Are the oil companies fooling the mom-pop investors?

Share Shah

The system of direct listing as introduced by the stock exchanges, it was anticipated that it would reduce the cost of issue and bring the listing price at a reasonable level and not North Pole of the real worth. But unfortunately there have been no justice or fair play. We have seen the inordinate list of stocks of electricity companies and perhaps we may once again see the same happening to the listing of Jumuna and Meghna oil companies.
   Truly these are not oil producers who would benefit from the oil price rise. The net importer of crude oil is Bangladesh Petroleum Corporation who has to pay heavy taxes because they were screwed by the then Chairman of National Board of Revenue a decade ago. The petroleum product price is set up by the government. These companies merely distribute the products and as such there is a cap on their profitability. If the investors are thinking about windfall gains because the crude is now $ 100, they are living in a fool's paradise.
   International oil companies have done very well. The listed companies e.g. Exxon, Shell, Mobile, BP have lots and lots to gain. Oil producing countries have become fat and now buying other assets. It is expected that these gains shall also be employed in new oil fields which may take a long gestation period. Indeed the international oil experts feel that in real terms $100 level of crude oil price is around the 1979 price level. They foresee a rise of 20-30 dollars in the next five years. The oil surge will not benefit these companies, only the government will gain because of the inordinate tax structure.
   The stock market debut of Jamuna Oil began after the submission of this piece. Two hours have been dedicated for the trading of this scrip; a monopoly given to ICB. The first ten minutes would be considered a build up of prices. The tough question is that during these ten minutes ICB can manipulate the prices by introducing bids of their surrogate accounts. Definitely this is a conflict of interest-then again ICB is the only organisation allowed to have the cake and eat it too. It is very strange because the regulator who goes after investors who are barely a breath away from last price refuses to take notice of ICB.
   After two working days there is a free for all and eventually shares would be normally traded. I think normally is a cruel word because once as ICB surrogates have played the pipe there is little chance that greedy investors would follow any other tune. The prices will keep on jumping till it dawn on the investors that something is wrong. By then it would be too late and many fingers would have been burned. There is no end to the speculation---- after the cooling period ICB would have the additional ability to buy shares on account of its various mutual funds and account. As such it shall keep on manipulation after all nothing is coming out of the pocket of ICB staffers.
   There is wide a range of speculation and absurd expectation. It is rumoured that the directors of the company are expecting prices around Taka 350 level. It is also said that ICB staff have been telling their clients to bid at least Taka 400 plus. I do not know if there is any truth in this rumour-only time will tell. After all the share book value is around Taka 15 and nominal value is Taka 10. Perhaps the Securities & Exchange Commission should have put a limit on the price level if it really wants to effectively develop the direct listing method.
   ICB as an institution has had every benefit fair and foul. It was able to trick the Asian Development Bank by not only retaining the original companies but by having three subsidies. This is only in paper because everything is run from the top. Every staff is benefited by positions in listed companies where they can squeeze facilities from the listed company and points from bank deposits. By doing all this chicanery ICB was able to retain its dominant role which it had almost lost in 1996.
   Those who believe in the conspiracy theory believe that the role of ICB staffer in 1996-97 was to ensure that all growing brokerage houses, investment companies were disgorged and put in harms way. One may recall that the enquiry committee was set up in 1996 was not established by choice of SEC but by certain person who wanted to fix the private sector. The Chairman of the Committee was clueless about the stock market and was easily moulded by ICB staffers to sign a report in order to fix the nascent players and ensure that ICB despite being the largest player, topping the list was not included. Later the Chairman was amply rewarded by sinecure position. The report was never opened by SEC but directly presented to the Ministry of Finance, where it is rumoured that is was doctored. Let me assure my readers that a public sector can never energise the capital market. This has not happened anywhere and wherever they have tried, it has resulted in political sycophancy. Many former ICB staffers who made a lot of money in 1996 have rightly moved into becoming players in the capital market.
   One cannot deny the role and services ICB has undertaken for this market. Indeed ICB was needed and ICB did many things to revitalise the stock market. It created savings instruments and mobilised funds. Our praise is for ICB as an institution and not to any specific person. But times are shifting and the government must seriously consider the new paradigm. Let the people do their work and let government concentrate on regulations. Alexander Hamilton Institute, a right wing think tank on fair international trade has recently shown concern about over regulation in many countries. Our answer to this has been putting a former top boss who over regulated all his life to now deregulate!!!

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"We feel very proud of being able to handle the money to perform activities for the development of our village, our own community. We contribute 15 per cent of the cost and ensure that our money is being used for the intended purpose", said a community member from a village in Jamalpur district who falls in the income category of hardcore poor.
   This has been possible, thanks to a Government-led community demand-driven initiative Social Investment Programme Project (SIPP), that has transformed lives of about 2 million people living in the 1000 project villages in Jamalpur and Gaibandha. Supported by the World Bank (WB), SIPP adopted Community Driven Development (CDD) approach to empower the community to collectively identify, prioritize, plan, fund and implement their development needs. This new approach has uncovered the potential of the rural poor in Bangladesh.
   Communities in 1000 villages have benefited from about 1300 community infrastructure sub-projects ranging from rural roads, to schools, to tube-wells, with better resulting quality and at low costs. About 40,000 community members directly benefited from skills development activities under the seed fund. Given the demand from the communities to expand the scope of the project, additional funds have been made available to the project. This fund will be used under the Consolidated Phase with particular focus on building institutions of the poor to give them voice and scale up and promote sustainable livelihoods for them, especially for those who have not benefited from other interventions. The communities' feedback on this revised bottom-up institutional structure is very positive, especially its focus on the poor and most vulnerable.
   Particularly, the rural communities have shown high enthusiasm in developing a community-led financing and livelihood model that suits their conditions better and provide them flexibility to adjust to their day-to-day circumstances. In less than a year, about 15,000 small savings and credit groups have been formed in two districts of Jamalpur and Gaibandha, who accumulated their own savings amounting Taka 22 million, many of them have started internal lending.
   These groups would be provided assistance to improve their livelihood through technical assistance and information about markets and products. The basic project rules of participation, transparency, and downward accountability have been institutionalised at all levels, and all village level institutions in about 1000 villages have been strengthened with membership of women, youth and the poorest sections of communities.
   After the recent floods in July-September 2007, the focus of the project has been expanded to undertake a livelihoods restoration programme for the flood-affected communities in partnership with PKSF. The additional assistance will be made available by the WB to the affected communities in the Northern flood affected districts in the first quarter of 2008.

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