corporate sectors with the
creation of sectors corporations in 1972. The firms under each and every corporation were treated
as private fiefdoms of both the bureaucracies and the political representatives. In other public
enterprises e.g. Bangladesh Shipping Corporation and Rupali Bank Ltd., those in charge frowned
upon the requirements for reports and meetings. The national carrier was set up for the benefits of
civil servants so that they may use the services for pittance. Emergence of banks in the private
sectors led to the authorization of mandates, which gave the sponsors and their progeny perpetual
rights to the directorships. The bank, which had a lion's share of bureaucrats as directors, was the
one, which was thoroughly raped and looted by insider lending.
What can one learn from this history? In bureaucracy there never was any dearth of managerial
skills. There was no misunderstanding about fulfilling the needs of compliance. Who else knows
more about the details of regulatory measures than the civil servant? What went wrong in the early
stages of Bangladesh's corporate history? One may consider that the main issue was about
disobedience. The rational of both the higher bureaucratic and political will was not to accept
regulation but to be above it. To make things happen as they wish in order to fulfill private needs.
These indeed raise the question of what could be summed as conflict of interest. One may also
wander whether the keys issues of this conflict is at all understood or respected. On the other hand
one may also blame that the leadership at the firm level was not focused, not competent or savvy
enough to forestall the selfish political challenges.
For any competent corporate strategist there is never a question of putting a square peg in a
round hole. The strategies at the top permeate down to the bottom. The man on the top often
becomes a father figure. He could be autocratic or democratic in his management style. The rest
will follow the signals of his decision process. Carl Levin, the social psychologist has pointed out in
his classical tome the leadership styles, which are autocratic, participatory and democratic.
Management science today favors the participatory style within the framework of a firm's
organization because it not only involves everyone but also gives every follower or worker some
opportunity of being a part f the company. Albeit the leader knows that only he has the final word.
So what should one seek out in the character of a leader of the corporate entity? There will be no
contest in the matter of skills and education of the CEO. But would the same principles apply to the
directors of the company? Perhaps not, because such directors are viewed as special entrepreneurs
who have reached the top through the ravages of the corporate jungle, although some may not
want to have lunch with them. Should this be right, considering the fact that they may not be
competent enough to supervise the policy matters of a company?
Now that the importance of good governance is being recognized, one may also expect that there
would be more focus on the need to have the right kind of leadership not only in the commercial
world but also in the government agencies. Unless the top is clean the dirt and filth will follow done
to the very bottom. One may observe the fact that corrupt regulatory agencies, are usually corrupt
from top to bottom. Whatever their management style, be it participatory or otherwise, unless the
top man is above board, the attitude is always to skin the public collectively.

Implementing the accords in RMG industry

M. Abdul Latif Mondal
In the light of the 10-point memoran-dum of understanding (MoU) signed on June 12 between the
government, and Sramik Karmachari OikkayParishad (SKOP) and owners of the readymade (RMG)
garment industry, another new MoU was signed on June 22 between 16 RMG workers' organisations
and owners. Since the MoU of June 12 had no representation from the RMG workers' organisations
and it was represented by workers having no connection with the RMG industry, they expressed
resentment over that MoU and announced on June 18 their agitation programmes and threatened to
call strike if their demands were not met. However, following the signing of the new MoU on June 22
by four directors of Bangladesh Garment Manufacturers and Exporters' Association (BGMEA) and
one of Bangladesh Knitwear Manufacturers' Association (BKMEA) on behalf of the owners and by
president or general secretary of each 16 RMG workers' organisations, they suspended all their
agitation programmes announced on 18 June.
For the convenience of the readers, the 10 conditions agreed upon in the tripartite deal on June
12 are mentioned below:
* Regret the damage of property and reach a consensus on immediate end to unrest.
* Withdraw the cases filed against the workers at Gazipur, Ashulia and Savar and release the
arrested workers.
* No workers to be terminated.
* Reopen closed factories immediately.
* All workers to be given appointment letter and identity card.
* No obstruction in fair trade unionism and combined bargaining.
* One-day weekly holiday to be given and other holidays as mentioned in the existing labour law
ensured.
* Overtime remuneration to the workers enjoying regular salary to be provided as per the labour
law.
* Maternity leave to be given with pay as per the labour law.
* Minimum wage board to be formed to fix wages.
The meeting held under the chairmanship of the State Minister for Labour prior to signing of the
tripartite agreement on 12 June decided to declare and implement the minimum wage structure for
the garment workers within three months of the formation of the wage board. The other terms of
the MoU would be implemented within not more than one month's time.
The media reports reveal that although the new MoU signed on June 22 between 16 RMG workers'
organisations and owners contain 16 points, these are basically the elaboration of the 10 conditions
agreed upon point in the tripartite deal on 12 June. The new MoU has, in addition, demanded a
judicial investigation into the recent violence in the RMG sector. It has also agreed to the
implementation of the minimum wage from June, no matter when it is announced by the wage
board.
Both the memoranda have been welcomed by the people and the media and they have stressed
the need for timely implementation. After the signing of the tripartite agreement on 12 June, the
daily New Age in its editorial on June 14 wrote: "A beginning to a peaceful resolution of the crisis
has been made. All's well that begins well, let us hope... The issue now is implementation of this
accord and close monitoring round all the factories in the country. As the owners have not agreed to
pay any interim relief, the wages revision should be implemented as soon as possible within the
stipulated time."
The civil society leaders have stressed the need for immediate and full implementation of the
memoranda to restore complete normalcy in the garment industry.
The media has reported that the US Ambassador to Bangladesh Patricia Butenis has expressed
satisfaction over the steps taken by Bangladesh Export Processing Zone Authority (BEPZA) to tackle
the recent labour unrest in Dhaka Export Processing Zone (DEPZ). She has appreciated the BEPZA
for its analysis of the problems and undertaking measures to bring back investors' confidence as
well as addressing the concerns of the workers..
The need for uninterrupted and smooth functioning of the country's 4,000 garment factories
employing over 2 million workers-- 90 percent of whom are first generation women --and earning
more than $ 6 billion in 2005 which amount to about 76 per cent of our foreign exchange earning,
can hardly be over-emphasised.
Studies conducted on the garment industry in Bangladesh have identified contribution from "the
cheap, disciplined and regimented workforce" as one of the important factors for the success of the
industry. But our RMG workers are unbelievably poorly paid. As reported in the media, the Brussels-
based International Textile, Garment and Leather Worker Federation ( ITGLWF), on May 24, termed
the BGMEA's reaction to the May labour unrest 'divorced from the reality of the industry' and
observed that such reaction 'makes the employers of Bangladesh a laughing stock internationally'.
In their estimation, in February 2005 a garment worker in Bangladesh received only 6 cents as
wage per hour, when the figure is 20 cents in India and Pakistan, 30 cents in China, 40 cents in Sri
Lanka and 78 cents in Thailand. The organisation described the wages as 'truly scandalous'.
It is expected that while recommending the minimum wage for the RMG workers, the minimum
wage board will take into consideration the minimum wages for the RMG workers in South-Asian
and Southeast-Asian countries, besides keeping in mind the minimum wage for workers in the
public sector of the country.
Another point that needs immediate attention of the owners is to ensure safety of workers in their
workplace. Inattention to workplace safety has resulted in a number of tragedies in the country's
garment industry. According to the ITGLWF, in five years prior to 2000, there were 30 fires in the
garment industry of Bangladesh that claimed over 250 lives. The ITGLWF apprehension of massive
disasters in the country's garment factories came true with the recent devastating fires in the KTS
Composite Textile Mill in Chittagong and collapse of a multi-storey building in Dhaka. Mentionable
that last year, after the Spectrum Factory collapse at Savar, the ITGLWF in an investigative report
warned that such tragedy could have happened in any one of 1,000 other factories and a similar
accident would soon happen again unless something was done immediately. But the garment
factory owners of the country paid little heed to that advice.
There were reports of sporadic violence in three or so garment factories in the DEPZ even after
the signing of the MoU on 22 June between the RMG workers' organisations and the owners. This
sporadic labour unrest resulted from the closure of the factories of the Youngone Group, A-One (BD)
Bangladesh and Softex Ltd. The BEPZA chairman has reportedly taken up the issue with the
management of the factories concerned to solve the problem.
There was another labour unrest at IRIS Fashion Ltd outside the DEPZ on July 4 over a rumoured
death of a worker by hired goons on July 3, non-payment of full amount for a piece of finished
product and the closure of the factory for indefinite period since July 4.
Considering the role of the garment industry in our national economy in general, and
empowerment of women and reduction of poverty in particular, all concerned must exercise their
judgement, patience etc to bring back complete normalcy in the RMG industry for its further
promotion and development in the highly competitive international market. The government,
therefore, must ensure that the agreed decisions are implemented timely and fully.