Forma # 1.ai - ICAB

The Bangladesh Accountant January-March 2011 | Vol. 69 No. 40 

Quarterly Journal of the Institute of Chartered Accountants of Bangladesh 

Vol. 69 No. 40 

ISSN 1993-3649 

January-March 2011 

CAPITAL MARKET : 

RISKS & OPPORTUNITIES

c o n t e n t s 

EDITORIAL BOARD 

Chairman 

Akhter Matin Chaudhury FCA 

Associate Editor 

Harun Mahmud FCA 

P : 02 Editorial 

P : 03 President’s Desk 

P : 05 Institute’s News 

ARTICLES 

Members 

Md. Abdus Salam FCA 

Masih Malik Chowdhury FCA 

M. Farhad Hussain FCA 

Md. Humayun Kabir FCA 

Md. Shahjahan Majumder FCA 

Amanullah Khan FCA 

Fazle Rabbi Mohammed Hasan FCA 

Md. Nurul Haque FCA 

Kazi Ehsanul Huq FCA 

Kanai Lal Saha FCA 

Md. Harun-or-Rashid FCA 

Md. Akbar Hossain FCA 

Md. Moniruzzaman FCA 

M. Abu Bakar FCA 

Mohammed Jashim Uddin FCA 

Abu Muhammed Saiful Islam FCA 

Md. Abid Hossain Khan ACA 

Kishower Amin ACA 

Shafiq Musharrof ACA 

Sujit Kumer Das ACA 

Zareen Hosein ACA 

Chairman – DRC-ICAB 

Chairman – CRC-ICAB 

Member Secretary: Secretary-ICAB 

N I Chowdhury FCA 

The Bangladesh Accountant 

Quarterly Journal of the Institute of Chartered Accountants of Bangladesh 

P : 13 

P : 19 

P : 22 

P : 41 

P : 45 

P : 49 

P : 55 

P : 59 

P : 63 

P : 65 

P : 69 

Bangladesh Capital Market 

Opportunity Still Knocks 

- Mr. Ahmed Raihan Shamsi FCA 

Avoiding Losses in the 

Share Market 

- Mr. M. Farhad Hussain FCA 

State of the Bangladesh Economy 

in Fiscal Year 2010-1011 

- Centre for Policy Dialogue (CPD) 

Fundamentals to Safeguard 

Investment in the Capital Market 

- Mr. Biplob Kanti Banik ACA 

Capital Market Review 

- IDLC Magazine 

Some Quotable Quotes 

on the Stock Market 

Who says Accountants 

are Boring People! 

- Mr. Sohel Kasem, FCA 

Corporate Social 

Responsibility (CSR) 

- Mr. A Wahab FCA 

The Flowering of Kaizen 

- (Extract from G4S International) 

Opportunities and Challenges for 

Adoption of IFRS for SMEs in Bangladesh 

- Md. Shahadat Hossain FCA 

STUDENTS’ SECTION 

Tips for C A Students 

- Sanjida Kasem FCA, FCMA 

ICAB New Curriculum 


January-March 2011, Volume: XI, Issue: 01 

A Quarterly Journal of 

The Institute of Chartered Accountants of Bangladesh 

Circular on Examination Structure 

and Conversion Criteria 

Designed & Printed By : ROOT Marketing Services

EDIT ORIAL 

The Perspective Plan and 

the Roadmap to Vision 2021 

The Institute of Chartered 

Accountants (ICAB) is the 

premier accounting body in 

the Country. It is the thought 

leader in accounting matters 

and is charged with upholding 

the highest standards of the 

accounting profession in 

Bangladesh. 

ICAB has come a long way 

since its inception. The 

Institute has produced highly 

skilled accountants. The 

qualification it offers is highly 

prized. The letters ACA and 

FCA are a matter of great pride 

for all those whose privilege it 

is to suffix these to their 

names. ICAB membership 

boasts leaders in every sphere 

of the national life of 

Bangladesh. The geographical 

spread of its membership is 

impressive with significant 

presences in UK, North 

America, the Middle East, 

Africa and Asia. 

Recently, under a twinning 

project, the syllabi and 

examination system of the 

Institute have been elevated to 

that of the Institute of 

Chartered Accounts in 

England and Wales, the 

premier global accounting 

body. It is a matter of great 

pride that the qualifications of 

those who pass under the new 

system will be recognised in 

England and Wales. 

The quarterly Journal of the 

ICAB does an admirable job of 

disseminating professional 

information to its members 

and keeping them abreast of 

the latest developments in the 

accounting profession. The 

publication has to keep pace 

with changing times and 

evolve to fulfil its onerous 

responsibilities. It must remain 

relevant to its readership at all 

times. The Journal should not 

only inform and educate but 

also be an attractive and 

interesting purveyor of its 

contents. It is in this spirit that 

the Journal sports a new look. 

The contents of the Journal 

have also been planned to 

cater to the needs of a broad 

range of professional interest. 

It should also be a medium for 

debate and a melting pot of 

opinions and views on matters 

of professional interest and 

interpretation. A dearth of 

material, however, often 

impedes the ideal mix. 

Members are therefore 

requested to contribute 

material for future issues. It is 

also intended that the Journal 

should appeal to wider 

readership including corporate 

bodies, executives and 

decision makers. A 

subscription drive to enrol 

such stakeholders will be 

conducted soon. It is 

particularly intended that 

students of chartered 

accountancy would find the 

Journal useful in their 

pursuance of qualification. 

Towards this end, each issue 

will contain a special section 

for students. We hope this will 

encourage them to subscribe 

to it. As a further incentive, the 

Journal is being offered to 

students at a very special rate. 

The Editorial Board hopes that 

you will enjoy reading the 

Journal and continue to 

benefit from it. Your feedback 

would be appreciated. 

Akhter M Chaudhury 

Chairman, Editorial Board 

02 

January - March 2011 

The Bangladesh Accountant

From the Desk of the President 

Focusing on Members 

“The Accountants,” ICAB’s 

quarterly journal has 

undergone a makeover and 

adopted a new look with the 

current issue. Credit goes to 

the Editorial Board Committee 

for the initiative. I thank the 

committee for regularly 

providing a space in the 

journal from now on for the 

ICAB President. 

ICAB was established under 

the Bangladesh Chartered 

Accountants Order 1973 as a 

supreme and sovereign 

regulator of the accounting 

profession of the accountants. 

Its membership has grown 

from 78 to more than 1400 

over almost four decades. This 

figure includes 34 female 

“ 

Every chartered accountant has the responsibility 

members. As the institute and 

its membership grow, we have 

to work more effectively as a 

body to address the needs of 

our members and 

communicate with each other 

to strengthen our profession. 

As president, my first task was 

to review and form 

committees for 2011. Through 

review, Professional 

Development committee for 

Women was merged with 

Professional Development 

committee of the Council. In 

addition, five new 

non-standing committees were 

formed for professional 

advancement. Each committee 

is chaired by a member of the 

council. The chairman will be 

responsibile to ensure that 

committee views are 

ascertained on key policy 

issues and clearly 

communicated to the council. 

Addition of new committees 

increases workload of the 

secretariat. We are working to 

overcome this limitation by 

ensuring that the committee 

chair and members work more 

proactively and regularly 

follow-up with the secretariat. 

Every chartered accountant 

has the responsibility to 

uphold the integrity of our 

profession. We as 

professionals have to be 

prompt but transparent in 

sharing information with 

ICAB, our clients, our 

prospective clients as well 

other stakeholders. Quality 

Assurance Board (QAB), a 

committee and monitoring cell 

of ICAB is working to identify 

areas of improvements of 

member firms to ensure 

adequate transparency in 

information sharing. Our 

Investigation Disciplinary 

committee is contributing to 

ensure that our members are 

held to the highest standards 

of professionalism and 

integrity. 

My goal is to strengthen 

ICAB’s capacity at par with 

to uphold the integrity of our profession” 

any other professional 

accounting body globally. In 

order to do so, ICAB has to be 

managed in a more 

businesslike manner. 

Currently, the secretariat are 

not able to fully serve the 

needs of our members due to 

lack of resources and effective 

The Bangladesh Accountant January - March 2011 03

management and 

communication. There are 

many members who do not feel 

that the Institute is meeting 

their needs effectively. We are 

striving to improve 

communications between the 

secretariat , members and 

council members. We are also 

using technology including 

e-mail and SMS to enhance 

communication with 

members.Till now most of our 

communications with members 

has been by way of paper, 

which is expensive and time 

consuming and often becomes 

a challenge to deliver timely. 

The solution is to go paperless 

and move to electronic 

communications. 

Unfortunately, not all members 

and particularly those outside 

Bangladesh, have furnished 

their email addresses to ICAB. I 

urge all resident and 

non-resident members to send 

their email addresses, which 

could also be included in the 

latest members’ handbook. I 

respect the decision of any 

member who may prefer 

traditional paper 

communication and they 

should inform the secretariat 

about their option of choice.As 

chairman of the Information 

Communication Technology 

(ICT) committee in 2010, I 

introduced SMS 

communication with members 

regarding meetings and 

seminars. 

Any member not currently 

availing this facility, if is 

interested in doing so can 

forward his/ her mobile number 

to ICAB to join the SMS list. If a 

member does not wish to 

publish his/ her contact 

information in the members’ 

handbook, s/he should inform 

ICAB about his/her decision in 

the correspondence. 

ICAB currently has a website to 

which the ICT committee has 

brought some improvement. An 

ICT sub committee is 

coordinating the effort to bring 

more change to the design and 

introduce new content to the 

website. I will provide a more 

detailed update to our members 

at a later date on digital 

technology based initiatives of 

ICAB. 

In my year in office, I will give 

my best effort to serve our 

members and enhance 

communications 

and 

information flow among ICAB, 

its members and other 

stakeholders. As capacity of 

ICAB is strengthened, the office 

bearers, council members and 

secretariat can support our 

members to cope with 

challenges of the profession in 

an information-based society. 

Ms. Parveen Mahmud 

President, ICAB 

04 



Institute’s News 

In This Section 

P:06 CPD Seminar 

P:09 Professional Matters 

P:11 Celebrations

Uniform Accounting a must for Energy Sector 

Commerce Minister at ICAB Seminar 

“Accountability of the 

energy sector should be increased 

and we need a uniform 

accounting system to ensure 

greater accountability of the 

sector. This is a complex issue 

because we are generating 

electricity using different types of 

fuel and selling the electricity at 

different rates to different users. 

That is why we need a uniform 

system of accounting” said the 

Chief Guest Mr. Muhammad 

Faruk Khan MP, Hon’ble 

Commerce Minister, GoB, at a 

CPD Seminar on Introduction of 

Uniform Energy Accounting in 

Bangladesh organized by the 

Institute of Chartered Accountants 

of Bangladesh (ICAB) on 22 

January 2011. 

Mr. Mesbah Ul Alam, Secretary, 

Ministry of Environment and 

Forests, GoB, was present as 

Special Guest. 

Mr. K Z Islam FCA, Past 

President, ICAB, conducted the 

seminar as Session Chairman. 

Dr. Jamaluddin Ahmed FCA, 

Council Member & Immediate 

Past President, ICAB, presented 

the keynote paper. 

Mr. Muhammad Faruk Khan MP, 

Hon’ble Commerce Minister, 

GoB, said that the power sector is 

expanding very fast and a large 

amount of electricity is going to 

be added to the national grid in 

the near future. As such there may 

be problems with the accounting 

of the sector if there is no uniform 

system in place. Moreover, there 

are subsidies and other issues 

involved in energy accounting. A 

clear accounting system for this 

sector is needed. 

Ms. Parveen Mahmud FCA, 

President of the Institute, in her 

address of welcome said that the 

theme of the seminar is very 

important in the context of the 

current state of the power and 

energy sector in the Country. “We 

are holding this seminar at a time 

when the Government of 

Bangladesh is working to utilize 

all its resources to achieve its 

vision to raise Bangladesh to a 

middle income economy. The 

President expressed ICAB’s 

appreciation of Bangladesh 

Energy and Regulatory 

Commission’s efforts to introduce 

uniform energy accounting 

practices. She also welcomed the 

Commission to collaborate with 

ICAB to introduce such uniform 

accounting practices. 

Mr. Mesbah Ul Alam in his 

speech said that Energy 

Accounting System is a process 

for recording, tracking and 

reporting the amount and costs of 

the various consumables used by 

commercial scale facilities. It 

involves the establishment of a 

data base for storing historical 

information on electricity, natural 

gas, other fuels, water etc. He 

declared that one cannot manage 

what one cannot measure. 

Accountants should propose a 

system of measurement that 

eliminates inconsistencies and 

balances limited resources with 

unlimited demand. Such a system 

should help regulators and 

administrators take better 

decisions. Successful 

development of the sector is 

predicated upon a reliable and 

rational accounting system and 

accountants have the capacity to 

help management to optimize 

resource utilisation. 

Dr. Jamaluddin Ahmed presented 

the paper in which he succinctly 

described the Information needs 

for Public Service Regulation, 

Uniformity in Accounting for 

Energy, Core issues in Uniform 

Energy Accounting, Scope of a 

Regulatory Accounting System 

and Development of Uniform 

Energy Accounting in Bangladesh. 

Mr. K Z Islam said “There is no 

denying that a uniform system of 

energy accounting is needed. 

There are discrepancies and we 

have a lot of problems with 

energy and its accounting and 

auditing. It is a fact, though, that it 

is very difficult to have a uniform 

accounting system in the energy 

sector as energy in Bangladesh is 

produced from many different 

sources”. 

Mr. Md. Shahadat Hossain FCA, 

Vice President, ICAB thanked 

everyone for participating in the 

seminar and for sharing their 

views on the topic. 

06 



An IFRC can ensure proper 

performance of CA Firms 

Dr. AB Mirza Md Azizul Islam 

Dr. AB Mirza Md Azizul 

Islam, Former Adviser for the 

Ministry of Finance and Planning 

to the Caretaker Government of 

Bangladesh urged ICAB members 

to support the initiative to form a 

financial reporting council which 

would ultimately help enhance 

the discipline of the CA firms. 

“Although the initiative to form an 

independent financial reporting 

council has been taken a long 

ago, it is yet to be materialized 

because of resistance by some 

vested interest”, said Dr. Azizul 

Islam, who was also the 

Chairman of Capital Market 

regulator Securities and Exchange 

Commission (SEC) speaking as the 

Chief Guest at a CPD Seminar on 

the Role of Capital Markets and 

Chartered Accountants held on 

Monday, 21 March 2011 at ICAB 

Auditorium in Dhaka. 

He said that some Chartered 

Accountants (CA) firms have 

failed to perform their duties 

appropriately. 

“In the past, some CA firms failed 

to perform their duties 

appropriately. In most cases, ICAB 

failed to take proper measures 

against those errant firms as there 

might be some conflict of interest 

involved,” said Mirza Aziz, urging 

ICAB members to support the 

initiative to form a financial 

reporting council. 

About the stock market Mr. Aziz 

said “Stock market analysts 

identified deep collusion among 

market stakeholders as a major 

setback that distorts that capital 

market and takes it to dizzy ling 

heights in signs of high volatility. 

Ms. Parveen Mahmud FCA, 

President-ICAB in her address of 

welcome said capital market is a 

market for securities, where 

business enterprises can raise 

long-term funds. 

Chartered Accountants work in all 

fields of business and finance. 

Some are engaged in public 

practice work, others work in the 

private sector and some are 

employed by government bodies. 

Chartered Accountants play the 

role of auditor to the company 

tapping the capital markets. They 

can also play the role of an 

advisor to the company tapping 

the capital markets. They are 

working for SEC or Stock 

Exchanges and play regulatory 

role. In fact they have a lot of 

roles to play in the field of capital 

market. 

We need to strengthen corporate 

governance in listed companies, 

analyze their performance, 

identify their weaknesses and take 

responsible measures. We are 

genuinely embarrassed when 

fingers are pointed towards 

accounting professionals for 

distorting market information. We 

have to be more responsible in 

our professional services. In this 

regard, the Quality Assurance 

Board monitoring cell and the 

Investigation Disciplinary 

Committee of ICAB are 

determined to ensure that its 

members look beyond self interest 

to uphold the profession’s 

integrity. 

Past President Mr. A K 

Chowdhury FCA conducted the 

session as Session Chairman. A 

lively floor discussion took place 

after presenting the theme paper 

by Mr. Ferdouse Ahmed Khan 

FCA. Mr. Md. Abdus Salam FCA, 

VP, ICAB said that CA firms can 

play different roles in the capital 

market. They can perform the 

duties of the regulator as well as 

adviser for the companies. He 

thanked everyone to share their 

views through this seminar while 

offering vote of thanks at the end 

of the seminar. 


Management Accountants, Auditors have 

to be more conversant with IT, Internet 

- President, ICAB 

The Institute of Chartered 

Accountants of Bangladesh (ICAB) 

organized a CPD Seminar on “IT 

Enabled Systems: Opportunities 

and Challenges for Assurance 

Professionals” on Thursday, 31 

March 2011 at ICAB Auditorium, 

Chartered Accountant Bhaban, 

100 Kazi Nazrul Islam Avenue, 

Kawran Bazar, Dhaka-1215. 

Mr. Mustafa Jabbar, President, 

Bangladesh Computer Samity 

graced the occasion as Chief 

Guest. 

Mr Abbas Uddin Khan FCA, Past 

President, ICAB conducted the 

Seminar as Session Chairman. 

Mr. Aniruddha Neogi, FCA (ICAI), 

CISA, CGEIT, CRISC Director, 

Monitoring Evaluation & Internal 

Audit, ICDDR,B presented the 

keynote paper. 

Parveen Mahmud FCA, President, 

ICAB in her address of welcome 

said that our vision is to build a 

Digital Bangladesh within 2021. 

So it is essential to enrich the ICT 

sector through developing 

software industry and IT services. 

She said management 

accountants, auditors and 

academicians will become more 

knowledgeable and conversant in 

the design, operation and control 

of accounting information systems 

through increased use of 

Information Technology and 

Internet. 

Auditors should update 

themselves to evaluate and 

safeguard assets and maintain data 

integrity through computer 

systems. To properly evaluate the 

potential risks, accountants and 

auditors must be familiar with 

current and emerging information 

technologies, she added. 

The ICAB President said, it is 

thought-provoking whether we 

are providing our students and 

future accounting professionals 

with a framework to understand 

the need for IT security and to 

address the threats. 

In ICAB and in firms, necessary 

computer facilities are not 

available for all students and 

trainees as required. So ICAB has 

included theoretical programme 

for students’ syllabuses for IT 

knowledge and IT application that 

have been written by ICAEW 

following IFAC requirements and 

agreed by ICAB, she added. 

Mr. Mustafa Jabbar in his speech 

thanked ICAB for entering the 

digital era and appreciated the 

creative role in the ICT sector. He 

said Information Technology is 

the key to development. Digital 

Bangladesh should not be only for 

a certain group of people or a 

section of society. It should 

benefit all. 

As one of the founders of 

Bangladesh Computer Samity 

(BCS), Mr. Jabbar highlighted the 

activities of BCS. He said BCS is 

playing a leading role in 

flourishing ICT and popularising 

the use of computers in rural 

areas through motivation. He said 

ICAB has gone one step ahead in 

the society by introducing ICT in 

its exam system. This effort will 

not only benefit ICAB, but also 

others concerned. The seminar 

ended with a vote of thanks. 

08 



Orientation Programme for Teachers 

and Students on New Curriculum 

“This is a golden scope to be 

the member of ICAEW by 

attending the new syllabus. We 

all should take this opportunity 

and maintain the quality of the 

syllabus related to ICAEW”, Ms. 

Parveen Mahmud FCA was urging 

in the Orientation Programme 

while delivering her address of 

welcome. She said that new ICAB 

curriculum based on ICAEW 

curriculum has already been 

introduced from January 2010 

and examinations under new 

curriculum were started from 

May-June 2010. She also 

informed the audience that The 


of Bangladesh (ICAB) and the 


in England and Wales (ICAEW) 

have been rigorously working to 

strengthen the accounting 

profession for compliance and 

practices of the standards and 

codes in the corporate sector. In 

October 2009 the ICAB signed a 

Memorandum of Understanding 

(MOU) with the ICAEW. 

Mr. Md. Abdus Salam FCA, Vice 

President, ICAB elaborately 

explained the new syllabus by 

showing power point. He said 

that this is the seven syllabus we 

have started implementing since 

January 2010. It is very much 

necessary to disseminate this kind 

of orientation, he added. Mr. 

Salam said that a new curriculum 

and examination system 

introduced by the Institute has 

been highly applauded by the 

corporate sector of the country 

and opined as parallel to the 

curriculum of world class 

accounting bodies like the 


in England and Wales (ICAEW). 

Mr. N I Chowdhury FCA, 

Secretary of the Institute said that 

ICAB is contributing profusely to 

establishing an enabling 

environment for a transparent and 

accountable financial culture. He 

said that the new ICAB 

Curriculum and the examination 

system which he predicted will 

elevate the status of ICAB to the 

rank of the world class accounting 

bodies. This programme was 

conducted by Mr. A S M Nayeem 

FCA. 


A delegation of the Institute of Chartered Accountants 

of Bangladesh (ICAB) led by Ms. Parveen Mahmud 

FCA, President, ICAB called on Dr. Mohammad 

Tareque, Finance Secretary at Bangladesh Secretariat 

on 10 January, 2011. She apprised the Secretary about 

the various activities and recent developments of the 

Institutes particularly about MoU and some other 

activities under this. 

She highlighted the role of Chartered Accountants in 

the financial scenario of the country. 

Dr. Mohammad Tareque, Finance Secretary, GoB, (extreme left) is 

seen with ICAB delegation 

The Secretary, Ministry of Finance gave a patient 

hearing to ICAB delegates and assured all possible 

cooperation. The delegation included Mr. Md. Shahadat 

Hossain FCA, Mr. Nasim Anwar FCA, Vice president, 

ICAB and Ms Suraiya Zannath Kahn FCA, Senior 

Financial Management Specialist, The World Bank. 

A Delegation of the Institute of Bangladesh (ICAB) 

made a courtesy call with Mr. A S M Alamgir Kabir, 

Chairman, Power Development Board (PDB) at his 

office on 01 March, 2011. Mr. Abbas Uddin Khan 

FCA, Member Council & Past President led the ICAB 

delegation which included Mr. Md. Abdus Salam 

FCA, Vice President, Mr. Md. Abu Taleb Talukder 

FCA and Mr. AKM Aminul Hoque FCA, 

Members-ICAB, The delegation informed the PDB 

Chairman that ICAB can play a very useful role if 

opportunities are offered. ICAB could provide 

professional services to PDB in designing a control 

device in collaboration with the PDB authority to 

reduce the system loss. 

Mr. Md. Faszlul Hoque, Member Finance, PDB was 

also present at the meeting. 

A ICAB delegation led by Mr. Abbas Uddin Khan FCA, Member 

Council & Past President, ICAB made a call with Chairman, PDB 

Ms. Parveen Mahmud FCA, President, ICAB giving a 

short brief on the proposals were made during the 

meeting time 

A delegation of the Institute of Chartered Accountants of 

Bangladesh (ICAB) made a courtesy call on Md. Ghulam 

Hussain, Secretary, Ministry of Commerce, GoB at his office on 

23 March, 2011. The ICAB delegation was led by Ms. Parveen 

Mahmud FCA, President, ICAB. Other members of the ICAB 

delegation were Mr. Md. Abdus Salam FCA, Mr. Md. Shahadat 

Hossain FCA, Vice Presidents, ICAB and Mr. N I Chowdhurey 

FCA, Secretary-ICAB. 

The ICAB delegation informed the Secretary, that as a member 

of different International and Regional Accounting Bodies, ICAB 

is playing a very vital role to improve the accounting and 

auditing standards, corporate management and governance, 

financial reporting standards and ethical issues related there 

with in Bangladesh. 

Mr. Md. Showkat Ali Waresi Joint Secretary, MOC and Mr. ATM 

Murtozaa Reza Chowdhury, NDC, Additional secretary, MOC 

were also present at the meeting. 

10 

January - March 2011 The Bangladesh Accountant

A two member team comprising Dr. Afra Saijad, 

Head of Education, ACCA Pakistan and Ms. 

Mohua Rashid, Country Manager, ACCA Bangladesh 

called on the ICAB President, Ms. Parveen 

Mahmud FCA on 7 February, 2011. 

The Meeting was focused on “Perspective of 

ACCA’s support to ICAB in the areas of tuition 

and teachers training”. They discussed ways and 

means of supplementing the existing training 

facilities for ICAB students. 

A Meeting between ICAB and ICAEW representatives 

was held on 10 March, 2011 at ICAB 

Mini Conference Hall. Some important issues 

were discussed in the meeting. The meeting was 

discussed about the working plan of ICAB and 

ICAEW to strengthen ICABV capacity building in 

Technical and Learning and profession development. 

The annual picnic of DRC, ICAB, was held 

on 14 January 2011. It was all fun and 

pleasure for about 400 picnickers who were 

enthralled by the natural beauty of the 

venue-“Rangamatia Water Front” located 

some 45 km from Dhaka at Gazipur. 

On the eve of the picnic, Ms Parveen 

Mahmud FCA, President ICAB, delivered a 

message in which she said “ICAB Picnic is 

essential recreation and serves as a happy 

and joyous occasion for all of us. It promotes 

fellowship and social interaction amongst us 

and our families which goes a long way 

towards strengthening our professional 

bonds. I am sure the scenery of “Rangamatia 

Water Front” will be greatly invigorating and 

will refresh us with a new zeal of life”. 

A ICAB team headed by Mr. Md. Shahadat Hossain FCA, paid glowing tributes for the Martyrs by placing wreaths at Central 

Shahed Minar on 21st February and at National Smriti Shoudha on 26th March, 2011 respectively 


Bangladesh Capital Market 

Opportunity Still Knocks 

Ahmed Raihan Shamsi FCA 

“It’s a Gilded Egg!” somebody 

shouts and everyone rushes on 

investing in the share market 

hoping to multiple their 

investment in a short time. What 

really made them invest with such 

zest and cause an amazing growth 

figure of 81.47% in DSE general 

index in 2010? 

In 2010 alone, the share market of 

Bangladesh has experienced BDT 

4,009 Bn annual turnover, BDT 

3,508 Bn market capitalization, 

52.2 Mn trade and 3.2 Mn BO 

accounts instigating the most ever 

vibrant period of share market in 

the history of Bangladesh . This is 

not just some “one fine morning” 

story. The market has been 

developing immensely in last few 

years and particularly in 2010, 

some added factors triggered this 

upsurge. If we look back, the 

market capitalization has 

increased significantly over the 

years; the market cap to GDP 

ratio stood at 50.8 % in 2010 

from 5.18% in 2005 . This is too 

good in too short span of time to 

sustain. 

DSE Market Capitalizaon over the Years 

50% 

45% 

40% 

35% 

30% 

25% 

20% 

15% 

10% 

5% 

0% 

USD mn 

45000 

40000 

35000 

30000 

25000 

20000 

15000 

10000 

5000 

0 

2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 

DSE M Cap 

Market Cap as % of GDP 

Note: GDP for 2009-10 is considered for 2010-11 Market Cap. as percentage of GDP calculaon 

As of March 02, 2011 Market Cap of DSE is 38.9% of the Bangladesh’s GDP (2009-10) 


DSE actually has outperformed 

other markets in terms of growth 

& performance in recent years. If 

DSE is put in a comparative 

analysis table (Graph-2), it is 

evident that this unusual growth 

created anomaly in 

the market, especially in the year 

2010. Reflection of this can be 

easily traced to the lower 

dividend yield percentage and 

higher average price/book value 

ratio compared to other major 

markets of Asia. This growth did 

not continue for long; the fall 

came and it came hard. The 

sudden market crash came like a 

bolt from the blue for everyone 

involved. 

DSE Relave Performance (Rebased) 

• Lack of effective monitoring 

from market regulators 

encouraged the market to take 

risky bullish trend without 

senses around. 

Why such huge rise & 

massive fall? 

The unusual growth experience 

was not caused by one single 

force. These varied from a range 

of some basic economic theory all 

the way to the mindset of the low 

volume Retail Investors. 

• Basic equation of demand 

supply created the bubble in 

the market. Demand of shares 

increased with the supply 

lagging far behind. This is evident 

from the oversubscription 

status of any IPO floated in the 

market. 

• Merchant banks invested 

heavily in the market as they 

had the knowledge and 

opportunity to do fundamental 

and technical analysis to gain 

an upper hand from the retail 

investors. This knowledge 

allowed them to make 

abnormally high profits and 

this is reflected in the hefty 

profit figures of 2010. 

• Commercial banks reduced 

the interest rate on fixed and 

savings deposit from 14-15% 

in 2008 to 9% in 2010 . Also 

Tax was imposed on Govt. 

Saving certificates. This forced 

the general investors to look 

for an alternative source and 

eventually ending up investing 

in the share market which was 

showcased to them as much 

faster money making waysimilar 

somewhat to a Casino! 

• Almost all Private Commercial 

Banks were focused on 

establishing their Merchant 

Bank Unit and billions of taka 

were invested to gain “quick 

return” from a heated market. 

Even industrial loans were 

invested in share market which 

went on for some time beyond 

the radar of Bangladesh Bank, 

SEC and other regulators. 

• Investment of black money 

was encouraged in the capital 

market during the Annual 

14 



Budget for the sake of so called 

economic development of 

country. 

• Government withdrew the 

imposition of tax on individual 

investment in share market 

after the budget. Tax on 

Institutional investment was 

kept at insignificant level. 

• Brokerage houses increased 

Round Table from The Daily 

Prothom Alo, 30-1-2011 their 

branch offices throughout the 

country to facilitate the 

entrance of new retail 

investors into the market. 238 

brokerage houses of DSE 

opened 590 branches in 32 

districts. Most of the new 

entrants lack the basic 

knowledge of share market 

and only has the intention to 

make “quick money”. The 

total no of BO accounts stood 

at 3.2 mn at the end of 2010 

with a 45% growth in 2010 

alone. 

• 27 out of 35 “shares split” had 

abnormal gain (ranging from 

5% to 70%) for almost no 

reason. Investors went for 

share purchase whenever there 

was news for share split. No 

concern was raised by any 

responsible corners. 

• 26 out of 32 shares 

dematerialized had abnormal 

return (ranging from 5% to 

304%); this also led to 

unnecessary hike in price. 

• 18 new IPOs were listed 

during 2010 with a total of 

BDT 11,700 Mn in public 

offering. This has given the 

stock market an organic 

growth by increasing the 

supply side and depth. 

• 23 companies raised BDT 

28,194 Mn through right share 

issue in 2010. Abnormal gain was 

observed among 11 shares 

(ranging from 11% to 58%) 

From all these sources, lot of 

money got injected into the 

Capital Market, and obvious result 

was too much money was chasing 

too few already overpriced shares 

in the market. The stock market 

crossed the threshold in 2010 

where it could no longer sustain. 

Merchant banks, Brokerage 

houses, Asset management 

companies and high net worth 

investors - everyone realized this 

and went into securing their 

investment in Q4 2010. Sell side 

started to gain momentum in the 

market. SEC and Bangladesh 

bank, even though realizing the 

overheated state of the market 

much earlier started taking strict 

measures when profit booking has 

already started rolling in the 

market. SEC took some restrictive 

measures by reducing the margin 

loan ratio and the individual and 

Merchant Bank credit limit. 

Bangladesh Bank went hard on 

the banks regarding their 

exposure in the capital market. It 

also increased the CRR from 5.5 

to 6% to reduce the money 

supply . All these measures 

transmitted a red alert signal in 

the minds of the retail investors 

resulting into massive panic sales 

by the investors. 

The Challenges faced by 

our Capital Market 

1.Supply constraints: Bangladesh 

has only 219 equity shares traded 

in the market. Whereas our 

neighboring countries have a 

good no of equity shares traded in 

the market like India has 3751, 

Pakistan 599, Srilanka 243, 

Indonesia 406, Vietnam 372. This 

supply side constraint generates 

excess liquidity problem and 

enhances the scope of price 

manipulation in the market. 

2.Rumor based investment 

decision: At present, the retail 

investors of our country lack 

systematic and fundamental based 

analytic investment process. They 

depend mostly on market rumors 

for investment. As a result, all the 

retail investors behave illogical 

and chase a certain company’s 

share based on rumors. Some 

deep pocket syndication 

reportedly spread rumors as part 

of their game. 

3.Dominance of retail investors: 

The retail investors of our capital 

market comprise of 70% to 80% 

of the total market capitalization. 

This percentage is much lower in 

other developed markets of the 

world. Ratio of Institutional to 

Retail investor needs to be 

increased as Institutional investors 

bring stability through non 

speculative long term 

investments. 

4.Coordination among 

regulators: SEC, Bangladesh 

Bank, Ministry of Finance and 

other related stake holders did not 

have enough coordination 

towards any given policy. This 

lack of coordination sometimes 

gives misleading indications to 

the market. Better management of 

the capital market in pace with 

global standards will not be 

possible without the coordinated 

efforts of the regulators. 

5.Debt market: Our country does 

not have an established secondary 

debt /bond market. Due to this, 

the companies are unable to fund 

their short term requirements. The 

capital market can be made more 

vibrant and lucrative if this facility 

can be incorporated. 

6.Existence of Syndicates: Our 

capital market has some deep 

pocket investor syndicates (often 

termed as ‘bull cartels’) who 

manipulates the market in their 


favor. These large fund holding 

investors manipulate the market 

through price inflation by rumor 

mongering after collecting a 

particular share at low price levels 

and religiously follow pump and 

dump strategy. 

The Brighter Side of the 

Story: Opportunities ahead 

of us 

1.Confidence: Confidence of the 

investor is still prevalent in the 

market as IPOs are still of 

oversubscribed. This entails the 

necessity to transmit the 

confidence among the investors 

by SEC and stock exchanges in 

the secondary market as well. 

2.Scope of Investment: There are 

a lot of shares with good PE ratio, 

historical lowest market price and 

good Net Asset Value (NAV). 

These factors all indicate that 

there is good investment 

opportunity. There are people 

develop the infrastructure of the 

country. Power and transportation 

sectors have been given priority. 

Padma bridge, Bangabandhu 

bridge and various power plants 

will be built and these projects 

require a lot of fund. Capital 

market can facilitate the funding 

with various types of securities 

and instruments issued. 

5.Book building: This procedure 

is a tested and accepted price 

discovery method in the 

developed capital markets of the 

world. It has received some 

Fixed Income Fund (FBFIF). 

Decisions like this will definitely 

improve the stability of the 

market. As of December 2010, 

the market cap of mutual funds 

stands at 1.45 % , which is 

significantly lower in terms of 

other Asian markets. Mutual funds 

are managed by expert fund 

managers and they usually buy 

shares at bargain (undervalued) 

price levels. Hence, in a bear 

market, they boost up the demand 

for strong fundamental shares and 

helps the market stabilize. We 

need more mutual funds in the 

“Emotions and habits play a vital role 

in the investment process” 

who did not consider capital 

market as their investment 

opportunity. These people can 

direct some portion of their 

savings in this market and gain 

profit. 

3.Implementation of Basel II: 

Banks have to raise capital based 

on this criteria set by Bangladesh 

Bank. Issuance of debt and equity 

by banks is their only option and 

this will generate liquidity in the 

market. 

4.Infrastructural development: 

Government of Bangladesh has 

taken various initiatives to 

criticism lately due to making 

issue price of the listed security 

too high and hence, is being 

reviewed by SEC. To encourage 

the large and well reputed 

corporate houses of the country to 

get listed in the exchanges, there 

is no alternative to this method as 

it ensures that the company gets 

its fair price while floating shares. 

However, Regulators need to be 

more vigilant in order to check 

manipulation/staging of planned 

games. 

6.Mutual funds: Recently SEC 

gave permission to offload BDT 5 

Bn mutual fund- First Bangladesh 

market given we can ensure 

increase in the supply side of 

quality shares. 

7.Tax Incentive: Banking, 

Financial and Telecommunication 

companies are not given incentive 

by way of tax rebate for giving 

high dividend to share holders 

which is applicable for other sectors 

listed in the stock exchange. Tax 

Incentives will encourage these 

sectors to pay higher dividends 

which will contribute to 

improvement of the investors 

approach by shifting focus from 

short term capital gain to long 

term stickiness with good stocks. 

16 



8.Capital gain: The capital gain 

made during this period is not 

transferred out of the country for 

our breath of relief. This is evident 

from the hefty profit figures of the 

Commercial Banks and Merchant 

Banks. Moreover, their growth in 

earnings is not relevant with the 

growth of the economy or even 

growth in LC opened. So, 

reinvestment of the money is 

possible in the market again. But 

it needs to be ensured that all 

institutions are making investment 

complying the regulations and not 

taking over exposures. 

Let the Market attain its 

true potentials 

As of 2 March 2011, the DSE 

General index stands at 5292 

points with a dramatic fall from 

the highest point of 8,918 on 5 

December 2010 . Retail Investors’ 

confidence over the market has 

been lost to great extent. 

Government and Regulators have 

been trying to up hold the market 

but a modest recovery is yet to be 

achieved. 

In this context, the question arises 

how to stop the market from 

further fall. It is believed that the 

present market is big enough and 

cannot be manipulated by some 

gamblers like they did back in 

1996. It took almost 14 years for 

the market to get to this height 

and it really has the strength and 

opportunities, both for investors 

and borrowers, to sustain. It is 

imperative to gain the confidence 

of the investors and take the 

market to a point of stability. 

Thereafter, the market is to be 

adjusted for the various anomalies 

that are inherent in it. 

• Strengthening surveillance is a 

must for our capital market. 

Trading behavior analysis of 

Broker House, Merchant 

Banks, and Mutual Fund 

companies needs to be 

performed by SEC. Various IT 

based automated systems are 

available in the market and 

some donor organizations / 

corporate houses will be 

interested to support SEC in 

this regard. Immediate 

arrangement and proper 

implementation of these 

systems will bring positive 

result in the market. 

• An independent expert 

Judiciary Tribunal is to be 

created solely for capital 

market issues. Enforcement of 

regulation is to be ensured in 

the market. The existing laws 

can also be modified to ensure 

that any foul play can be 

punished in accordance to the 

impact. The share scam of 

1996 is still not resolved and 

no disciplinary action has 

been taken till date. It gives 

room for the wrong doers to 

keep on spoiling the market 

without much fear of any 

punishment. 

• Long term strategy should be 

adopted in consultation with 

all the stakeholders of capital 

market. A consolidated team 

approach is to be taken into 

consideration. Coordinated 

effort, positive market driven 

policies and prudent decision 

can make the market a good 

investment sanctuary. 

• Efforts should be given to 

increase the number of listed 

securities ( from existing 219 

equity shares) in the market. 

Offloading a good number of 

fundamentally sound and well 

reputed companies’ shares in 

the market will increase the 

depth of the market and 

strengthen the supply side. 

Mere offloading shares of 

non-performing State Owned 

Enterprises ( SOE) will not scarcity 

of good shares . 

• Lead time of ‘Application to 

Listing’ of a new company is 

to be reduced significantly. It 

takes on an average 2-3 

months to complete the 

procedure in our country, 

compared to around 1-2 weeks 

in developed markets i.e. US, 

UK, Singapore, HK. This 

creates blockage of a lot of 

funds from the market. Unless 

the fund invested in one IPO is 

released, a small investor can 

not invest in open shares in 

the market. A move to cut the 

time frame between 

application and listing will 

benefit with higher velocity of 

invested fund in Capital 

Market Process simplification, 

adoption of IT based best 

practice and automation can 

help to faster execution of 

IPO, which will facilitate more 

IPOs to come to market. 

• The market should focus on 

bringing in more institutional 

investors. These investors have 

long term commitment and 

provide liquidity to the market. 

Longer investment horizons 

reduce market volatility and 

their investment strategies are 

fundamental focused rather 

than being speculative. 

• SEC should consider the 

flotation of more Mutual 

Funds in the market to 

increase its dimension. This 

fund has the capacity to 

provide retail investors with 

indirect market access, better 

prevention of wealth & capital 

losses, reduction of 

dependency on retail investor 

and induction of more 

institutional investors. 

• Appropriate amendments of 

Companies Act and related 


ules from SEC are required, 

allowing the company to buy 

back its own shares (section 58 

of Bangladesh Companies Act 

states clearly that a company 

cannot buy its own shares). 

The UK companies act of 1955 

disallowed companies from 

holding their own shares; 

however this was repealed in 

1993. The Indian capital 

market has allowed buy backs 

since 1998. This option can 

reduce price volatility of a 

particular share in the market. 

• Media can play a big role in 

directing the investors towards 

the actual learning from the 

recent disorder in the market. 

They should infuse confidence 

by disseminating information 

regarding existence of scope 

for knowledge based 

investment opportunity in the 

market. 

• Modification is required in the 

index calculation procedure 

with International best 

practice. Under current 

method, a particular large cap 

company ends up with 

significant impact on the Index 

movement with slight 

movement in its share price. 

Free-float based index 

calculation can be the option 

for consideration. This step 

will reduce magnification of 

DGEN index with great extent. 

• Investors should concentrate 

more on individual shares 

rather than making decisions 

based on market index. Still 

there is scope of making 

money by investing in the 

shares that possess good 

fundamental and technical 

valuation. If a major portion of 

the investors realize this 

learning, significant amount of 

stability can be achieved even 

in this downpour. 

• There is no alternative to 

analysis for participation in the 

capital market. Analyst 

Reports/Research Reports play 

a vital role in developed 

markets. Investors should 

realize that they are investing 

in stock being an equity 

partner of a company. They 

should go for a thorough 

health checkup of the 

company selected. There are a 

lot of ways to gather that 

knowledge from various 

institutions. Even SEC can 

arrange training programs at a 

large scale for investors in 

general. With the right 

knowledge and awareness 

built, the ‘syndicates’ will not 

be able to siphon out money 

capitalizing on the small 

investors’ ignorance. 

• Political commitment towards 

the development of power, 

infrastructure and legislation. 

Improving these sectors will 

boost up industrialization in 

our country. If we look at the 

composition of all the scrips of 

our stock market, 

manufacturing sector 

comprises of only 22.21 % of 

the market capitalization. This 

percentage needs to be 

improved for a strong 

economic growth. Capital 

market can play a pivotal role 

in this regard. 

Capital Market of Bangladesh, to 

us, is still ‘a mine of opportunity’. 

Still the market is suitable for 

investment as there are lots of 

value driven shares at a 

reasonable price. Investors should 

come forward with a mindset of 

making a long term investment. 

Gain and loss both come as a 

package in the investment game. 

Prudent decision making can 

enhance gain or reduce loss and 

this should be the objective of the 

investors in general. 

True commitment by the 

concerned regulators and the 

present political government can 

improve the situation. Needful 

revision in the regulations with 

effective enforcement, automation 

in vigilance, encouraging 

analytical / research reports and 

creating better awareness can take 

our Capital Market to a structured 

level which can contribute 

significantly to the economic 

development. 

(The author is thankful to Mr. 

AKM Sohan Alam and Mr. Khaled 

Maruf for their support) 

The Author is Member, ICAB and 

Deputy CEO & Chief Finacial Officer of 

Grameenphone Ltd. 

18 



Avoiding Losses in the 

Share Market 

M. Farhad Hussain FCA 

Patience, mathematics and due 

diligence to screen the stock are 

the secrets to avoid losses in the 

stock market. To reduce the 

chances of loss, you must 

minimize mistakes. Fewer the 

error made over your investing 

career, better the long term 

returns. Earning an extra 

percentage on your investment 

compounds into amazing amount 

in the long term. 

The same holds true if you can 

avoid a loss. When you lose 

money, even for just a year, you 

slowly erode the terminal value of 

your investment. Losses also 

reduce the positive effects of 

compounding. 

Losses occur primarily for 

three reasons: 

1. You took a bigger risk and 

exposed yourself to a higher 

possibility of loss 

2. You invested in an instrument 

that failed to keep pace with 

inflation and interest rates 

3. You didn’t hold the instrument 

long enough to let its true 

intrinsic value to be realized 

Please not the risk in getting into 

something without knowing 

about it. 

It’s a sad fact that most day traders 

lose money over time. Research 

has clearly shown that long-term 

returns are tied to your holding 

periods and to the price you pay. 

Excessive trading and a disregard 

for fundamental risks serve as 

weighty anchor that keeps 

short-term oriented investors 

away from consistently 

performing well. Over time, most 

of their winning trades are likely 

to be eaten up by their losing 

trades. 

The following is a list of top five 

rules for success in investment in 

shares: 

Rule 1. Take a long-term 

perspective. 

Rule 2. Keep adding money to the 

market and let the magic of 

compounding work for you. 

Rule 3. Don’t try to time the 

market. 

Rule 4. Stick to companies you 

understand. “When we 

invest in stocks, we invest 

in businesses.” 

Rule 5. Diversify.Goleman’s 

theories of cognitive 

evolution have particular 

relevance for investors. 

Most of the sweeping 

developments in the fields 

of economics and finance, 

Mauboussin noted, were 

tested, applied, and taught 

within the past 40-50 

years. 

It has taken tens of thousands of 

years for us to catch up with our 

environment, it is fair to say that 

humans have no mental basis, or 

context, to understand how to 

invest in capital markets rationally. 

This awareness of our limitations 

can help us avoid common stock 

picking errors. Investors tend to 

make seven common errors of 

judgment: 

1. We have an innate desire to 

be a part of crowd and feel 

safer making mistake with 

others than striking out on our 

own. 

2. We suffer from 

overconfidence in our 

abilities. 


3. We are unable to assess 

probabilities rationally. 

4. We are easily lured by 

storytelling, especially when 

the story attempts to provide 

answers to pressing questions. 

5. We want to rely on “rules of 

thumb” even in the absence 

of rigorous proof. 

6. we ignore statistical truisms 

regarding chance and 

probability. 

7. We believe that the intuitive 

skills possessed by some 

humans (successful stock 

pickers, for example) are 

readily transferable. 

Emotions and habits play a vital 

role in the investment process. 

“ 

b. Greed 

If you are greedy, you can never 

make much money in the capital 

market because you cannot beat 

the market always. Greed is 

another major factor that make 

investors loose money by 

sheaving their get out price 

because the price of the stock is 

going up and they hang on to get 

a higher price than what they 

planned for. 

c. Poverty Mentality 

Most investors mistake their 

poverty mentality as being smart 

by dodging to pay for knowledge. 

Most investor in this category 

prefer to invest in ignorance 

instead of paying for vital 

information that will help them. 

read business magazines and 

journals to get information and do 

cross check any information that 

comes your way before making 

use of it. Also beware of 

sponsored analysis so you do not 

fall prey to them.Common sense 

and a knowledge of business is 

more important to the investment 

process than academic formulas. 

Ignore day-to-day fluctuations in 

the market: They’re often 

meaningless to the bigger picture. 

Avoid relying on forecasts because 

most prove to be wrong and are 

Emotions and habits play a vital role 

in the investment process” 

The Stock Market is a place where 

million are made, it’s a place 

where the principle of taking from 

those that do not have (The poor 

and the not too Rich), and give to 

those who are already rich of 

extremely rich applies. People do 

not just loose money in the Stock 

market for no just cause or reason. 

There are a lot of reasons why 

people loose money in the stock 

market. These reasons include: 

a. Ignorance 

It has been established that 80% 

of stock investors, invest based on 

rumors and not on real and true 

facts. Ignorance is a major reason 

why many loose money in the 

capital market 

d. Sentiment 

Stocks are not your friend, so do 

not fall in love with any stock 

rather, treat them as your slave by 

using and dumping them when 

you have achieved what you had 

in mind while buying them. 

Buying stocks on sentiment 

includes buying a stock because 

you like the stock or to help a 

friend or relation meet their target. 

Never buy a stock based on you 

sentimental feelings. 

e. Wrong Information 

When you are not informed, you 

are deformed and half education 

is a greater problem compared to 

illiteracy. Attend seminars and 

made to entice you to trade. 

Remember that you are buying 

piece of a company and trying to 

share in its fortunes. Don’t adopt 

the view that investing is about 

shuffling stock certificates. 

Let time be the natural friend of 

your portfolio. There is also 

another alternative: Don’t do 

anything. More fortunes are made 

by sitting on good securities for 

years at a time than by active 

trading. 

Stay within your strengths when 

evaluating businesses. Judge a 

business by what it’s worth to its 

owners and what it costs to 

maintain it. The business is 

wonderful if it gives you more and 

more money every year without 

20 



putting up anything-or very little. 

And we have some businesses like 

that. A business is also wonderful 

if it takes money, but where the 

rate at which you reinvest the 

money is very satisfactory. The 

worst business of all is the one 

that grows a lot, where you’re 

forced to grow just to stay in the 

game at all and where you’re 

reinvesting 

the capital at a very low rate of 

return. And sometimes people are 

in those businesses without 

knowing it. 

Don’t trap yourself into believing 

a business or product is worth 

exactly what someone is willing to 

pay. Someday, you’ll end up 

paying dearly for a business 

propped by perception only. Do 

your homework before purchasing 

a stock. 

I don’t think you can be a really 

good investor over a broad range 

without doing a massive amount 

of reading. You might think about 

picking out 5 or 10 companies 

where you feel quite familiar with 

their products, but not necessarily 

so familiar with their financials…. 

Then get lots of annual reports and 

all of the articles that have been 

written on those companies for 5 

or 10 years…. Just sort of immerse 

yourself. And when you get all 

through, ask yourself, “What do I 

not know that I need to know”? 

Some companies are easier to 

understand and some are not. 

Result of some companies are by 

and large consistent and some are 

not. Try to look for the ones that 

are easy to understand and have 

consistent track record. 

Never feel compelled to buy or 

sell just because it seems 

fashionable. A low price doesn’t 

guarantee a bargain. The company 

must offer a combination of good 

value and improving 

fundamentals.Look at stock 

fluctuations as your friend rather 

than your enemy-profit from the 

folly rather than participate in it. 

Three most important words of 

investing: “margin of safety 

Most investors illogically become 

euphoric when stock prices rise 

and unhappy when they fall. They 

show no such confusion in their 

reaction to food prices: Knowing 

they are forever going to be 

buyers of food, they welcome 

falling and deplore price 

increases. (It’s the seller of the 

food who doesn’t like declining 

prices). 

Price fluctuations have only one 

significant meaning for the true 

investor. They provide him with 

an opportunity to buy wisely 

when prices fall sharply and to sell 

wisely when they advance a great 

deal. At other times you will do 

better if you forget about the stock 

market and pay attention to the 

operating results of his companies. 

The Author is a Council Member & 

Past President of ICAB 


State of the Bangladesh Economy 

in Fiscal Year 2010-1011 

Mr. M. Farhad Hussain FCA 

Acknowledgement 

The CPD IRBD 2010‐11 team 

would like to express its profound 

gratitude to Professor Rehman 

Sobhan, Chairman, CPD for his 

advice and guidance in preparing 

this report. The team gratefully 

acknowledges the valuable 

contribution of Ms Anisatul 

Fatema Yousuf, Head and 

Director, Dialogue & 

Communication Division, CPD 

and her colleagues at the Division 

in preparing this report. 

Contribution of Administration & 

Accounts Division is also highly 

appreciated. Support of Mr A H M 

Ashrafuzzaman, Senior System 

Analyst and Mr Hamidul Hoque 

Mondal, Senior Administrative 

Associate is particularly 

appreciated. The team would like 

to appreciate the valuable support 

it has received in accessing 

relevant data and information 

from concerned officials 

belonging to a number of 

institutions including Bangladesh 

Bank, Bangladesh Bureau of 

Statistics (BBS), Bangladesh Power 

Development Board (BPDB), 

Board of Investment (BoI), 

Department of Agricultural 

Extension (DAE), Dhaka Stock 

Exchange (DSE), Export 

Promotion Bureau (EPB), Ministry 

of Food and Disaster 

Management (MoFDM), Bureau 

of Manpower, Employment and 

Training (BMET), National Board 

of Revenue (NBR), Petrobangla, 

and Planning Commission. 

Recent Trends in the 

Capital Market 

The capital market in Bangladesh 

is increasingly coming under 

scrutiny as it is detracting from its 

core purpose i.e. raising equity 

for industrial activities. It is 

maintained that recent growth in 

the capital market is difficult to 

relate to the growth of real 

economy, rather it is indicative of 

inadequate investment 

opportunities in productive 

sectors, short‐term speculative 

trading behavior underpinned by 

market irregularities and 

anomalies, weak oversight 

functions of regulatory bodies and 

poor policy framework for the 

financial sector. From this 

perspective, four key issues may 

be highlighted in the context of 

the current state of affairs in the 

sector. These are: a) lack of 

investment opportunities in 

productive sector; b) poor 

governance in the capital market; 

c) market manipulation; and d) 

anomalies in the financial sector. 

Since FY2005‐06, stock market 

related indicators have registered 

significant rise66; these trends 

have continued in FY2010‐11. 

Between July 2010 and December 

2010, DSE General Price Index 

(DGEN) has registered a growth of 

34.7 per cent, market 

capitalisation has increased by 

29.5 per cent and Price Earnings 

(P/E) ratio has increased to 26.3 

(Table 11). Overall market 

capitalisation at the end of 

December, 2010 was as high as 

51.5 per cent of GDP, which was 

38.5 per cent of GDP even in 

June, 2010. Market related factors 

such as issuance of the highest 

number of Initial Public Offerings 

(IPOs) in FY2009‐1067, entry of 

large number of small investors in 

the market with large volume of 

liquidity and revealed market 

anomalies in an inefficient market 

can only explain a part of this 

growth. 

22 



Table 11: Major Indicators related to the Stock Market: FY2008 to November, FY2011 

Indicators FY08 FY9 FY10 

FY11 

(Jul. Dec.) 

FY09 

over 

FY08 

% Change 

FY10 FY11 over 

over FY10 

FY09 (Jul. Dec.) 

DSE General Index 3000.5 3010.26 6153.68 8290.41 0.33 104.42 89.24 

No. of listed securies 378 443 450 445 17.2 1.58 7.23 

Total number of companies 271 282 243 246 4.06 13.83 4.24 

Market capitalisaon (billion USD) 14.07 19.02 38.51 49.86 35.18 102.47 86.11 

Issued capital (million USD) 4149.71 6634.94 8755.02 9220.5 59.89 31.95 22.16 

Turnover (million USD) 47.97 136.55 273.53 233.77 184.66 100.31 76.74 

Market P/E 22.8 18.44 24.08 26.29 19.12 30.59 2.50 

GDP at current price(billion USD) 79.56 89.36 98.75 101.22 12.31 10.51 7.61 

Market capitalisaon as % of GDP 17.68 21.28 38.5 51.52 20.36 83.22 80.90 

No.ofIPOs 12 14 21 9 16.67 50 28.57 

%ofoversubscripon for IPOs 94 93.6 0.43 

Growth of total investment 14.31 13.4 12.23 

Source: Based on informaon available in the websites of DSE and Ministry of Finance, GoB. 

Lack of investment 

opportunities in the 

productive sector 

a) Lack of investment 

opportunities in the productive 

sector and presence of excess 

liquidity 

Growth of investment in the 

productive sectors experienced a 

slow down during the recent years 

mainly because of adverse impact 

of the global recession, and crisis 

of energy and power. A large 

number of export‐oriented and 

other industries are struggling to 

secure their return on investment. 

Private investment during 

FY2009‐10 was Tk. 1362.8 billion 

(i.e. 19.7 per cent of GDP), with 

the lowest level of growth over the 

last five years (12.7 per cent). As a 

result, a large volume of investible 

surplus was available in the 

banking sector (Tk. 28849 crore at 

the end of October 2010). Banks 

had been offering modest rate of 

interest (7‐10 per cent) on various 

savings instruments such as time 

deposit, wage earner’s bond and 

NSDs, which in the face of 

growing inflation meant that in 

real terms yields on these 

instruments was significantly 

low.69 Small savers, who are the 

main investors in these savings 

instruments, were further 

discouraged because of reduction 

of deposit rates of NSD certificates 

and interest rate of wage earners’ 

bonds as well as imposition of tax 

at source on interest income and 

cancellation of automatic 

re‐investment of wage earners’ 

bonds. Net investment in NSD 

certificates has declined by 49 per 

cent during July‐September 2010, 

while it was as high as 270 per 

cent for the comparable period of 

the previous year.70 Consequently 

small savers were prompted to 

look for alternate investment 

opportunities, more specifically in 

the capital market. 

Investment in the capital market, 

particularly short term trading in 

small size securities is found to be 

profitable compared to that of 

long term investment in the stock 

market as well as investment in 

various savings certificates 

including the NSD certificates. 

This is evidenced by empirical 

data. According to Table 12, 

investors received relatively 

higher rates of return for long term 

investment in the capital market 

more than 80 per cent companies 

holding Annual General Meeting 

(AGM) in recent years have 

offered a return which was higher 

than that on savings certificates. 

Besides, 22 per cent of the 

companies holding AGM, offered 

right shares during FY2009‐10. 

However, in some instances 

companies could not hold AGMs 

in due time and did not offer 

return to their investors which 

indicate risks associated with long 

term investment. 


Table 12: Return to Investment in the Capital Market for Over One Year 

Type of Benefit FY2007 08 FY2008 09 FY2009 10 

No of 

companies 

Cumulave 

share (%) 

No of 

companies 

Cumulave 

share (%) 

No of 

companies 

Cumulave 

share (%) 

Right share 0 3 1 25 22 

50% and Above 23 12 30 14 20 41 

40% 49% 5 15 12 20 2 43 

30% 39% 34 34 40 37 9 51 

20% 29% 36 55 38 54 18 67 

10% 19% 56 86 80 90 21 87 

1% 9% 14 94 11 95 7 93 

No dividend 10 100 11 100 7 100 

Total companies held AGM 178 225 109 

Total Number of Listed 

companies 

271 282 243 

Source: CPD Esmates, 2010. 

Short‐term return on trading 

appears to be much higher as is 

revealed from the estimation of 

capital gains of DSE 20 and Z 

category shares (Table 13). 

Although the return on a number 

of shares was negative which 

indicates the related risks 

associated with short‐term trading 

of shares, on average return to 

blue chips and Z‐category shares 

was considerably high. This may 

be true for other categories of 

shares. Low risk with high return 

in case of short term trading has 

acted as a ‘pull factor’ and has 

encouraged investors (mostly 

small investors) to divert funds 

from other sources to the stock 

market. 

Table 13: Potenal Capital Gain on Different Categories of Shares 

Year FY2007 08 FY2008 09 FY2009 10 

Category Highest Average Lowest Highest Average Lowest Highest Average Lowest 

DSE20 345.98 93.58 21.51 99.39 11.78 31.85 184.32 48.73 25.85 

Z 

category 

371.43 100.3 6.82 330.77 78.68 34.87 2198.73 341.1 29.93 

Source: CPD esmates, 2010. 

Note: Potential capital gain of DSE 20 and shares of Z category is the difference between share prices of the 

first day and closing day of trading in the fiscal year. 

24 



) Huge inflow of new investors 

in the stock market eager to 

participate in the ‘Keynesian 

Beauty Contest’ 

In recent years there is an 

unexpected rise in the number of 

investors in the stock market. Total 

number of Beneficiary Owner 

(BO) account holders till 20 

December, 2010 was 3.21 

million.71 This number increased 

by 154 per cent between January 

to December 2010.72 A large part 

of these investors have little 

knowledge about the market and 

participate in trading as if they are 

participating in a ‘Keynesian 

Beauty Contest’. 

A number of factors have 

facilitated the influx of investors to 

the stock market, such as opening 

of brokerage houses in various 

districts (590 branch offices of 238 

brokerage houses of DSE are 

currently being operated in 32 

districts)73, organization of ‘share 

mela’ in different districts and 

introduction of internet‐based 

trading operation. Also 

market‐related information is now 

easily accessible through 

electronic and print media as well 

as internet. According to a number 

of studies (Tetlock (2007); 

Tumarkin and Whitelaw 

(2001)74), a large number of 

investors are now participating in 

short‐term trading. Besides, 

prediction about future flow of 

funds to the stock market is 

encouraging investors to 

participate more in the short‐term 

trading. 

Poor governance of the 


a) Weak Performance of the 

Regulatory Authority 

The capacity of the Securities and 

Exchange Commission (SEC) 

appears to be inadequate in 

ensuring market regulation of the 

type that is required in view of the 

current scale and scope of the 

country’s stock market. Various 

markets regulating instruments75 

made use of by the SEC often 

appears to lack both 

ppropriateness and effectiveness 

from the perspective of providing 

the required stewardship in the 

market. 

There are several reasons for this 

observation. First, frequent 

changes in the rules by the SEC 

concerning margin loans have led 

to volatility during the ‘buffer 

period’. This has also led to 

confusion with regard to the 

method of calculation of the 

margin. Second, application of 

lock‐in period in case of sale of 

placement shares is not being 

properly maintained; rather in a 

number of incidence the rule has 

been relaxed. Third, floating of 

right shares is increasingly 

becoming a way of mopping up 

money from the market.76 A total 

of Tk. 2,014.5 crore was raised by 

16 companies by way of issuance 

of right shares between July 2010 

and second week of December 

2010.77 Fourth, lack of expertise 

in the area of competent 

examination of audited reports of 

listed companies, submitted in 

support of revaluation of assets, is 

a major operational weakness of 

the SEC. A number of companies 

have used the method of 

revaluation of assets with a view 

to raising the share prices and 

thereby to collect additional funds 

from the market. Fifth, SEC has 

taken an inordinately long time to 

implement the guidelines set by 

the International Organisation of 

Securities Commissions (ISCO); 

because of the delay to apply 

these guidelines share prices of a 

number of listed companies have 

experienced unusual volatility.78 

Sixth, because of weak monitoring 

and surveillance system, the SEC 

is not suitably equipped to take 

actions against the incidence of 

possible insider trading in the 

market. Seventh, although 

price‐sensitive information is 

supposed to be made public 

throughdaily trading operations, 

often such information is leaked 

out earlier or rumours are 

purposefully spread to influence 

the market behaviour. 


) Weak Institutional Capacity 

SEC at present has to work with 

limited office staff, with lawyers 

who in many instances lack the 

required competences; SEC also 

has to work without chartered 

accountants.79 With its limited 

human resource capacity SEC is 

able to monitor only two 

brokerage houses in a month. 

Moreover, SEC has no surveillance 

software of its own; rather it uses 

the softwares of DSE and CSE to 

monitor the market. Proper 

surveillance of transactions often 

becomes difficult because SEC has 

to depend on the support of 

others.80 SEC is yet to initiate the 

project titled Improvement of 

Capital Market which includes a 

component of support to purchase 

a high‐powered computer 

software for monitoring and 

surveillance operation.81 

The nature of relationship 

maintained by the SEC with the 

Ministry of Finance82 is not 

helpful for the market (e.g. face 

value harmonisation issue).83 The 

Parliamentary Standing Committee 

for the Ministry of Finance in 

certain cases has taken an 

‘adversarial position,’ thus 

creating unwarranted pressure in 

the operation of the SEC and the 

capital market. 

The operation modalities of the 

DSE and CSE, on the other hand, 

are being questioned on many 

accounts. First, the software used 

in case of daily trading in DSE is 

alleged to be ‘faulty’ as all the 

trading baskets cannot open at a 

time, and it requires some time to 

get access to all the baskets after 

the trading starts at 11 am. To 

adjust such delays CSE has 

introduced the so‐called ‘pre‐hour 

transactions.’ Second, there is a 

possibility of interruption of daily 

trading at DSE even if a few 

branches of brokerage houses do 

not operate properly due to 

technical problem. Third, often 

the directives of the SEC related to 

trading are found to be difficult to 

implement because of lack of 

updated softwares in the DSE.84 

While DSE needs to invest more 

on improvement of its trading 

softwares, it has come under 

criticism for its investment in land 

purchase, for establishing a resort, 

raising questions about its 

allocative priorities.85 Fourth, 

there is a clear conflict of interest 

between DSE management board 

and brokerage houses as owners 

of different brokerage houses are 

also the members of DSE 

management board. 

Market Manipulation 

A number of irregular practices 

have been reported in various 

national dailies which indicate 

market manipulation by a number 

of bull cartels.86 It is alleged that 

these bull cartels comprise of only 

a limited number of people 

including some members of 

DSE/CSE, officials of SEC, political 

leaders, big businessmen, officials 

of financial institutions, and 

owners of brokerage houses. 

Various incidences has been 

reported in the newspapers as 

regards manipulating practices 

such as operation of curb market 

in case of offering placement 

shares of IPOs, lifting of lock‐in 

period in favour of selected 

companies, speculative trading of 

‘Z’ category shares to artificially 

raise share prices, use of book 

building system through 

syndicated practices (see Box 6), 

fake transactions through 

brokerage houses, and access to 

price sensitive information prior to 

public announcement.87 Because 

of weak surveillance and 

monitoring system, SEC is usually 

unable to prevent such illegal 

practices. 

Box 6: Book Building System - Who is geng the benefit of the system? 

Introduction of book building system in the recent past has regrettably, in some cases, turned out to be a 

tool for manipulating market prices. Instead of ensuring competition among big investors during the ‘price 

discovery’ stage, it is alleged that the system has been used by market syndicates for placement of shares 

at an artificially high price. This artificial price is maintained for a certain period (usually till the lifting of 

the lock‐in period, i.e. 15 trading days) following which investors tend to offload their shares at a higher 

price. There are only three instances where book building system was practiced, of which two companies 

were directly listed in the market. 

On one occasion, those who hold the private placements were able to siphon off a considerable amount 

of money by selling shares at a high price within the span of one month after the offloading of the shares. 

As a result, share price of the company fell by 33 per cent within one month and by 50 per cent in next 

26 



On one occasion, those who hold the private placements were able to siphon off a considerable amount 

of money by selling shares at a high price within the span of one month after the offloading of the shares. 

As a result, share price of the company fell by 33 per cent within one month and by 50 per cent in next 

two months and did not rise thereafter (Figure 15). Capital flight during the first 15 days of the transaction 

of the shares of this company is estimated to be at least Tk. 83.7 crore. Similarly, in case of yet another 

company, only in the first two days of trading flight of capital has been estimated to be to the tune of Tk. 

64.8 crore. However, this was not the case for a third company which was not directly listed and 

indicative price of this share did not experience much volatility. However, the SEC was unable to take 

appropriate measures to address this type of abnormal market behaviour and those who were involved 

with such abusive practices were not met with sanctions.88 

Recently SEC has revised several aspects of the book building system such as putting a bar against 

mentioning the expected future earnings in company’s prospectus, making it mandatory for bidders to 

participate in the road show organised by the issuer company and shortening the period of processing the 

book‐building for new companies. Implications of the revised system of book building will need to be 

closely studied and appropriate lessons will need to be drawn. 

Figure 15: Daily Share Price of Company X Following Book Building System 

Source: Based on Dhaka Stock Exchange (DSE). 

Anomalies in the Financial 

System 

Certain anomalous provisions of 

the financial system of the country 

concerning the capital market are 

adversely affecting the 

development of the capital 

market. First, although 

commercial banks are not allowed 

to invest more than 10 per cent of 

their deposits in the stock 

market89, a total of 12 

commercial banks have been 

identified by the Bangladesh Bank 

which have violated this rule. 

Though the central bank has 

instructed these banks to adjust 

their investment within the 

stipulated time of November 

2010, things have not changed 

much. Second, funds disbursed to 

industrial enterprises in the form 

of term loan, working capital and 

over‐draft against workers’ salary 

is reported to have been diverted 

to the capital market. The central 

bank has instructed commercial 

banks to adjust such loan 

portfolios (particularly loans worth 

more than Tk. 10 million) by 15 

February 2011. Third, 

unsubstantiated gossips and 

rumour with regard to 

enforcement of the Insurance Act 

2010 and the Insurance 

Regulatory Authority Act 2010 

have fuelled prices of shares of 

some of the listed insurance 

companies. Fourth, while 

merchant banks are supposed to 

be issue‐managers, at least for one 


IPO in a year, a number of these 

banks were unable to comply with 

this target.90 This would indicate 

that the number of merchant 

banks in operation is large 

compared to what the market 

could sustain.91 Where the 

operation of the merchant banks 

should have been confined to 

portfolio management, often these 

banks are alleged to act as 

‘brokerage houses’. 

Lack of coordination among 

various financial markets 

including debt market, equity 

market and bond market is 

considered to be a major 

weakness for sustainable growth 

of the capital market. Decisions 

(or indecisions) of different market 

regulatory bodies taken at various 

points of time, have often 

contributed towards significant 

volatility in the market. For 

example, possible diversion of 

industrial credit to the capital 

market was anticipated by the 

Bangladesh Bank in its Monetary 

Policy Statement for 

July‐December 2010, but the 

required surveillance came only at 

a much later stage. Further, the 

margin rule instrument available 

to the SEC appears to have been 

applied without proper assessment 

of the overall money supply and 

demand situation prevailing in 

different sectors. Moreover, 

notwithstanding their mandated 

responsibilities, most market 

agents, such as brokerage houses, 

merchant banks, investment 

banks, institutional investors, 

members of DSE, are involved in 

short term ‘trading’. Overall, lack 

of proper coordination between 

two leading regulatory bodies of 

the financial sector, namely the 

Bangladesh Bank and SEC is said 

to have contributed to the current 

volatile behaviour that is observed 

in the country’s capital market . 

Prospect of smooth landing 

of the market? 

In the backdrop of much 

apprehension about severe market 

correction, the capital market has 

experienced some hiccups in 

December, 2010.92 In this 

connection, on 19 December 

2010 DSE witnessed the highest 

fall in a day in the history of stock 

market (6.7 per cent fall of total 

share pricehe index in a day). It is 

to be noted that within 15 days 

(6‐19 December 2010) share price 

index dipped by 1264 points 

(‐16.1 per cent) incurring an 

estimated loss of capital of about 

Tk.41,984 crore (Figure 16). 

Whilst a number of actions (and 

inactions) of the SEC is alleged to 

have contributed to this situation, 

mopping up of liquidity by the 

financial institutions in view of 

instructions of the Bangladesh 

Bank is may have played a major 

role in this downward spiral in the 

share price index.93 SEC has 

taken a number of urgent 

measures, such as re‐fixing margin 

loan ratio, withdrawal of the 

requirement of extra deposit of the 

brokerage houses, bringing back 

the shares of Grameen Phone and 

Marico to normal trading floor 

from spot market, and extending 

the timeline for reporting of loans 

of the commercial banks (as per 

instruction of Bangladesh Bank), 

which has temporarily 

smoothened the volatility in 

market prices. 

Figure 16: Fall of the DSE Share Price Index between November 2010 and December 2010 

Source: Based on DSE. 

28 



It is widely accepted that the 

current behaviour of the capital 

market is totally at variance with 

market fundamentals. The critical 

question is whether the stock 

market will ultimately experience 

a crash à la November 1996 or is 

it going to adjust smoothly? In 

1996, within five months the 

share price index rocketed from 

959 (June 1996) to 3,064.9 

(November 1996) recording a rise 

of as high as 219 per cent, but 

within the next few months it 

reverted back to the earlier 

position (957.4 in April, 1997, 

‐68.8 per cent) (see Appendix 1). 

The 1996 is stated to be a 

‘generated market’ with a few 

players (‘bull cartel’) who had 

inside information about the 

market. Initially the market was 

interpreted as ‘buoyant and 

robust’, but soon went bust 

causing huge losses to small 

investors. 94 

Optimists would like to stress that 

2010 differs significantly from 

1996 because of a number of 

distinctive features.95 However, 

developments in the ‘hardware’ of 

the stock market should have been 

accompanied by effective 

‘software’ instruments. An absence 

of those instruments has tended to 

encourage investors to invest 

more in the short‐term trading 

segment of the market. In the 

absence of effective ‘software’ 

instruments market may 

experience some claming down 

for a short time, through various 

reactive initiatives and 

interventions; however, it will be 

very difficult to sustain current 

‘buoyancy’ in the long term. The 

‘boom’ market may go ‘bust’ 

unless appropriate measures and 

initiatives are not taken 

immediately. In the following 

paragraphs, some of those 

measures are highlighted. 

Policy Suggestions 

The analysis in the previous 

sections reveals that challenges 

confronted by the stock market 

involves not merely lack of good 

stocks but rather it is related to a 

number of problems associated 

with bad governance and 

manipulation in the market itself 

and anomalies in the financial 

sector. Following measures can be 

considered to address the 

attendant market anomalies and 

irregularities in the stock market. 

Operational Measures 

a) Discourage short term trading 

in the stock market: Imposition 

of capital gains tax on short 

term trading which is currently 

applicable on institutional 

investors may be extended to 

private investors to be 

applicable for short‐term 

trading.96 Capital gains tax on 

short term trading by private 

investors can be a good source 

for revenue generation. 

Advanced trading software 

needs to be installed both at 

SEC as well as at brokerage 

houses to estimate capital gain 

for each transaction and the 

related revenue to be paid to 

the NBR. 

b) Strengthen surveillance 

mechanism of the SEC: Current 

strength of SEC needs to be 

increased to monitor the 

various brokerage houses to 

ensure that transactions in the 

stock market are made in 

accordance with the relevant 

rules. SEC should strengthen its 

legal advisory support system 

as well as financial auditing 

and monitoring capacities by 

appointing experienced and 

well‐reputed professionals for 

these purposes. 

c) Appropriate measures for 

effective operation of the 

market: SEC may consider a 

number of measures in order to 

improve the operational 

efficiency of the market. This 

includes extension of lock‐in 

period for trading of placement 

shares, particularly for 

institutional placements, 

especially under the 

book‐building system; 

appropriate scrutiny of audited 

reports submitted by the listed 

companies in order to ensure 

their quality and authenticity. 

d) Enforce disciplinary measures 

against improper/illegal 

activities: SEC should take 

disciplinary measures against 

various kinds of illegal 

activities such as, punishment 

for spreading rumours and 

short buy/sale; halting 

transaction of shares showing 

abnormal rise/fall in the prices 

and penalizing brokerage 

houses or cancellation of their 

licenses if settlement of 

accounts is not carried out in 

an appropriate manner. 

e) Strengthen educational 

programmes for new investors: 

SEC should undertake more 

educational programmes 

through its newly established 

Capital Market Institute for 

new investors to educate them 

on market fundamentals, 

market players and their role, 

anomalies and irregular 

practices in the market and 

their impact on share prices, 

legal measures at the disposal 

of SEC and law enforcing 

authorities when rules of game 

are violated or tampered with. 


Management related 

measures 

a) Strengthen the SEC 

Management: The SEC should 

be staffed by a group of people 

who are conversant with the 

nitti‐gritties of the market, are 

highly competent, and are of 

good reputation with wide 

public exposure. They should 

be honest and be able to take 

stern actions against misdeeds, 

wrong doings and illegal 

practices. The high profile of 

the management body of SEBI 

in India should act as an 

example for Bangladesh if any 

such restructuring of the 

management of the SEC is 

contemplated. 

b) Demutualization: DSE should 

take appropriate measures for 

demutualisation in the market 

through enforcement of 

appropriate regulations by 

putting in place restrictions so 

that owners of brokerage 

houses cannot become 

members of DSE management 

board. 

Policy measures 

a) Government’s decision to 

off‐load shares in the market: 

The progress with regard to 

offloading of shares of SoEs has 

been rather scant, although on 

a number of occasions 

government had announced 

(latest in November 2010) 

offloading of those shares, 

particularly of eight SoEs. 

Government should offload 

those shares without delay. 

b) Increase spread of corporate tax 

rates between listed and 

non‐listed companies: The 

existing spread of corporate tax 

rates between listed and 

non‐listed companies (10 per 

cent) may be further widened (15 

per cent) from its existing level 

(27.5 per cent) by further 

reducing tax rates to encourage 

new enlistment in the market. 

3.5 OVERSEAS 

EMPLOYMENT AND 

REMITTANCES 

Both in terms of the number of 

workers going abroad and the 

remittance flow, the first half of 

FY2010‐11 has posed formidable 

challenges for Bangladesh. 

Number of migrant workers has 

decreased by almost half 

compared to average figure for 

comparable periods of FY2006‐07 

and FY2007‐08, and for the first 

time growth of remittance has 

entered into negative terrain. Both 

of these performance indicators 

are likely to have adverse impact 

on Bangladesh’s labour market 

situation and balance of payment. 

Deceleration in Overseas 

Migration 

During the first five months of 

FY2010‐11 (July to November), 

overseas migration fell by about (‐) 

24 per cent compared to the 

corresponding period of the 

previous fiscal year. This 

disturbing development owes to 

both demand side developments 

in importing countries and the 

supply side constraints arising 

from the structural weaknesses 

which characterise Bangladesh’s 

migrant workforce. 

Changing Economic 

Scenario in the Post‐Crisis 

Period 

In the backdrop of the post‐crisis 

macroeconomic scenario, 

particularly the slowdown in 

economic activities in the 

construction sectors, traditional 

manpower destinations of 

Bangladesh have hosted lower 

number of migrant workers in the 

recent past. Although by now 

recovery has set in motion in most 

of these countries, the lagged 

response of the crisis is reflecting 

on the number of workers 

demanded in various sectors of 

the economy in these host 

countries. This is corroborated by 

the fact that overseas migration 

from Bangladesh to Kingdom of 

Saudi Arabia (KSA) and the UAE, 

two of her key manpower export 

destinations, fell respectively by (‐) 

51.7 per cent and (‐) 10.3 per cent 

during July‐November period of 

the current fiscal compared to the 

corresponding period of 

FY2009‐10 (Figure 17). Similar 

trend is also found for several 

other markets where Bangladesh 

has been a major supplier of 

migrant labour force in the past. 

30 



Figure 17: Overseas Migraon from Bangladesh to Major Manpower Imporng Countries (July – November) 

Source: Bureau of Manpower Employment and Training (BMET). 

Increased market share of 

non‐Middle Eastern countries in 

recent times is indicative of some 

market diversification away from 

the Middle Eastern countries; 

however, share of these countries 

is relatively low, also because 

these tend to demand more skilled 

manpower. In spite of some 

improvements in the skill 

composition of migrant labour 

force in recent times, the share of 

‘less’ and ‘unskilled’ category 

continues to dominate 

Bangladesh’s migrant workforce 

(more than 74 per cent of total 

overseas migrants from 

Bangladesh during July‐October, 

2010 belonged to the ‘less‐skilled’ 

category). This has handicapped 

Bangladesh’s capacity to access 

the newly emerging opportunities 

in the post‐crisis global labour 

market. 

Stringent Regulatory 

Measures in the Host 

Countries 

Bangladesh’s problems have been 

compounded by the moratorium 

on issuing of new work permits 

(Akamas) and their renewal by the 

Saudi government. Although they 

had earlier indicated that it would 

allow transfer of Akama for 

Bangladeshi workers, which 

would enable them to switch to 

new employers after expiry of the 

initial job contract, till now no 

progress has been made on this 

front. Discussion with various 

stakeholder groups97 indicate that 

due to the current policy, Saudi 

employers are unwilling to issue 

work visas to Bangladeshi citizens. 

This has undermined 

employability, and led to illegal 

status of workers in the many 

instances. As a consequence, 

remittance flow from Saudi Arabia 

has been adversely affected. 

Illegal Stay of Bangladeshi 

Workers Abroad 

As was noted above, because of 

Akama related complexities, a 

large number of Bangladeshi 

workers have lost their legal status 

in Saudi Arabia. Similar has also 

been the case in Malaysia where a 

large number of Bangladeshi 

migrant workers have lost their 

legal status. This had two negative 

impacts: As was found from 

discussion with returned migrants 

from Malaysia, many such 

workers are discouraged to leave 

Malaysia and return since they are 

apprehensive that once they leave 

Malaysia they will not be able to 

go back.98 Recent reports suggest 

that more than 0.4 million 

Bangladeshis are now residing 

illegally in Malaysia. Secondly, 

the emergent situation has 

induced the Malaysian 

Government to put embargo on 

recruitment of workers from 

Bangladesh. 

High Cost of Migration 

Cost of overseas migration has 

traditionally been higher in 

Bangladesh compared to 

neighbouring countries. Many of 

the players involved, including 

recruiting agents, have connived 

to exploit the workers. This has 

led to this higher migration cost in 

Bangladesh. It has been found that 

in most cases a worker from 

Bangladesh has to incur more than 

twice or thrice the cost borne by a 

worker from India, Pakistan or 

Nepal to go overseas. For 

instance, although the government 

has fixed payment for workers 

going to Malaysia at a maximum 

of 84 thousand taka/workers (as of 

2009) 


interviews with returned workers 

reveal that they had to spend on 

average about Tk. 2 lakh. Besides, 

discussion with a group of South 

Africa bound Bangladeshi migrant 

workers at Dubai Airport revealed 

that, the workers were contracted 

to pay Tk. 6 lakhs each if they 

were successful to finally enter 

South Africa.99 

As is known, three banks are 

currently offering specialised loan 

facilities to the migrant workers. A 

study on migrant workers 

conducted by Refugee and 

Migratory Movements Research 

Unit (RMMRU) indicates that, only 

97 aspirant workers had so far 

received loans from these banks in 

2010. The study also pointed out 

that high interest rate and lack of 

efforts on the part of the banks’ 

officials at the field level tends to 

discourage potential migrant 

workers from taking loans from 

the offering banks. 

Changing Preferences of 

Major Labour Importing 

Countries 

The problem from the supply‐side 

has been compounded by the 

policies of some of the host 

countries. KSA and Malaysia are 

two relevant examples. The GoB 

has been trying to address the 

situation through high‐level 

official visits and discussion at 

various levels. Tangible results of 

these efforts are yet to be seen. 

Some of the key manpower 

importing countries appears to 

have shifted their focus from 

traditional manpower exporting 

countries to prospective new 

ones. According to a number of 

returned migrants and recruiting 

agents, Saudi Arabia and Malaysia 

now prefer workers from Nepal. It 

may be mentioned here that 

Nepal alone has sent about 

18,019 workers to Saudi Arabia 

and more than 42,454 to Malaysia 

during July‐October period of 

FY2010‐11.100 To compare, 

Bangladesh’s manpower export to 

these two countries during the 

same period was 1,742 and 434 

respectively. 

There is a need for more persistent 

diplomatic efforts to change the 

situation. It may be recalled here 

that recently the Malaysian 

government has offered to recruit 

a sizeable number of Bangladeshi 

workers on ‘G to G’ basis (i.e. 

government to government basis). 

Bangladesh should try to take 

advantage of this opportunity by 

ensuring that the rules and 

regulations stipulated by the host 

country are strictly adhered to. 

Unscrupulous Practices by 

Recruiting Agents 

Besides charging abnormally high 

processing fees, a number of 

recruiting agents in Bangladesh 

are reported to provide false 

information to aspirant migrant 

workers regarding job contract, 

wages, tenure, fringe benefits, etc. 

This, on many occasions, result in 

illegal stay of workers in the host 

countries as they leave the initially 

contracted job due to 

disagreement over wages and 

benefits. Furthermore, some of the 

returned migrants have also 

informed that a number of 

recruiting agents offer job 

contracts in overseas companies 

which do not have appropriate 

vacancies. As a consequence, 

these migrants get engaged in jobs 

offered by other companies, a 

practice which is considered to be 

illegal by the host countries. 

Besides, anecdotal information 

also suggests that some recruiting 

agents from a number of other 

labour exporting countries 

(including Nepal) are engaged in 

sending Bangladeshi workers to 

the Middle‐East and other 

destinations, with fake passports, 

by introducing them as citizens of 

their own countr . This does not 

seem unreal in view of the fact 

that Bangladesh has an abundant 

supply of workers willing to go 

overseas and countries such as 

Nepal are short of workers when 

compared to the large number of 

offered job opportunities. Such 

practice also increases migration 

cost as the aspirant migrants have 

to go through indirect routes to 

reach the destination countries. 

There has been a significant 

deceleration in the growth of 

remittance inflow to Bangladesh 

during the first five months of the 

current fiscal (July to November). 

Total remittance inflow has 

declined by (‐) 1.7 per cent over 

this period compared to the same 

period of FY2009‐10. To compare, 

remittance rose by 24.4 per cent 

in FY2009‐10. A number of factors 

have contributed to this situation. 

Decelerating Manpower 

Export 

As Figure 18 suggests, there is a 

correlation between the negative 

growth in remittance inflow and 

the deceleration in the flow of 

overseas migration. Remittance 

inflow from major manpower 

importing countries except 

Malaysia has seen a fall over the 

recent months, to varying degrees. 

Although the ‘stock effect’ should 

have, at least in the near‐term, 

compensated for the (lower) ‘flow 

effect’, it is disquieting to see that 

lower levels of migration has 

tended to be accompanied by 

lower remittance flow. 

32 



Source: BMET. 

Figure 18: Market Specific Growth in Overseas Migraon and Remiances: 

However, one needs to be 

cautious in interpreting the impact 

of compositional changes in 

FY2009 10 vs FY2010 11 (July – November) 

manpower export markets on 

remittance inflow to Bangladesh. 

As Figure 19 shows, despite some 

significant changes in the share of 

different countries as manpower 

importers from Bangladesh, their 

share in terms of sources of 

remittance has remained rather 

less differentiated in the recent 

past. This would indicate that 

while lower overseas migration 

might may contributed to 

decreased remittance inflow, the 

stock effect have somewhat 

compensated for this, particular in 

host countries where there is a 

sizeable number of workers 

already exist. Nevertheless, if the 

deceleration in overseas migration 

continues, its lagged impact on 

remittance inflow will eventually 

catch up in the medium term, 

even in those countries; in that 

case the growth in remittance flow 

is likely to go down further. 

Figure 19: Market Composion for Bangladesh’s Manpower Export and Remiance Earnings: 

Share of Major Labour Imporng Countries 

Manpower Export 

Remiance 

Source: BMET, Bangladesh Bank. 


In view of the significant fall in 

remittance inflow from Saudi 

Arabia, it is perhaps worth 

investigating as to whether the 

restrictions arising from Akama 

has induced the Bangladeshi 

workers to opt for informal 

channels (hundi) to remit earnings 

to Bangladesh. 

Cost of Remittance 

The cost of sending remittances is 

falling world‐wide in recent times. 

Bangladeshi workers have also 

been able to take advantage of 

this, thanks also to a number of 

steps taken by Bangladesh’s 

policymakers to facilitate the 

transfer. An analysis of cost of 

remitting money to Bangladesh 

from different countries shows that 

it has seen some decrease during 

the first quarter of FY2010‐11 

compared to the same period of 

FY2009‐10, for Saudi Arab, 

Malaysia and United Kingdom; 

however, there has been some rise 

for Singapore (Figure 20). 

Figure 20: Cost of Sending Money to Bangladesh from Selected Countries 

Source: World Bank. 

While a worker had to pay an 

average of USD 4.89 to remit 

USD 200 from Singapore to 

Bangladesh during Q1 of 

FY2009‐10, the transaction fee 

increased to USD 5.99 during Q1 

of FY2010‐11. However, for 

remitting equivalent amount the 

processing fee in Saudi Arabia had 

decreased to USD 8.39 in Q1 of 

FY2010‐11 from USD 8.7 in Q1 

of FY2009‐10; for UK, the corresponding 

charges were USD 

11.43 and USD 13.37 respectively. 

Available information 

suggests that the processing fee for 

transfer of remittance in Malaysia 

decreased from USD 10.91 to 

USD 9.36 between Q3 of 

FY2009‐10 and Q1 of FY2010‐11. 

Indeed, total remittance from 

Malaysia has increased from USD 

158 million in Q3 of FY209‐10 to 

USD 168 million in Q1 of 

FY2010‐11. However, notwithstanding 

that the cost of remittance 

had declined for Saudi 

Arabia and UK, remittance from 

these two countries declined by (‐ 

) 2.4 per cent and (‐) 3.0 per cent 

respectively during the comparable 

periods. 

Way Forward 

• While announcing the 

National Budget for 

FY2010‐11, the government 

had set a target of sending 5.77 

lakh workers abroad in the 

current fiscal. In view of the 

record so far (first five months), 

to achieve this target, an 

average of more than 60 

thousand workers will need to 

go abroad for work each month 

over the next seven months. 

However, given the current 

trend, attainment of this target 

appears to be highly unlikely. 

Since the number of migrant 

workers constitute a significant 

proportion of the annual 

incremental labour force of the 

country, such deceleration in 

overseas migration from 

Bangladesh will create 

additional pressure on the 

already challenged domestic 

labour market. CPD survey 

indicates that there is a 

common understanding among 

the relevant stakeholders to the 

effect that if the current 

deceleration in manpower 

exports from Bangladesh is to 

be reversed, the key strategy 

ought to be the revitalisation of 

the job markets in the Middle 

East. The government has been 

taking a number of initiatives to 

address the attendant situation, 

but till now the results have not 

been very encouraging. A 

proactive and aggressive 

diplomacy will need to be 

pursued in two areas if the 

present is to be addressed: 

resolving the Akama problem 

and ensuring the continuation 

of new recruits from 

Bangladesh. 

34 



• Government should continue 

the dialogue with major 

labour‐importing countries, 

particularly in the Middle East, 

to allow change of jobs by 

Bangladeshi migrant workers 

(without transfer fee). A recent 

study projects that about 

500,000 people, in different 

workmanship categories, will 

be needed in Saudi Arabia for 

the ongoing construction of 

new cities.101 The awarding of 

Qatar, to host the Football 

World Cup 2022 is also likely 

to create hundreds of 

thousands of jobs in the 

construction sector. 

Negotiations should be 

initiated so that Bangladesh is 

able to take advantage of these 

emerging opportunities. 

• Efforts should now be 

strengthened so that 

Bangladesh is able to cater to 

the emerging needs in new 

markets for migrant workers in 

the developed world, 

particularly in caring services, 

nursing, medical technicians, 

etc. Besides, countries such as 

Qatar and the UAE are likely 

demand more workers in the 

professional and highly‐skilled 

categories for the 

service‐and‐knowledge based 

economy that they are trying to 

build.102 To access such 

opportunities, a time‐bound 

plan should be put in place so 

that workers willing to travel 

abroad have the opportunity to 

undergo skill upgradation 

training. 

• Available reports suggest that 

demand for migrant workers is 

set to go up also in South Korea 

and in Libya. Unfortunately 

though, only 1,409 people 

went to South Korea during the 

first five months of FY2010‐11 

(however, this number was 

more than double the number 

that went to Malaysia during the 

same period) and none to Libya 

(whereas more than 12 

thousand people went to the 

country during the last six 

months of FY2009‐10). Efforts 

should be made to exploit the 

opportunities in the Libyan 

market. In recent times, people 

from Bangladesh have started 

to go to a number of African 

countries including Angola, 

Algeria, Nigeria, Botswana, and 

South Africa. In view of the 

ongoing deceleration in 

manpower export to the 

traditional markets, policy 

emphasis should be put to 

facilitate increased migration to 

these new and emerging 

markets. 

• World Bank (2010)103 

estimates indicate that 

low‐income countries will 

attain an average of 8.2 per 

cent growth in remittance in 

2010 and the forecasts are that 

in 2011 and in 2012 the 

growth rates could reach 8.7 

per cent and 9.0 per cent 

respectively. Bangladesh’s 

current growth rate of 

remittance is way below the 

levels suggested by these 

optimistic projections. There is 

thus an apprehension that 

Bangladesh is not being able to 

take advantage of the emerging 

global opportunities. If 

Bangladesh is to match the 

expected performance of the 

low income countries and 

attain growth rate of about 8‐9 

per cent by the end of FY2010‐11, 

it will have to maintain a 

monthly average growth rate of 

24 per cent during the 

remaining period of 

FY2010‐11. Indeed, 

Bangladesh should carefully 

study the policies pursued by 

other countries in this regard 

and draw the necessary 

lessons. 

• Strict monitoring and 

implementation of processing 

and visa fees which is fixed by 

the government is urgently 

required. Because of 

excessively high expenditure 

that a Bangladeshi worker has 

to incur, length of stay abroad, 

level of wages, timely payment 

of wages, and opportunity for 

working overtime are critically 

important for the workers. 

Rationalisation of cost of 

migration and ensuring 

compliance of the same by the 

recruiting agents must be given 

high priority on the 

government’s agenda. Work of 

the recruiting agencies should 

be monitored on a regular 

basis. If agencies are found to 

be involved in malpractice 

such as failure to provide 

appropriate and truthful 

information to aspirant 

workers, these should be 

strictly dealt with and those 

responsible should be legally 

obliged to pay the due 

compensation to the migrant 

workers. 


• Malaysia has recently 

expressed its intention to 

import manpower from 

Bangladesh only through the 

government channels. The 

objectives of such a proposal 

are to reduce migration cost 

and to ensure some discipline 

to the process. According to 

available information, the 

Government of Bangladesh will 

need to ensure that migration 

cost to Malaysia is kept 

between Tk. 25,000 to Tk. 

35,000 and these workers will 

get work permit for five years. 

In view of this changing 

situation, government should 

play a proactive role to 

increase the capacity of BMET 

to send a larger number of 

migrant workers through legal 

channel. If required, the BMET 

should be suitably strengthened 

towards this. Aspirant workers 

should be given appropriate 

information with regard to 

emigration procedure, laws, 

language and culture of the 

destination countries. 

• Regrettably, in recent times 

Bangladesh is losing some of its 

manpower market to Nepal and a 

number of other countries. 

GoB should look into the 

matter, identify reasons and 

take measures to address the 

situation. The allegations of 

recruitments of Bangladeshi 

workers by recruiting agencies 

of other countries should also 

be properly investigated. 

4. SHORT‐TERM 

OUTLOOK AND 

CONCLUDING 

OBSERVATIONS 

The crucial importance of how the 

Bangladesh economy performs in 

FY2010‐11 ought to be judged 

inter alia, from the following two 

perspectives. First, globalising 

economies such as Bangladesh 

will have to be able to capitalise 

on the ongoing turnaround in 

global economy. Second, 

FY2010‐11 being the first year of 

the Sixth Five‐Year Plan 

(2011‐2015), a good kick‐off in 

the first year will help to 

materialise the medium term 

objectives of the Plan. 

Growth for Structural 

Change 

For sustainable inclusive 

development, Bangladesh 

economy needs to experience a 

structural change based on 

promotion of productive sectors. 

Given the resource endowment of 

the country, it is maintained that 

an employment‐ intensive, but 

highly productive manufacturing 

sector has to spearhead such a 

structural change. In view of the 

above, growth experience of 

Bangladesh in past three decades 

reveals two broad phases. 

(i) GDP growth during 1980s and 

1990s had originated mainly in 

rapid growth of the manufacturing 

industries (Figure 21). 

(ii) In 2000s, service sector 

provided a substantial base to 

augment additional national 

income, while manufacturing and 

crop sector held their positions. 

Figure 21: Incremental Share of GDP by Broad Sectors (%) 

Source: Esmated from MoF (2010). 

36 



These relative developments 

among the GDP components 

indicate elements of structural 

change within the Bangladesh 

economy. In this process, while 

agriculture sector has ceded its 

relative share, service sector – not 

manufacturing sector – has largely 

picked up the space. This has 

happened notwithstanding 

acceleration of the GDP growth 

rate observed in the recent past. 

Thus, the Outline Perspective Plan 

of Bangladesh 2010‐2021: Making 

Table 14: Sectoral Share of GDP (in Per cent) 

Required sectoral 

contributions for attaining 

growth target 

Given the slowdown in the 

incremental share of the 

manufacturing sector in the recent 

2021 A Reality has rightly 

emphasised that the contribution 

of manufacturing sector in GDP 

has to be enhanced to 26.0 per 

cent and 30.0 per cent by 

FY2014‐15 and FY2020‐21 

respectively (Table 14) from the 

existing level of 17.3 per cent 

(FY2009 -10). Admittedly, attaining 

these challenging targets will 

require considerable acceleration in 

the manufacturing production. 

Sectors FY10 FY15 

(Target) 

FY21 

(Target) 

Agriculture 19.5 16.0 15.0 

Industry 28.9 35.0 40.0 

Manufacturing 17.3 26.0 30.0 

Service (including Customs Duty) 51.6 49.0 45.0 

Source: BBS (2010) and Planning Commission (2010). 

enhanced growth performance, 

attaining the GDP growth target in 

FY2010‐11 will depend, at the 

margin, on added contribution 

from this sector. Indeed, in view 

of current structure of GDP, 

economic growth beyond 5 per 

cent is mostly determined by 

manufacturing sector’s level of 

output. 

GDP growth target for FY2010‐11 

has been set at 6.7 per cent. The 

last time a ‘more than six and half 

per cent’ growth was achieved 

was in FY2005‐06 when 

manufacturing sector contributed 

more than 25.8 per cent of the 

aggregate growth (Table 15). An 

analogous performance will need 

to be registered from the 

manufacturing sector in 

FY2010‐11 (about 40 per cent). 

The growth contribution from 

agriculture sector also has to be as 

good as in the last year 

(FY2009‐10) (about 10 per cent). 

Historically, steady performance 

by the services sector (about 50 

per cent) has been underwritten 

by moderate achievements in the 

other sectors. About 49.3 per cent 

incremental contribution in GDP 

needs to be registered by the 

service sector in FY2010‐11. 

Table 15: Sectoral Contribuon to GDP Growth (%) 

Contribuon to Growth (%) 

Sector 

Required in FY11 

FY06 FY07 FY08 FY09 FY10 

(CPD Projecon) 

Agriculture Sector 16.7 15.6 11.3 14.0 15.5 11.9 

Crops 9.1 7.8 4.8 8.8 10.3 9.0 

Industry 39.4 35.9 30.6 31.6 29.3 37.3 

Manufacturing 25.8 25.0 19.4 19.3 17.2 25.4 

Service Sector 45.5 51.6 50.0 52.6 53.4 49.3 

Total 100 100 100 100 100 100 

Source: Esmated from MoF (2010) and CPD projecon. 


Growth Outlook for 

FY2010‐11 

At the halfway mark of 

FY2010‐11, there are several 

indications that the economy has 

gained some momentum, 

particularly due to the pick in 

external demand. Enhanced 

export receipts during the early 

months of FY2010‐11 also speak 

about the upbeat manufacturing 

growth. Greater investment 

demand is reflected in strong 

industrial credit flow leading to 

growing imports demand for 

capital machinery and other 

production inputs. The outcome 

of crop sector is also expected to 

match the recent past 

performance. The productions of 

Aus and Aman have been 

satisfactory, while optimistic 

outcome is being forecasted for 

the Boro yield by several quarters. 

The performance of service sector 

generally has been very steady in 

nature and should be consistent 

with the energetic performance of 

the real sectors. Thus, in the final 

analysis, broad‐based 

manufacturing growth will define 

the final growth outcome in 

FY2010‐11. 

However there are a couple of 

disquieting factors which may 

subdue the GDP growth figure for 

the current fiscal year. The dismal 

performance of small 

manufacturing industries could 

inhibit the potential expansion of 

manufacturing output.104 Further, 

considering the employment 

linkages of small scale 

manufacturing industries, low 

performance of the sector would 

have an adverse impact on labour 

market. Moreover, sluggish 

implementation of public 

investment programme is not only 

failing to provide the much 

needed infrastructure services, but 

this is also holding back private 

investment prospects. 

Furthermore, the emerging power 

supply situation may not be 

adequate to accommodate the 

potential expansion of agriculture 

and manufacturing sectors in the 

coming summer season. Slow 

visible progress in the energy and 

power sector is becoming a 

binding constraint for the growth 

and competitiveness of the 

processing activities as well as for 

further development of business 

supportive services.105 In 

addition, the unhealthy trend in 

domestic capital market is also 

diverting funds and attention from 

the development of the real 

sectors. Given the current context, 

it will be challenging to attain the 

GDP growth target at the end of 

the fiscal year if the manufacturing 

sector does not experience a 

broad‐based boost, promoting 

structural change. 

Macroeconomic 

management in view of the 

growth target 

The review of key economic 

variables suggests that 

macroeconomic stability in 

FY2010‐11 is coming under some 

strains on a number of fronts. 

These emerging strains may have 

implications for attaining the GDP 

growth objective. The size of the 

budget deficit at the end of the 

fiscal year will remain within the 

programmed target, but there is a 

need to pay specific attention in 

ensuring balance among the 

different sources of deficit 

financing. Rationalisation of prices 

of public utilities will be necessary 

to reduce fiscal burden. Rising 

food inflation may generate an 

overall cost push, although there 

is no indication of any foodgrain 

shortage in the country. There is 

also a growing concern over the 

balance of payment situation due 

to weak remittance inflow and 

growing trade deficit. In this 

context, stability of exchange rate 

will be of importance in 

maintaining macroeconomic 

stability. 

In order to address the issue of 

rising commodity prices (including 

fuel and food), volatile capital 

market, slow recovery of 

investment demand and the 

pressure on balance of payment, 

appropriate fiscal and monetary 

policy support for facilitating the 

growth process will be required. 

Indeed, in this case fiscal policy 

has to take the lead with monetary 

policy taking an accommodative 

stance commensurate with the 

emergent needs. It is pertinent to 

mention that delivery of the 

envisaged investment plan for 

achieving the growth target 

warrants moderately expansionary 

monetary policy. In view of the 

current inflationary trend, it is 

often suggested that, it is time that 

the monetary authority slows 

down the credit growth to protect 

macro‐economic stability. 

However, given the nature of 

inflation in Bangladesh, reigning 

in domestic credit growth in the 

current context will be not only 

pre‐mature, but may also prove to 

be counter‐productive. In a 

situation of a disincentive to the 

supply‐side, inflation may soar 

further as one is aware of the 

limits of the demand‐side inflation 

38 



management which often 

readjusts the economy at a low 

level equilibrium. 

There is a growing need to 

backstop the balance of payment 

in the coming months. However, 

the current reserve situation does 

not warrant any panic in this 

regard. The current BoP situation 

is yet to generate an adequate 

rationale for seeking financially 

expensive and policy conditional 

loans from foreign sources. It is 

not clear under what 

arrangements current negotiation 

with the IMF is being held. It is 

important that the government is 

able to maintain its 

growth‐supportive policy space 

including fiscal expansion and 

enhanced subsidies to critical 

sectors. If the conditionalities of 

the said loan is at variance with 

the declared development policy 

framework of the government 

such inconsistencies could 

undermine domestic ownership 

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indications that the economy has gained some momentum, 

particularly due to the pick in external demand” 

over the development agenda. 

Indeed, a public disclosure of the 

soon‐to‐be‐finalised IMF 

programme may enable us to have 

an informed discussion in this 

regard. 

CPD maintains that given the 

present state of the economy 

policymakers should not get 

overly preoccupied with concerns 

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policy measures should be geared 

towards a broad‐based, inclusive 

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(2010). Recent Monetary Policy 

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40 



Fundamentals to Safeguard 

Investment in the Capital Market 

Biplob Kanti Banik ACA 

Abstract 

Capital market is a risk exposed 

market and at the same time it is 

also a very attractive field of 

investment. But lack of prudence 

of investors in this market 

sometimes led massive 

catastrophic effect on the whole 

economy of any country. Country 

like Bangladesh is yet to establish 

a long stable capital market due to 

lack of some infrastructure and 

intellectual resources. Capital 

Market risk arises from various 

factors. Among the factors, some 

are fundamental and some are 

incidental. Both too much bearish 

and bullish market is not expected 

in the economy. Before going to 

invest in capital market and to 

source capital form capital 

market, one should have a 

minimum knowledge about 

capital market. And regulators, 

institutions should act proactively 

in playing their due role. 

Below are some basics to 

know about capital market 

On understanding the following, 

one may easily get the primary 

concept of the capital market and 

only then can go to invest in the 

capital market. 

What is the capital Market 

In my own perception, Capital 

market is a place where investors 

and entrepreneurs have come to 

benefit by exchanging their 

respective resources. Here money 

may be defined as the resource of 

investor and business idea and 

intellectuality may be defined as 

the resource of entrepreneur. 

Investors come with their money 

to invest in a potential, 

sustainable and well managed 

business and Entrepreneurs come 

to invite prospective and intended 

investors to join them providing 

necessary fund to launch or run 

the business that they intend to 

do. 

Capital market also allows 

subsequent trading of issued 

shares (which are issued through 

financing). 

Types of Capital Market 

The capital markets consist of 

primary markets and secondary 

markets. 

Primary Market 

Newly formed (issued) securities 

are bought or sold in primary 

markets. 

For example, IPO (Initial Public 

Offering shares), Private 

Placement and Promoters’ shares. 

The transactions in primary 

market exist between investors 

and public. 

Secondary Market 

Secondary market allows 

investors to sell securities that 

they hold or to buy existing 

securities. For example: buying 

100 shares of a company through 

stock broker from another party 

who are not direct 

investor/promoters in share 

issuing company. 

The transactions in secondary 

market exist between investors. 


Where is the capital market 

situated? 

Like traditional marketplace, 

capital market is not a land area 

where products are sold by 

weighing or counting, rather 

capital market consists of some 

institutions, regulators and 

authority under law of the 

respective country. 

Institutions, regulators and 

authorities are the infrastructure of 

the capital market. 

What are the products of 

capital market? 

Capital seekers (Entrepreneurs and 

Business holders) come to the 

market with different types of 

instrument to sell for raising their 

shortage fund. Such instruments 

may be regarded as the products 

of capital market. These are : 

-Share (the small part of capital) 

-Bond (Convertible and 

Non-convertible) 

-Debenture and other similar 

instruments 

Who could be capital 

market regulators and why? 

Nothing could be conducted 

without proper guidelines, rules 

and regulations whether the 

business is intended to make 

appreciation of money or to make 

welfare of the community. 

Likewise capital market needs to 

be regulated, controlled and ruled 

for the welfare of investors, 

entrepreneurs and other related 

parties. Government should be 

the firsthand regulator of the 

capital market with independent 

body. 

What happens if capital 

market is not regulated 

properly? 

A shattered, fragile and sick 

capital market is burden for 

economy and barrier to growth of 

trade and commerce and overall 

development of the country. 

Non-existence of sound and 

sustainable capital market will 

create dearth of sourcing and 

investing of capital which 

ultimately will create 

unemployment and make a 

slowdown of GDP growth. 

What is the difference 

between money market and 

capital market? 

Basically the difference between 

the capital markets and money 

markets is that capital markets are 

for long term investments, 

companies are selling stocks and 

bonds in order to borrow money 

from their investors to improve 

their company or to purchase 

assets. Whereas money markets 

are more of a short term 

borrowing or lending market 

where banks borrow and lend 

between each other, as well as 

finance companies and everything 

that is borrowed is usually paid 

back within certain period. 

Another difference between the 

two markets is what is being used 

to do the borrowing or lending. In 

the capital markets the most 

common thing used is stocks and 

bonds, whereas with the money 

markets the most common things 

used are commercial paper and 

certificates of deposits. 

Following are some 

fundamental risks factors of 


The capital market risk usually 

defines the risk involved in the 

investments. 

There are two types of capital 

market –the stock market and the 

bond market; we may discuss 

stock market risks. 

Factors associated with capital 

market risks. 

Characteristics of Investor 

There are some investors who 

42 



come in stock market to make 

profit overnight without any 

simple understanding of the 

business fundamentals .They think 

that this market is only for making 

profit by buying and selling shares 

after two or three days . 

Though they call themselves 

investors they do not behave like 

investors. They behave like 

vendors. 

There is no formal authority to 

educate investors of capital 

market in our country. 

As we see when share prices 

significantly fall, investors rally on 

the street, damage public property 

and chant slogans against 

regulatory bodies and 

government. 

But one should ask that when 

investors and make them 

understand about capital market 

risk factors. 

The more investors are 

prudent, the more risk to be 

mitigated Psychological 

factors 

Research has shown that there are 

certain psychological factors that 

shape the stock market prices. 

Sometimes people tend to see 

patterns and make 'noise' 

although no such patterns may 

exist. Individuals are also victims 

of group thinking. 

Lack of corporate governance in 

publicly traded company. 

Most of the listed companies have 

no corporate governance 

practices in conducting their 

businesses. Regulatory bodies 

Failure to protect from 

speculation 

Sometimes the market behaves 

illogically to any economic news. 

The stock market prices can be 

diverted in any direction in 

response to press releases, rumors 

and mass panic. The stock market 

prices are also subject to 

speculation. So, to protect market 

from any buzz, our regulatory 

bodies and intermediaries must 

act proactively so that investors 

are saved from any kind of wrong 

doing regarding their investment. 

Understanding of Financial 

Information/Analysis 

Any investment decision requires 

rigorous financial analysis. In our 

capital market, most of the 

investors do not calculate their 

return based on company’s 

“Any investment decision requires rigorous financial 

analysis. In our capital market, most of the investors do 

not calculate their return based on company’s dividend 

payout ratio and earnings per share (EPS)” 

business fails; do real promoters, 

shareholders or directors come to 

street to express their anger? 

Rather they review their activities, 

decisions and analyze market 

situation and take decision as to 

whether they will continue their 

business or close down. 

Instead of reviewing their 

investment decisions, why 

investors in capital market (in 

secondary market) come to the 

street? Is it not the failure of our 

regulatory bodies, intermediaries 

of stock market that they could 

not educate the investors and 

direct the market in right track in 

which investors can trust? 

Therefore it is capital market 

institutions’ onus to educate 

only issue some compliance 

requirement in the name of 

ensuring corporate governance. 

And without some financial 

institutions, it is rarely found that 

companies are complying with 

such requirement. 

Existing Companies Act, Bank 

Company Act and Securities and 

Exchange Commission Act and 

Rules are not updated with 

modern practice of business rules 

and regulation for which business 

houses can deal their business as 

they wish. 

Inadequate compliance and 

governance in the listed 

companies and weak monitoring 

by the regulatory bodies expose 

capital market to risks. 

dividend payout ratio and 

earnings per share (EPS). Rather 

they say ‘buy this share and it will 

go up by Taka 100’ or say ‘it will 

go up’. They only consider gain 

over trading within 3 or 4 days. 

But how could it be possible? 

They don’t examine. It seems to 

be ridiculous! 

For example, If an investor bought 

a share of a company at Taka 

500.00 from the secondary 

market having face value of Taka 

100 and net assets value of Taka 

300.00 and the investee company 

is paying dividend at 20% p.a. 

what will be the return on 

investment of the investor on that 

particular share ? 

In this case, return on investment 

(20/500)*100=4% (it is assumed 


that the investor holds his share to 

the record date of dividend 

entitlement). 

But some investors do not know 

what is dividend; some think they 

will get dividend on Taka 500 i.e. 

Taka 100 and some really know 

their dividend would be Taka 20. 

If investing Taka 500 we get Taka 

20 annually from the capital 

market why should we not go to 

money market where return on 

investment would be around 10% 

to12 % and there will be no risk 

factors of losing capital and 

income? 

The purpose of business is not 

only making profit but also 

maximization of wealth by 

creating net assets value year after 

year. Investing in the capital 

market, investors may get chance 

of making profit and 

maximization of his wealth value 

which is not possible in money 

market. 

But should we buy wealth of Taka 

300 for Taka 500?. And if we 

buy, would we be able to get pay 

back of our investment within 3 

or 4 days or even in one year ? If 

it is not possible by analyzing the 

growth trend of investee company 

then question may come why 

should we buy share with taka 

500? 

In this case, either we should wait 

till the value of investment has 

grown above Taka 500 or we 

should find another investment 

opportunity. 

So if an investor wants to have a 

decent return on his investment 

(expecting dividend) for short 

term and to maximize the value of 

his equity then capital market is 

the perfect place for such 

investor. 

So before coming into capital 

market, investors’ decisions 

should be taken for long term 

with a view to maximize the 

value of their wealth and not for 

making profit overnight. 

Investor in the capital 

market should also consider 

the following risks 

The market risk defines the overall 

risk involved in the capital market 

investments. The stock market 

rises and falls depending on a 

number of issues. The collective 

view of the investors to invest in a 

particular stock or bond plays a 

significant role in the stock market 

rise and fall. Even if the company 

is going through a bad phase, the 

stock price may go up due to a 

rising stock market. While 

conversely, the stock price may 

fall because the market is not 

steady even if the investee 

company is doing well. Hence, 

these are the market risks that the 

stocks investors generally face. 

The industry risk affects all the 

companies of a certain industry. 

Hence the stocks within an 

industry fall under the same 

industry risk. 

The regulatory risk may affect the 

investors if the investee company 

comes under the obligation of 

government implemented new 

regulations and laws. 

The business risk may affect the 

investors if the company goes 

through some convulsion 

depending on management, 

strategies, market share and labor 

force. 

Systematic Risks 

The risk inherent to the entire 

market or entire market segment. 

Also known as "un-diversifiable 

risk" or "market risk 

Investopedia explains 

Systematic Risk 

Interest rates, recession and wars 

all represent sources of systematic 

risk because they affect the entire 

market and cannot be avoided 

through diversification. Whereas 

this type of risk affects a broad 

range of securities, unsystematic 

risk affects a very specific group of 

securities or an ndividual security. 

Systematic risk can be mitigated 

only by being hedged. 

Even a portfolio of well-diversified 

assets cannot escape all risks. 

Conclusion 

It is capital market intermediaries 

who have to take firsthand 

responsibility for evolving our 

capital market. As capital market 

is one of the important 

contributors to growth of our 

GDP, this market should be a 

place of profitability, 

sustainability, viability and 

confidence and trust for investors. 

Investors’ maturity, reaction and 

prudence are also vital to have 

sound capital market. 

If we consider the above factors of 

capital market risks before taking 

investment decision, a chunk 

amount of risk can be mitigated. 

We should bear in mind that this 

is not the place to rush to make 

money overnight rather it is the 

place where slow and steady wins 

the race. 

The Author is a Member of ICAB & 

Manager (Account & Finance) 

M. M. Ispaahani Ltd., Chittagong 

44 



Capital Market Review 

Volatility in the Bangladesh 

Stock market: Regulators 

step in to bring back 

investors’ confidence 

The country’s premier bourse 

Dhaka Stock Exchange (DSE) 

began the first trading day of 2011 

on January 2, 2011 against the 

backdrop of a record single-day 

fall in share prices and a persistent 

liquidity shortage. Although the 

general index of DSE (DGEN) had 

soared by 82% in 2010, the first 

week of the New Year was 

marked by volatility and violent 

protests by investors. DGEN rose 

by 14.18 points on January 2 but, 

the index has plunged by 569 

points over the next four trading 

days and a whopping 213 points 

on January 6. 

The second week of the year gave 

even a bigger shock to the 

investors when DSE suffered the 

steepest ever single-day fall in the 

bourse's history on January 9, 

2011. DGEN plunged by 600 

points, and all indices fell nearly 

8% amid panic-sale. Securities 

and Exchange Commission (SEC) 

and DSE authorities had to 

suspend trading at 11.50 a.m. 

when DGEN shed 660 points or 

9.25% between 11 am and 11.50 

am. 

Dhaka stocks bounced back on 

January 11, 2011 when DGEN 

rose more than 15% - the highest 

one-day spike ever - rebounding a 

day after a record plunge sparked 

violent protests nationwide and 

prompted a flurry of 

market-boosters from the 

authorities. DGEN gained 

1,012.65 points to close at 7,512. 

243 issues, out of 248 securities, 

advanced massively because of 

the investors buying frenzy when 

195 issues hit the upper band of 

their respective circuit breakers, 

forcing automatic freeze on their 

transaction. And there were no 

sellers for most of the stocks. 

Dhaka stocks opened the third 

week on January 16, 2011, with a 

positive note, but soon nose-dived 

amid volatility, after record plunge 

and rebound in the previous week. 

Out of the total of 247 issues 

traded on the DSE, 215 declined 

and 32 advanced. SEC suspended 

trading of both the bourses again 

on January 18, 2011 for the 

second time within eight days due 

to free fall of share prices. 

DSE had lost 600 points in five 

minutes of trading on January 20, 

2011. Thousands of aggrieved 

investors in Dhaka and elsewhere 

in the country took to the street to 

protest the collapse of the stock 

market and fought pitched battles 

with police as most of the 

investors had lost more than 50% 

of their capital in the collapse. 

DGEN lost a massive 1249.54 

points, or 16.49%, the highest 

ever in a week, as panic-stricken 

investors went for heavy selling, 

in most cases offloading their 

entire stocks, following liquidity 

crisis in the capital market. 

The Securities and Exchange 

Commission (SEC)—the capital 

market regulator—suspended 

trading for January 23-24, 2011, 

as per the directive of the 

government, while finance 

minister Muhith held a series of 

meetings with stakeholders on 

January 23 to stem the massive 

slides in share prices in the 

previous weeks. The 

government’s intervention in the 

capital market in the last week of 

the month kept the Dhaka stocks 

afloat as the premier burse’s 

general index showed an upward 

trend ending two weeks of 


massive slides. On January 25, 

2011, DGEN soared up by 

494.73 points, or 7.82%. But the 

day’s turnover hit two years’ low 

at BDT 2.06 bn as there were very 

few sellers in the market. DGEN 

advanced by 1,059.57 points or 

16.75%, to close the week at 

7,385.91 points, as share prices in 

all three trading sessions 

increased following suspension of 

trading for two days on January 

23-24, 2011. Out of total 262 

issues traded on the week, prices 

of 253 advanced and 5 declined. 

The average daily turnover in the 

week, however, was 5.88% less 

than the previous week. The 

volume of trading and daily 

turnover was low in three trading 

days as investors, who were in 

heavy losses, did not want to sell 

their shares hoping that the 

market would regain further. 

Dhaka and Chittagong stocks 

continued with the gaining streak 

for the fourth day on January 30, 

2011 as investors, boosted by 

increased liquidity supply, went 

into buying spree. DGEN 

advanced by 186.69 points, or 

2.52%, to close at 7,572.61 

points on the day, when prices of 

most of the shares increased 

further. Of the total 261 issues 

traded on DSE on this day, 225 

advanced, 33 declined and three 

remained unchanged. The 

selective price index of 

Chittagong Stock Exchange gained 

by 333.63 points, or 2.45%, to 

close the day at 13,896.43 points. 

DGEN gained 1,246.24 points in 

four trading sessions since January 

25 after the government took 14 

decisions to boost investors’ 

confidence following two weeks 

of massive collapse in the market. 

However, Dhaka stocks fell on 

January 31 as the investors went 

for selling shares to book profits 

after a four-day gaining streak. 

DGEN declined by 88.38 points, 

or 1.17%, to close at 7,484.22 

points on the day. Of the total 

258 issues traded on this day, 178 

declined, 78 advanced and 2 

remained unchanged. 

The government on January 25, 

2011 formed a three-member 

committee headed by the 

Bangladesh Krishi Bank 

Chairman, Khandkar Ibrahim 

Khaled, to investigate share 

market scam. The committee will 

investigate the problems and 

irregularities in the share market. 

It will start its activities on January 

27, 2011 and submit a report 

within three months. 

The finance ministry on January 

24, 2011 published a bailout 

package spelling out steps to 

protect the troubled stock market. 

The decisions include: 

1. Index breaker will be 

withdrawn 

2. Circuit breaker of any share 

will be trimmed in 

consultation with bourses 

3. Probe committee will be 

formed within two weeks to 

assess recent developments in 

the market 

4. A comprehensive guide line 

for share placement will be 

prepared 

5. SEC advisory committee will 

be restructured, and BB will have 

representation into the body 

6. Share buyback will be allowed 

after reforming company laws 

7. Frequent meetings by SEC and 

BB to discuss their policies 

8. SEC will not intervene in case 

of margin loans and will 

prepare a long-term policy 

9. More training programmes 

should be arranged for 

investors 

10. SEC will set PE ratio 

considering market situation 

11. BB will take a flexible 

approach to financial 

institutions’ investment to 


12. Institutional investors such as 

banks, financial institutions 

and merchant banks will 

reinvest a portion of their 

profits from stock trading into 

stock market. 

Securities Exchange Commission 

(SEC) and Bangladesh Bank (BB) 

took a series of steps to stabilize 

the market which virtually had no 

impact on the market. 

BB would be lenient to the banks 

which had provided more funds 

to their merchant banking wings 

than the allowable limit (15% of 

their total capital) because of the 

46 



current crisis in the capital 

market. Earlier BB directed the 

banks which had invested more 

than the ceiling to adjust the 

excess amount by December 31, 

2010. 

BB decided to withdraw the 

deadline set for the commercial 

banks to adjust loan that have 

been diverted from industrial 

sector to capital market. The 

commercial banks would now be 

able to adjust such loans 

whenever they feel comfortable. 

Earlier, BB set January 15, 2011, 

as the deadline for the banks to 

recover loans taken by borrowers 

as industrial credit but were 

diverted into the share market. 

BB has ruled out the impact of 

increased cash reserve 

requirement (CRR) on the money 

market. BB withdrew BDT 20 bn 

on December 15, 2010 by 

increasing CRR but injected over 

BDT 200 bn in last few days as 

liquidity support to different 

banks. 

SEC directed that investors would 

be now eligible for margin loan at 

1:2 instead of the current 1: 1.5 

and lifted restrictions on 14 

companies (which were sent to 

OTC market as they failed to 

de-materialize paper share within 

deadline) being traded at the spot 

market. Netting facilities have also 

been opened for all 

non-marginable securities. 

SEC relaxed the highest limit of 

mutual fund's (MF's) investment 

in the shares of a single company 

up to March 31, 2011. As per 

law, an MF is not allowed to 

invest more than 10% of its total 

scheme size in shares of a single 

company and 25% of the size of 

its all schemes in the shares of a 

single industry, debenture and 

other securities. 

SEC repealed the BDT 100 mn 

loan cap it had imposed on a 

single investor. 

SEC allowed a new investor to 

enjoy margin loan facilities just 

15 days after the opening of a 

beneficiary owner's account, 

instead of 30 days. 

Stock dealers from January 19, 

2011, are allowed to purchase 

shares worth up to BDT 150 mn 

without any margin to the 

exchanges. Previously, a stock 

dealer had to deposit a certain 

amount of money as margin to the 

exchanges for its additional trade 

exposure after BDT 50 mn, 

including own and clients' 

portfolios. 

SEC on January 19, 2011, 

postponed the book building 

method for initial public offering 

until further order in a bid to stop 

overvaluation of primary shares of 

companies using the method to 

be listed and exodus of money 

from the market. 

SEC has introduced circuit breaker 

on the capital market index which 

halts the market if the index gains 

or loses more than 225 points. 

The move came in a bid to 

prevent unusual fluctuation in the 

market but backfired on the first 

day (January 19, 2011) of its 

introduction as trading of Dhaka 

shares ground to an automatic 

halt the first 86 minutes. 

SEC on January 25, 2011 halved 

the limit of circuit breaker on 

individual stock in a bid to tighten 

the price fluctuation of shares of 

the company. 

SEC decided not to cancel or 

postpone the initial public 

offerings of Mobil Jamuna 

Lubricants Bangladesh and MI 

Cement Factory that are using the 

book building method suspended 

by the government. In 

consultation with the government, 

the regulator took the decision on 

January 25, 2011, as sponsor 

directors of the companies 

promised to buy the shares back, 

if the prices go below offer prices 

within the first 30 days after 

listing. 

BB, after a high-level meeting on 

January 23 with the finance 

minister, directed on 15 banks to 

transfer their share market profits 

to their reserve instead of 

distributing those among 

shareholders. 

This paper is published with the 

permisssion from IDLC 


Some Quotable Quotes 

on the Stock Market 

“AK Chowdhury FCA, Past President, ICAB & 52 Co-Founder, CSE – It would appear that because of 

abrupt policy shift by SEC & BB & usual manipulation undertaken by a syndicate of DSE & over agile 

greed of merchant banks: the share market is losing confidence and hence, the crash” 

- AK Chowdhury FCA 

“• The first rule is not to lose. The second rule is not to forget the first rule.” 

• I never attempt to make money on the stock market. I buy on the assumption that they could close 

the market the next day and not reopen it for five years. 

• If past history was all there was to the game, the richest people would be librarians. 

• Wall Street is the only place that people ride to in a Rolls Royce to get advice from those who take 

the subway. 

• Only buy something that you'd be perfectly happy to hold if the market shut down for ten years. 

• Be fearful when the world is greedy and be greedy when the world is fearful. 

• Wide diversification is only required when investors do not understand what they are doing. 

• It's almost a mathematical impossibility to imagine that, out of the thousands of things for sale on a 

given day, the most attractively priced is the one being sold by a knowledgeable seller (company 

insiders) to a less-knowledgeable buyer (investors) 

- Warren Buffett 


“The stock market is but a mirror which provides an image of the underlying or fundamental economic 

situation. Cause and effect run from the economy to the stock market, never the reverse. In 1929 the 

economy was headed for trouble. Eventually that trouble was violently reflected in Wall Street.” 

- John Kenneth Galbraith 

“The things that will destroy America are prosperity-at-any- price, peace-at- any-price, safety-first instead 

of duty-first, the love of soft living, and the get-rich-quick theory of life.” 

- Theodore Roosevelt 

“October: This is one of the peculiarly dangerous months to speculate in stocks. The others are July, 

January, September, April, November, May, March, June, December, August and February.” 

- Mark Twain 

“There’s no denying that a collapse in stock prices today would pose serious macroeconomic challenges 

for the United States. Consumer spending would slow, and the U.S. economy would become less of a 

magnet for foreign investors. Economic growth, which in any case has recently been at unsustainable 

levels, would decline somewhat. History proves, however, that a smart central bank can protect the 

economy and the financial sector from the nastier side effects of a stock market collapse.” 

- Ben Bernanke 

“Money is like manure. You have to spread it around or it smells.” 

- J. Paul Getty 

“Wall Street is one big turf war. By benefiting one person you are disadvantaging another person.“ 

- Bernard Madoff 

“Stock market bubbles don't grow out of thin air. They have a solid basis in reality, but reality as distorted 

by a misconception.” 

- George Sorost 

50 



“The Chinese use two brush strokes to write the word 'crisis'. One brush stroke stands for danger; the 

other for opportunity. In a crisis, be aware of the danger-but recognize the opportunity.” 

- John F Kennedy 

“Investors have very short memories.” 

- Roman Abramovich 

“Buy when the cannons are firing, and sell when the trumpets are blowing.” 

- Nathan Rothschild 

“The time of maximum pessimism is the best time to buy and the time of maximum optimism is the best 

time to sell. Outperforming the majority of investors requires doing what they are not doing. Buy when 

pessimism is at its maximum” 

- Sir John M. Templeton 

“Life is all about mitigation and management of risk and not of its elimination and avoidance” 

- Unknown 

“At particular times, a great deal of stupid people have a great deal of stupid money...the money of these 

people - the blind capital - is particularly large and craving. It seeks someone to devour it and there is a 

plethora; it finds someone and there is speculation; it is devoured and there's panic." 

- Walter Bagehot 

“Blaming speculators as a response to financial crisis goes back at least to the Greeks. It's almost always 

the wrong response.” 

- Larry Summers 

“Global capital markets pose the same kinds of problems that jet planes do. They are faster, more 

comfortable, and they get you where you are going better. But the crashes are much more spectacular.” 

- Larry Summers 


“The stock market is filled with individuals who know the price of everything, but the value of nothing.” 

- Philip Fisher 

“A market is the combined behavior of thousands of people responding to information, misinformation 

and whim.” 

- Kenneth Chang 

“Wall Street people learn nothing and forget everything.“ 

- Benjamin Graham 

“Spend at least as much time researching a stock as you would choosing a refrigerator.” 

- Peter Lynch 

“The average man doesn’t wish to be told that it is a bull or a bear market. What he desires is to be told 

specifically which particular stock to buy or sell. He wants to get something for nothing. He does not 

wish to work. He doesn’t even wish to have to think.” 

- Jesse Livermore 

“In this business if you're good, you're right six times out of ten. You're never going to be right nine times 

out of ten.” 

- Peter Lynch 

“You can say on one hand the market is crazy but it's not 1999. People have had their medicine from 

over exuberance. I find it really interesting that those two businesses, Yahoo! and Google, which are just 

online advertising businesses, are valued at more than the media behemoths in America.” 

- James Packer 

“Before this century is over, the Dow Jones Industrial Average will probably be over one million versus 

around 10,000 now. So for the long-term, the outlook is tremendously bullish if you buy stocks blindly 

to keep for a century.” 

- John Templeton 

“Men think in herds, go mad in herds, but recover their senses one by one.” 

- Charles Mackay 

52 

January - March 2011 The Bangladesh Accountant

“Most people try to maximize the number of times they are right, the real question is how much you 

make when you are right.” 

- Bill Miller 

“The list of qualities [an investor should have] includes patience, self-reliance, common sense, a tolerance 

for pain, open-mindedness, detachment, persistence, humility, flexibility, a willingness to do 

independent research, an equal willingness to admit mistakes, and the ability to ignore general panic.” 

- Peter Lynch 

“The best investors are like professional socialites. They always know where the next party is going to be 

held. They arrive early and make sure that they depart well before the end, leaving the mob to swill the 

last tasteless dregs.” 

- The Economist 

“Investing is a lot like sailing - you can go anywhere you wish without forecasting the wind. What is 

essential is to measure the wind properly and often, and align yourself with prevailing conditions.” 

- John Hussman 

“The first principle of winning is not to lose. Never worry about what we don't make, worry about what 

we might lose.” 

- J. Dennis Delafield 

“History of business shows that advances in technology are not reaped by those that make technology but 

rather those who use it.” 

- Ralph Wanger 

“Debt is the worst poverty.” 

- Thomas Fuller 

“Today, there are three kinds of people: the haves, the have-nots, and the have-not-paid-for-whatthey-haves.” 

- Earl Wilson 


“Oh, for the good old days when people would stop Christmas shopping when they ran out of money.” 

- Unknown 

“Food, Water, Shelter, Air, Sleep, Societal inflation has expanded need into greed. Suddenly the basic 

survival needs also include a cell phone, cable TV, and French manicured fingernails.... We've become 

the absolute biggest whiners of all human history with the absolute smallest justification for whining.” 

- Charlie Diekatze 

“The human race has had long experience and a fine tradition in surviving adversity. But we now face a 

task for which we have little experience, the task of surviving prosperity.” 

- Alan Gregg 

“When government accepts responsibility for people, then people no longer take responsibility for 

themselves.” 

- George Pataki 

“Debt is the slavery of the free” 

- Publilius Syrus 

“Capitalism is license to steal; the government simply regulates who steals and how much.” 

- Abbie Hoffman 

“Capitalism without failure is like religion without sin.” 

- Allan Meltzer 

“You want to know a sure way to lose money? Buy what’s popular and don’t know what you are 

investing in.” 

- Marty Whitman 

Source : Internet 

54 



Who says Accountants 

are Boring People! 

Sohel Kasem, FCA 

Well, a million people at least, 

including my mother and my 

wife. Remember the famous 

Monty Python sketch where John 

Cleese is the Vocational 

Guidance Counsellor and 

Michael Palin is a Chartered 

Accountant wishing to spice up 

his life by becoming a lion tamer. 

Part of the conversation goes like 

this: 

"Vocational Guidance Counsellor 

(John Cleese): Well yes, Mr. 

Anchovy, but in your report here 

it says that you are an extremely 

dull person. Our experts describe 

you as an appallingly dull fellow, 

unimaginative, timid, lacking in 

initiative, spineless, easily 

dominated, no sense of humour, 

tedious company, and 

irresponsibly drab and awful. And 

whereas in most professions these 

would be considerable 

drawbacks, in accounting they 

are a positive boon. 

Anchovy (Michael Palin): But 

don't you see? I'm only as awful 

as this because accountancy does 

this to people..." 

John Cleese (left) sorting out Michael 

Palin, a chartered accountant, who wishes 

to be a lion tamer in this Monty Python 

sketch. 

That sketch was first aired on 

December 21, 1969 and more 

than 40 years later, accountants 

all over the world claim that they 

still haven’t recovered from it. 

Go back in time even further and 

we have Charles Dickens having a 

go at us: 

"Meek men, hunched over dusty 

ledgers, perched on high stools, 

peering beneath green eyeshades. 

But Charles Dickens also gave 

perhaps a fitting definition of 

good financial management, 

which our friends in Wall Street 

would have done well to heed. In 

his 1850 novel, David 

Copperfield, Mr. Micawber 

observes quite profoundly: 

"Annual income twenty pounds, 

annual expenditure nineteen 

pounds nineteen and six, result 

happiness. Annual income twenty 

pounds, annual expenditure 

twenty pounds nought and six, 

result misery." 

Okay, so we have established that 

Accountants are not your most 

exciting people, but still, we serve 

a purpose and a very important 

one at that. We fulfill the need to 

keep accurate and reliable 

financial records and ensure there 

is good financial management and 

discipline, for after all, doesn’t 


everything eventually boil down 

to money? As businesses grow in 

size and complexity transcending 

national boundaries, it is 

necessary to understand the 

intricacies of balance sheets, 

profit and loss accounts and cash 

flows, and in general how 

financial statements are prepared 

and presented. The role of the 

auditor also becomes crucial in 

acting as an independent overseer 

of truth and fairness of such 

financial statements. His 

attestation is relied upon by 

investors and stakeholders in 

making investment decisions. 

Clearly good accounting systems 

and financial management require 

good accountants and their 

necessity in today’s business 

world is absolutely vital. 

What is Accounting 

Accounting is defined by the 

American Institute of Certified 

Public Accountants (AICPA) as 

"the art of recording, classifying, 

to employees, managers, 

owner-managers and auditors. 

Management accounting is 

concerned primarily with 

providing a basis for making 

management or operating 

decisions. Accounting that 

provides information to people 

outside the business entity is 

called financial accounting and 

provides information to present 

and potential shareholders, 

creditors such as banks or 

vendors, financial analysts, 

economists, and government 

agencies. Because these users 

have different needs, the 

presentation of financial accounts 

is very structured and subject to 

many more rules than 

management accounting. The 

body of rules that governs 

financial accounting is referred to 

as International Accounting 

Standards (IAS), International 

Financial Reporting Standards 

(IFRS) and in the USA, as 

Generally Accepted Accounting 

Principles, or GAAP. 

Fra Lucas Pacioli (c 1445 – 1514), the 

Father of modern day Accounting 

devised the concept of Double 

Entry bookkeeping, still the 

cornerstone of modern day 

accounting. In this model, he 

proposed the idea of two sides of 

any financial transaction – a debit 

and a credit. Sophisticated and 

computerized accounting 

software and all the present day 

and futuristic models all rely on 

this very simple principle – for 

every entry, there must be an 

equal and opposite entry. Rather 

like Newton’s Third Law of 

Motion – for every action there 

must be an equal and opposite 

“The earliest records of Accounting date back more 

than 7,000 years to the Middle East and were found 

among the ruins of Babylon, Assyria and Sumeria, 

and summarizing in a significant 

manner and in terms of money, 

transactions and events which are, 

in part at least, of financial 

character, and interpreting the 

results thereof.” 

Today, accounting is called "the 

language of business" because it 

is the vehicle for reporting 

financial information about a 

business entity to many different 

groups of people. Accounting that 

concentrates on reporting to 

people inside the business entity 

is called management accounting 

and is used to provide information 

History 

The earliest records of Accounting 

date back more than 7,000 years 

to the Middle East and were found 

among the ruins of Babylon, 

Assyria and Sumeria, where 

people used primitive accounting 

methods to keep track of goats 

and herds. The Romans used 

accounting extensively and there 

are plenty of references in ancient 

Islamic and Hindu scriptures. 

Modern day accounting traces its 

roots to the 14th century when an 

Italian monk, Lucas Pacioli, 

reaction. See, we are a very 

scientific discipline. 

Double Entry system ultimately 

facilitated the development of 

joint stock companies, allowing 

investors to gain firsthand 

knowledge of their operations 

through the use of accounts 

prepared to provide this 

information. This development 

resulted in a split of accounting 

systems for internal (i.e. 

management accounting) and 

external (i.e. financial accounting) 

purposes, and subsequently also 

in accounting and disclosure 

56 



egulations and a growing need 

for independent attestation of 

external accounts by auditors. 

Accounting as a 

Professional Qualification 

A professional qualification in 

accounting opens up many doors 

to finance, banking, management, 

audit and assurance, due 

diligence, tax and advisory 

services and is definitely a career 

worth thinking about. Accounting 

is mainly a post graduate 

professional qualification, 

although in recent times the doors 

have been opened up to A Level 

students also. There are several 

types of professional 

qualifications, the major ones 

being listed below: 

English system 

• Chartered Accountancy (CA) 

• Cost and Management 

Accountancy (CIMA) 

• ACCA 

American System 

• CPA 

Chartered Accountancy 

(CA) 

Chartered Accountancy is an 

English origin qualification and 

derives its name and roots from 

the Royal Charter granted by 

Queen Victoria of England in 

1880 and is still regarded as the 

most prestigious accountancy 

qualification in the world. It is 

followed by the former 

Commonwealth countries, 

including Bangladesh and its 

South Asian neighbours, Australia, 

Canada, New Zealand, South 

Africa, Scotland and Ireland. The 

English Institute, full name – the 


in England & Wales, now has 

about 167,000 qualified 

accountants. 

The Chartered Accountancy 

qualification generally 

encompasses a 3 year 

apprenticeship period, referred to 

as Articles, with a licensed 

professional accounting firm. In 

addition to completing this 

Articleship period, the student 

also has to pass 2 or 3 sets of 

Professional exams in order to call 

himself a Chartered Accountant. 

Once they have qualified to 

become a Chartered Accountant, 

they can then apply for 

membership with the respective 


in their country and are then 

referred to as either an ACA 

(Associate Chartered Accountant) 

or an FCA (Fellow Chartered 

Accountant), the distinction being 

only in terms of seniority. ACAs 

have to complete 5 years of 

continuous membership and 

attain a certain number of CPD 

hours (Continuous Professional 

Development) after qualification 

to become an FCA. 

The local Institute of Chartered 

Accountants of Bangladesh has 

also recently signed an MOU with 

the English Institute (ICAEW) and 

changed its syllabus and 

examination procedures to bring 

us in line with the ICAEW 

qualification, thereby granting us 

access to international recognition 

for the first time. 

See ICAB website for further 

information: www.icab.org.bd 


Number of Qualified Accountants worldwide (approx. numbers as of July 2010) 

UK USA Canada Australia South Bangladesh Others Total 

Asia 

Chartered 

Accountants 167,000 - 75,000 50,000 207,000 1,000 62,000 562,000 

CIMAs 80,000 - 50,000 

- 

80,000 1,000 - 211,000 

ACCAs 140,000 - - - - - - 140,000 

CPAs - 370,000 - 129,000 - - - 499,000 

Total 387,000 370,000 125,000 179,000 287,000 2,000 62,000 1,412,000 

Prospects for Accountants 

in the Job Market 

If money is the language of 

business, then no one speaks it 

better than accountants. The 

growing importance of trade and 

industry along with the rapid 

growth of capital and money 

markets in an economically 

developing nation like ours has 

increased the importance of 

accountants enormously. 

Generally, they play a strategic 

role by providing professional 

advice, aiming to maximise 

profitability on behalf of their 

client or employer. They work in 

many different settings; including 

public-practice firms, industry and 

commerce, as well as in the 

not-for-profit and public sectors. 

In Bangladesh, chartered 

accountants work as Chief 

Finance Officers, Financial 

Controllers, Financial Advisors or 

Directors (Finance) and watch 

over the finances in the day to 

day management of companies. 

They are engaged in activities like 

market research, budget planning, 

working capital management, 

inventory control, policy 

planning, securities consultancy, 

etc. There are also a large 

number, approx 200 Bangladeshi 

chartered accountants, working 

all over the world including the 

USA, UK, Canada and Australia in 

various responsible positions in 

business and commerce. 

Conclusion 

To use a time worn cliché, the 

world is your oyster, figuratively 

speaking. Professionally qualified 

accountants are in huge demand 

nowadays and there is a common 

complaint that demand is far more 

than the supply. In addition to 

careers in businesses, banks, 

finance and management, there is 

also a big pool of accountants 

engaged in audit and assurance, 

tax and advisory services. In 

recent times, and particularly in 

the wake of spectacular financial 

debacles particularly in the West, 

e.g. Enron, there is now a strong 

demand for forensic accountants. 

This is our equivalent of a 

Sherlock Holmes detective plot, 

whereby an army of accountants 

sifts through endless paper trails 

to unravel a maze of financial 

crimes and felonies. 

The financial rewards for a newly 

qualified accountant are far more 

than those afforded to a newly 

qualified doctor, engineer or an IT 

specialist. Moreover, it offers a 

job stability rarely found in any 

other career. So, for young men 

and ladies, if you haven’t already 

decided on a career, think again. 

You could do worse than opt for a 

career in Accounting – boring or 

not! 

The Author is a Council Member & 

Past President, ICAB & 

Senior Partner, A Qasem & Co. 

Chartered Accountants 

58 



Corporate Social 

Responsibility (CSR) 

A Wahab FCA 

The concept, Corporate Social 

Responsibility (CSR) has been 

gaining importance in recent 

years among the business 

community of Bangladesh 

although it came into common 

use in early seventy's of the last 

century when multinational 

corporations came into scene 

worldwide. The CSR is the 

deliberate inclusion of public 

interests into corporate decision 

making and the honoring of a 

triple bottom line: People, Planet, 

Profit. CSR focused business 

would proactively promote the 

public interests by encouraging 

community growth and 

development of various social 

issues like Environmental 

Improvement, Economic 

Development as well as Social 

Development. Among the 

environmental issues, CSR deals 

with global warming, geological 

balance, pure water management, 

carbon emission, city 

beautification and waste 

management, sea water level. 

CSR deals with Agricultural 

production and processing, crop 

diversification, employment 

generation, education and training 

of human resources in the 

Economic Sector. In the same way 

CSR takes care of investing for 

women's right issues, extending 

donations to HIV/AIDS campaign 

agencies, welfare activities for 

disabled, donations for public 

universities, relief activities after 

natural disaster and calamities, 

welfare activities for grassroots 

children and acid victims etc., 

under its Social Development 

programme. 

Under Community based 

development approach the CSR is 

becoming more widely accepted 

and in this approach corporations 

work with local communities to 

better the social life and other 

aspects of society. For examples, 

the Shell Foundation set up a 

project in Flower Valley of South 

Africa by setting up an early 

learning centre to help educate 

the community's children as well 

as develop new skills for the 

adults. Often companies 

participate in the activities for 

establishing education facilities 

for adults and for HIV/AIDS 

education programs. Most of 

these projects are located in 

Africa as the continent suffers 

badly from HIV/AIDS diseases. 

There is another approach of CSR 

in the form of philanthropy 

including donations and aid given 

to local organizations and 

impoverished communities in the 

developing countries. 

The sense of rendering social 

services by business houses to the 

members of the community is a 

good sign for the society to 

develop itself in the fields, the 

society needs. This is in addition 

to the main objective of the 

business houses to earn profit and 

in return to share a portion of it 

along with the members of the 

society for the improvement of 

their social standard and 

improvement of life style. 

In the recent years the Govt. of 

Bangladesh has been encouraging 

the Business Community to 

extend their support to the 

members of the Society in the 

form of CSR. As a tool of 

regulatory guidance in this 


espect, the Ministry of Finance, 

Internal Resources Division, Govt. 

of Bangladesh has recently issued 

a SRO numbered as 270 

AvBb/AvqKi/2010 dated 1st July 

2010 with certain directives in 

respect of the CSR and granting 

incentives in the form of waiver of 

tax @ 10% on the amount spent 

for CSR. 

1) Economic field covering the 

subjects of agricultural 

production and processing, 

crop diversification, 

employment generation, 

Education and Training for 

improvement of human 

resources and the allied 

matters, such as donations to 

institutions to set up computer 

lab and training institute of 

Information Technology, 

implementation program of 

English learning in Non Govt. 

education institutions having 

been enlisted for MPO and to 

boost up the earnings capacity 

exchange for the country. 

2) Environmental field covering 

the issues of global warming, 

Ecological balance, Pure 

Water Management, setting up 

Water Supply Institutions, 

Carbon Emission, Sea Water 

level, forestry, City 

Beautification and Waste 

Management and other allied 

subjects such as donations to 

the institutions engaged in 

providing hygienic drainage 

and sewerage services in the 

hill tracts districts, river 

erosion and char areas. 

3) Social Development field 

covering the issues like 

Investing for Women's Rights 

Issues, extending donations to 

HIV/AIDS campaign Agencies, 

Welfare activities for disabled 

and handicapped members of 

the Society, donations for 

public universities, relief 

Activities after natural 

calamities and disaster 

treatment of poor patients who 

suffer from cancer, kidney, 

liver, thalamasia, eye and 

cardio diseases etc. and 

donations to the institutions 

engaged in the research of 

subjects connected with 

liberation war and for the 

welfare of freedom fighters 

and to uphold the cause and 

spirit of the liberation war and 

for the revival of such feeling. 

As per statutory requirement of an 

organization eligible for the 

facilities under SRO mentioned 

earlier, the undertaking shall have 

to fulfill the following conditions 

in respect of CSR. 

1) That such an undertaking shall 

have to pay regularly the 

salary and allowances of its 

employees including P. F and 

gratuity and health benefits on 

the basis of the principle 

"charity begins at home". In 

addition, in case of an 

“ 

The CSR is the deliberate inclusion of public interests 

into corporate decision making and the honoring of 

a triple bottom line: People, Planet, Profit” 

of the members of the Society, 

donations to Govt. approved 

educational institutions 

engaged in the technical and 

vocational training to the poor 

and meritorious students and 

to develop their earning 

capacity, donations to the 

institutions engaged in the 

development of infrastructure 

for sports and imparting 

training thereof in the national 

level and also donations to 

such institutions engaged in 

imparting vocational training 

to skilled and unskilled labour 

force for its exports abroad to 

earn valuable foreign 

management activities, welfare 

activities for grassroot children 

and acid victims and donations 

for establishment of old homes 

and shelter centers for the 

destitute and other matters 

such as donations to the 

institutions engaged in the 

treatment of cancer, leprosy, 

cataract surgery etc. and 

donations to the institutions 

engaged in the field of family 

planning and birth control and 

to those NGO's who distribute 

the materials of family 

planning and birth control free 

of cost, donations to the 

specialized hospitals for free 

industrial undertaking it must 

have a waste treatment plant 

as per law. 

2) The undertaking shall have to 

pay regularly the govt. dues 

like Income Tax, VAT and 

other taxes and duty. In case of 

an undertaking taking loan 

from any bank or financial 

institution, it must have settled 

the dues regularly. 

3) Such an undertaking shall 

make payment of grant or 

donation only to such 

institutions as are, approved by 

the Govt. for CSR activities. 

60 



4) Such an undertaking shall 

comply with the regulations 

under the labour law of the 

country and shall discourage 

the employment of child 

labour. 

5) Such an undertaking approved 

for CSR facilities shall not 

charge the related amount 

spent for the CSR purposes in 

its Manufacturing, Trading and 

Profit and Loss Account. 

6) The undertaking claiming Tax 

Holiday shall have to obtain a 

clearance certificate for the 

relevant income year from the 

Directorate of El1vironment. 

7) The concerned undertaking 

claiming the CSR facilities 

under the Income Tax Law 

shall have to maintain 

necessary books and records 

for CSR activities and shall 

submit necessary evidence in 

support of the amount actually 

spent, to the concerned OCT; 

and 

8) The undertaking rendering the 

CSR services shall have to 

obtain an Income Tax Rebate 

Certificate from the National 

Board of Revenue on the basis 

of its work plan for the tax 

rebate under the CSR scheme 

in recognition of its approval 

for CSR. 

Because of this incentive granted 

to the organizations for CSR 

services there is response in a big 

way from large number of 

undertakings which is evidenced 

by the sign boards with slogans of 

addressing the different social 

issues as well as beautification of 

the roads and establishments at 

cities and at different locations of 

the country. But there is still 

scope of broadening the scope of 

operations of the concept by 

attracting more business houses in 

the net work of CSR as a part of 

the total development of the 

entire nation. 

To attain this objective an attempt 

should be made more seriously in 

this respect and the organization 

should first manage its affairs on 

the basis of the principle "charity 

begins at home" by providing the 

welfare services to its own 

employees in the form of paying 

salaries, provident fund, and 

gratuity and health facilities 

regularly. 

As per demand of the business 

community for a long time, the 

Govt. has allowed this incentive 

for CSR services by allowing 

rebate of tax at 10% of the 

amount spent for the services so 

rendered. The business 

community should take advantage 

of it but necessary cautions 

should be taken so that nobody 

can misuse the facilities offered 

by the Govt. To ensure its proper 

use the accounts should be 

audited regularly. For this purpose 

social accounting, auditing and 

reporting by every corporate 

organization should be ensured as 

the social accounts, a concept 

describing the communication of 

social and environmental effects 

of a company's economic actions 

to particular interest groups within 

society and to society at large, is 

an important element of CSR. 

There are criticisms and concerns 

related to the CSR. The 

proponents of the CSR debate on 

the concerns linked to the CSR. 

This include CSR's relationship to 

the fundamental purpose, nature 

of business and questionable 

motives for engaging in CSR as 

are likely to involve in insincerity 

and hypocrisy. Some critics say 

that through CSR activities the big 

companies like British America 

Tobacco, The petroleum giant B. 

P. which are well known for its 

high profile advertising campaign 

on environment aspects (of its 

operations) and McDonald to 

distract the public opinion from 

ethical questions posed by their 

core operations. They argue that 

some corporations engage 

themselves in CSR activities for 

enjoying commercial benefit by 

raising their reputation with 

public as well as the govt. They 

suggest that the corporations 

which exist solely to maximize 

their profit are unable to deliver 

services to the society as a whole. 

The recent incident of oil spills of 

B. P. in the Mexico gulf is an 

example of disasters causing 

damage to the environment which 

will take a long time to recover. 

However, the good effects of the 

CSR program always outweigh its 

drawbacks. 

In a developing economy like 

ours we now need more and 

more participation and 

co-operation of the corporate 


ody in the social development 

sector of the country than any 

time before. Through CSR, the 

said organizations can render 

better services to the society in 

the improvement of the programs 

involved in the economic, 

environment and social 

development field of the country. 

In return, the business community 

should get some tax benefit as 

allowed for the activities under 

the CSR net work duly regulated 

by the Govt. 

In a meeting organized by 

Management and Resource 

Development Institute (MRDI) in 

association with Manusher Jonno 

Foundation (MJF) with the 

business community of 

Chittagong the speakers stressed 

on the need for developing a 

culture in the country to 

encourage business to be more 

socially responsible. They have 

appreciated the Govt. move to 

allow 10% tax rebate on the 

amount spent for CSR. In another 

meeting held in Khulna towards 

middle of December 2010 under 

the sponsorship of same group it 

was the opinion of the speakers 

and the analyst of the meeting 

that the country can 

institutionalize corporate social 

responsibility (CSR) interventions 

to deal with malnutrition, 

education, health, employment 

and poverty. 

In the meeting Rokia Afzal 

Rahman, former caretaker govt. 

adviser and the president of 

Bangladesh Employers' Federation 

said that CSR is coming out of the 

purview of the doing social good 

and is fast becoming a business 

necessity. She emphasized upon 

policy support and incentive from 

the govt. to encourage corporate 

sector to be more active in CSR. 

Syed Md. Aminul Karim, member 

of the NBR, present in the 

meeting referred to the revised 

Statutory Regulatory Order (SRO) 

on CSR and hoped it will facilitate 

and encourage the business 

community to come up with more 

CSR activities. In the course of his 

deliberation, Mr. Hasibur 

Rahman, Executive Director of 

MRDI said CSR is recognized 

globally as a strong process for 

the corporate entities to serve 

community needs. According to 

them proper utilization of the CSR 

fund can be a key factor in 

eliminating poverty. In this 

connection some of the learned 

speakers has sought a working 

definition of C.S.R in the context 

of Bangladesh pointing to the 

necessity to differentiate among 

CSR, philanthropy and charity. 

However, these noble services to 

the society in whatever form it 

may come are getting focus 

gradually. It is the expectation of 

the members of the society that 

business persons should come 

forward and widen the periphery 

of activities under their corporate 

social responsibility with a view 

to boosting up education and 

having pollution free environment 

and to alleviate poverty in the 

country for the betterment of the 

entire nation and it should be 

treated as a war declared against 

poverty, illiteracy, Malnutrition 

and pollution of all kinds. 

The Author is a Member of ICAB & 

Senior Partner, A Wahab & Co. 


62 



The Flowering of Kaizen 

Business Leaders Have 

always sought to increase 

efficiency, quality and output. 

Many theories on how to achieve 

this become temporarily 

fashionable before fading into 

obscurity. But one idea seems to 

have taken root across the globe 

and is being adapted for use in an 

astonishing number of different 

settings. 

Following World War II, Japanese 

industry was hampered by a 

tendency to concentrate on 

manufacturing cheap but inferior 

copies of Western products. To 

rectify this, they engaged business 

experts from the United States 

whose advice sowed the seeds for 

the flowering of “Kaizen” and 

subsequent commercial success. 

Kaizen is a Japanese word 

meaning “improvement” (or 

change for the better) and is 

closely associated with the 

successful expansion of Japanese 

enterprise. It is a principle that 

advocates the total involvement of 

an organization in improving its 

activities at every level. 

This was a move away from the 

traditional top down form of 

sometimes repressive 

management and , instead, 

encouraged the workforce at each 

stage of a process to identify and 

implement improvements to their 

individual contributions. 

The idea was then extended so 

that instead of engaging in a 

one-off brainstorm of ideas, staff 

were encouraged to participate is 

a continuous process of positive 

change which enabled the 

end-product to be consistently at 

the leading edge of innovation 

and quality. This basic idea is 

now more commonly termed 

“Continuous Improvement” (CI). 

Nothing New 

Although Kaizen and its offshoots 

may look like a breakthrough in 

organizational management, it 

could be argued that its ideas are 

simply a development of other 

systems that have been exploited 

over many years. In the 18th 

Century, for example, a 

Frenchman named Emile Coue 

devised a personal 

self-improvement programme 

from which came the repeated 

mantra, “Every day in every way, I 

am getting better and better”. And 

a saying in the British Army when 

preparing for action is that “There 

is always one more thing to do”. 

So what has made the Kaizen 

system of continuous 

improvement the model for others 

to follow? It was probably a book, 

Kaizen – the key to Japan’s 

Economic Success by Masaaki 

Lmai, that kick-started the 

revolution. 

It has also produced a rash of 

similar theories and a new lexicon 

of terms relating to the process: 

Lean Thinking; Total Quality 

Management; Frugal Innovation, 

and more. 

Kaizen Worldwide 

As the spread of CI practices has 

gathered pace throughout both 

industrial non-profit 

organizations, it has been 

accompanied by a growth in 

training facilities and 

consultancies. In 1988, the 

Malcolm Baldridge Award was set 

up in the US, recognizing Kaizen 

CI as an internationally credible 

system. By 1992 the EU had 

established the European 

Foundation of Quality 

Management. Both these 

institutions provide a yardstick by 

which CI success can be 

measured. Meanwhile, many 

organizations recruit directors of 

CI and specialist posts can be 

found from breweries in Canada 

to medical health centres in 

Singapore. There are kaizen 

courses in Russian graduate 

schools and the International 

Kaizen Institute, established by 

Masaaki Lmai in 1986, operates in 

a large number of countries. 

Extract from G4S International 

Issue 410 


Opportunities and Challenges for 

Adoption of IFRS for SMEs in Bangladesh 

Md. Shahadat Hossain FCA 

On July 2009 the International 

Accounting Standards Board 

(IASB) published an International 

Financial Reporting Standard 

(IFRS) designed for use by small 

and medium sized entities 

(SME).That standard is the 

International Financial Reporting 

Standard for Small and 

Medium–sized Entities (IFRS for 

SMEs or the standard). Small and 

medium-sized entities are entities 

that do not have public 

accountability, and publish 

general purpose financial 

statements for external users. 

According to IASB’s report SMEs 

are estimated to represent more 

than 95% of all companies in the 

world. The objective of financial 

statements of a small or 

medium-sized entity is to provide 

information about the financial 

position, performance and cash 

flows of the entity that is useful 

for economic decision-making by 

a broad range of users who are 

not in a position to demand 

reports tailored to meet their 

particular information needs. 

The objective of introducing IFRS 

for SMEs is to ensure that financial 

statements provided to external 

users i.e banks are consistently 

prepared by all businesses. That 

does make sense when a bank or 

other external user is trying to 

evaluate the financial viability of 

the company. In Bangladesh IFRS 

for SMEs is very important 

because almost more than 70 

percent of total bank loan is 

disbursed to the private 

companies. Again more than 30 

percent of stock market 

encompasses the share of banking 

sector. So to ensure the depositors 

interest and also to ensure the 

interest of investors in banking 

sector financial discipline of small 

and medium sized entities need 

to be strengthened. For 

strengthening the financial 

discipline for SMEs there is no 

other alternative but to prepare 

financial statements according to 

the standard. Now the question is 

according to local legislation how 

far the standard is adoptable in 

Bangladesh. In Bangladesh 

financial statements of private 

limited companies i.e the entity 

that does not have public 

accountability are prepared 

complying with the contents of 

Companies Act. So it is relevant to 

compare the contents of the 

standard and that of the 

Companies Act. Some important 

issues in this regard are described 

below. 

As per the standard a 

complete set of financial 

statements of an entity shall 

include 

(a) a statement of financial 

position as at the reporting 

date. 

(b) a separate income statement 

and a separate statement of 

comprehensive income. 

(c) a statement of changes in 

equity for the reporting period. 

(d) a statement of cash flows for 

the reporting period. 

(e) notes, comprising a summary 

of significant accounting 

policies and other explanatory 

information. 


As per the Companies Act 

1994 financial statements 

includes 

(a) Balance sheet (Sec-183) 

(b) Profit and Loss Account 

(Sec-183) 

(c) Statement of changes in 

financial position (Sec-185, 

Schedule-XI, notes- f) 

(d) Notes (Sec-185 (1) 

From above it may be seen that 

comprisal of financial statements 

according to both the Companies 

Act and the standard is almost 

same, only difference is in some 

nomenclature. It is also 

mentionable here that as per the 

Companies Act statement of cash 

flows is not mandatory but 

preparation of this will not be 

violation of the Act. 

As regards to accounting policy 

the standard requires disclosure of 

all types of policy based on which 

financial statements have been 

prepared. These disclosures are 

also required as per the 

Companies Act. In this regard 

another important issue is change 

of accounting policy. As per the 

standard the nature of changes in 

accounting policy, the amount of 

adjustment needed for such 

changes in current period and 

prior period should be disclosed. 

Similarly as per the Companies 

Act, if any change in accounting 

policy takes place, the material 

effect in the current period or in 

subsequent periods due to such 

changes should be disclosed 

together with the reasons. The 

effect of the change should, if 

material be disclosed and 

quantified. 

Regarding recognition and 

measurement of fixed assets 

which is the most important item 

of private companies the standard 

include that the entity shall 

recognize the cost of an item of 

property, plant and equipment as 

an asset if, and only if, it is 

probable that future economic 

benefits associated with the item 

will flow to the entity, and the 

cost of the item can be measured 

reliably. An entity shall measure 

an item of property, plant and 

equipment at initial recognition at 

its cost and after initial 

recognition all item should be 

measured at cost less any 

accumulated depreciation and 

any accumulated impairment 

losses. As per the Companies Act 

fixed asset should be stated in the 

original cost and the addition 

thereto and deductions there from 

during the year under each head 

and the total depreciation written 

off or provided up to the end of 

the year. So it can be opined that 

there is no fundamental 

differences between the 

Companies Act and the standard 

as regards to recognition and 

measurement of fixed assets. 

As per the standard an entity shall 

measure inventories at the lower 

of cost and estimated selling price 

less costs to complete and sell. As 

per the Companies Act value of 

inventories to be stated in the 

financial statements are placed at 

the lower of historical cost and 

net realizable value. It is also 

mentionable here that there is no 

difference between the standard 

and the Companies Act as regards 

to recognizing components and 

calculation of cost of inventories. 

Main contradictory issues 

between IFRS and local laws are 

measurement of value of financial 

instruments. Financial instruments 

mean a contract that gives rise to 

a financial asset of one entity and 

a financial liability or equity 

instrument of another entity. In 

nut shell for a private company 

financial instrument include 

investment, borrowings etc. As 

per the standard when a financial 

instrument is measured initially an 

equity shall measure it at its fair 

value, which is normally the 

transaction price and at the end of 

each reporting period, an entity 

shall measure all financial 

instruments at fair value and 

recognize changes in fair value in 

profit or loss. As regards to 

measurement of value of 

investment i.e financial 

instrument the instruction of 

Companies Act is that it should be 

presented in financial statements 

showing nature of investments 

and mode of valuation, for 

example cost or market value. 

Aggregate book value of a 

company’s quoted investments 

and also the market value thereof 

shall be shown. This content of 

the Companies Act reveals that 

investment may be presented at 

market value in the financial 

statements which is completely in 

line with fair value presentation as 

per IFRS for SMEs. 

Intangible asset is an important 

and exceptional item for the 

private company. In this regard 

policy of the standard is that an 

entity shall recognize an 

intangible asset as an asset if, and 

only if: 

(a) it is probable that the expected 

future economic benefits that 

are attributable to the asset 

will flow to the entity; 

(b) the cost or value of the asset 

can be measured reliably; and 

(c) the asset does not result from 

expenditure incurred 

internally on an intangible 

item. 

An entity shall measure an 

intangible asset initially at cost 

and subsequently it will measure 

66 



at cost less any accumulated 

amortization and any 

accumulated impairment losses. 

As regards intangible assets the 

policy as mentioned in the 

Companies Act is that this will be 

accounted for as miscellaneous 

expenditure and following items 

will be included under this 

heading. 

(1) Preliminary Expenses 

(2) Expenses including 

commission or brokers as on 

underwriting or subscription 

of share or debentures. 

(3) Discount allowed on the issue 

of shares or debentures 

(4) Interest paid out of capital 

during construction ( also 

stating the rate of interest) 

(5) Development expenditures 

not adjusted 

(6) Other items (Specifying 

nature) 

As regards to amortization of such 

assets the Companies Act also 

contains that expenditure under 

the head miscellaneous 

expenditure, which has not been 

capitalized shall be written off 

over the years on which the 

benefits of such expenditure is 

expected to accrue, or on some 

other suitable basis. From both 

the contents of the standard and 

the Companies Act it is clear that 

there is no such contradictory 

issues between these two 

accounting guidelines of 

intangible assets. 

Provision is also another 

important item for true and fair 

presentation of financial 

statements. Guideline as regards 

to provision in the standard are 

that an entity shall recognize a 

provision only when: 

(a) the entity has an obligation at 

the reporting date as a result of 

a past event; 

(b) it is probable (ie more likely 

than not) that the entity will be 

required to transfer economic 

benefits in settlement; and 

(c) 

the amount of the 

obligation can be estimated 

reliably. 

An entity shall measure a 

provision at the best estimate of 

the amount required to settle the 

obligation at the reporting date. 

The best estimate is the amount 

an entity would rationally pay to 

settle the obligation at the end of 

the reporting period or to transfer 

it to a third party at that time. At 

each reporting date an entity shall 

review provisions and adjust them 

to reflect the current best estimate 

of the amount that would be 

required to settle the obligation at 

that reporting date. Any 

adjustments to the amounts 

previously recognized shall be 

recognized in profit or loss unless 

the provision was originally 

recognized as part of the cost of 

an asset. When a provision is 

measured at the present value of 

the amount expected to be 

required to settle the obligation, 

the unwinding of the discount 

shall be recognized as finance 

cost in profit or loss in the period 

it arises. 

As regards to provision the 

contents of Companies Act is that 

the profit and loss account shall 

set out the various items relating 

to the income and expenditure of 

the company arranged under most 

convenient heads and in 

particular shall disclose the 

aggregate, if material, of the 

amounts set aside to provisions 

made for meeting specific 

liabilities, contingencies of 

commitments. As per the 

Companies Act the expression of 

“provision” shall mean any 

amount written of or retained by 

way of providing for depreciation, 

renewals or diminutions in value 

of assets, or retained by way of 

providing for any known liability 

of which the amount can not be 

determined with substantial 

accuracy. So it is clear from above 

statement that the accounting 

procedures of “provision” as 

mentioned in the Companies Act 

are completely in line with the 

standard. 

Revenue is an important issue of a 

private entity. Summarized 

guideline in respect of 

measurement of revenue in the 

standard is that an entity shall 

measure revenue at the fair value 

of the consideration received or 

receivable. The fair value of the 

consideration received or 

receivable takes into account the 

amount of any trade discounts, 

prompt settlement discounts and 


volume rebates allowed by the 

entity. Revenue will include 

only the gross inflows of 

economic benefits received and 

receivable by the entity on its 

own account and exclude all 

amounts collected on behalf of 

third parties such as sales taxes, 

goods and services taxes and 

value added taxes. In an agency 

relationship, an entity shall 

include in revenue only the 

amount of its commission. The 

amounts collected on behalf of 

the principal are not revenue of 

the entity. 

Provision of the Companies Act as 

regards to recognition and 

measurement of 

revenue for a private entity is as 

follows 

• The turnover, that is the 

aggregate amount for which 

sales are affected by the 

company, commission paid to 

selling agents. 

• In the case of companies 

rendering or supplying 

services, the gross income 

derived from services 

rendered or supplied. 

• In the case of other 

companies, the gross income 

derived under different heads 

Here we can conclude that there 

is nothing noteworthy in the 

contents regarding accounting 

treatment of revenue in the 

Companies Act which is 

contradictory to the the standard. 

Proper treatment of events after 

the end of the reporting period is 

an essential element to reflect the 

financial position and operational 

results of a private entity. 

Summary of various requirements 

under the standard in this regard 

is that an entity shall adjust the 

amounts recognized in its 

financial statements, including 

related disclosures, to reflect 

adjusting events after the end of 

the reporting period and shall not 

adjust the amounts recognized in 

its financial statements to reflect 

non-adjusting events after the end 

of the reporting period but shall 

disclose the nature of the event, 

and an estimate of its financial 

effect, or a statement that such an 

estimate can not be made for each 

category of non-adjusting events 

after the end of the reporting 

period. As per content of the 

Companies Act as regards to 

events after the end of the 

reporting period is that asset and 

liabilities should be adjusted for 

events occurring after the balance 

sheet date that provide additional 

evidence to assist with the 

estimation of amounts relating to 

conditions existing at the balance 

sheet date or that indicate that the 

going concern assumption in 

relation to the whole or part of the 

enterprise is not appropriate. 

Assets and liabilities should not 

be adjusted for, but disclosure 

should be made of, those events 

occurring after the balance sheet 

date that do not affect the 

condition of assets or liabilities at 

the balance sheet date but are of 

such importance that 

non-disclosure would affect the 

liability of the users of the 

financial statements to make 

proper evaluations and decisions. 

Accounting system and disclosure 

requirements as to events after the 

end of the reporting period is very 

much similar with the guidelines 

as mentioned in the standard. 

Apart from recognition and 

measurement issue there are 

requirements of lot of disclosures 

in the financial statements of 

small and medium sized entity as 

per IFRS for SMEs but in no case 

contents of the Companies Act 

will be the hindrances of such 

disclosure because in the 

Companies Act it is mentioned 

that all material information 

should be disclosed that is 

necessary to make the balance 

sheet clear and understandable so 

from above comparison between 

contents of the Companies Act 

and the standard it is clear that 

there is no obstacle to prepare 

and present the financial 

statements of small and medium 

sized private entities complying 

the IFRS for SMEs. 

Though Companies Act will not 

be the obstacles to adopt the IFRS 

for SME but main challenge to 

adopt this standard would be 

dearth of proper knowledge, 

practice and giving due 

importance to account due to 

insufficient accountability system 

to prepare correct accounts by 

small and medium sized entities. 

Another important issue in this 

regard is tax matter. Tax is a vital 

issue for the businessmen of our 

country. Most of the businessmen 

would like to prepare their 

financial statements in such a 

manner so that they can get 

maximum benefit of tax. 

Moreover their remains a lot of 

practices followed by the tax 

authority which are not infavour 

of preparation of proper accounts 

such as disallowance of some 

actual expenditure and provision 

for bad debts, estimation of gross 

profit margin, consideration of tax 

deduction at source as final tax 

payable etc. 

The descriptions pinpointed 

above are the main challenges to 

adopt the IFRS for SMEs. Despite 

those challenges for the greater 

interest of profession, depositors 

of bank, and investors in capital 

market and finally to bring about 

the financial discipline in private 

sector of Bangladesh 

implementation of IFRS for SMEs 

is very essential. 

The Author is Vice President, ICAB 

68 



Students’ 

Section 

Sanjida Kasem 

FCA, FCMA is a 

Member of 

ICAB & ICMAB 

Partner, A Qasem & Co. 


A 

Tips for Chartered Accountancy Students 

Sanjida Kasem FCA, FCMA 

s a general rule, tips or advice should only be given when they are 

asked for. The students have not asked for my advice, I have written 

this because this may help the students in falling asleep! 

Jokes apart, what has been written here is actually what I have tried 

when I was a student in pre-historic days. Since then, the syllabus has 

changed, the subjects have changed, the teachers, classrooms, books, 

everything has changed. Only one thing hasn’t, the pass rate in CA 

exams is still low, and the students still feel the exams are hard to pass. 

While everyone has their own particular effective method of studying, a 

few things work for all. Let’s take a look at them: 

1. Maintain a healthy lifestyle: Eat and sleep regularly, do some 

exercise everyday, in short, take good care of yourself. How does it 

help your studies? If you are not healthy, or suffering from any 

deficiencies, you won’t be able to study properly. You will be tired 

easily, will lose your temper often, and you will generally make 

yourself unpopular with all those around you! 

Do not take any anti-depressant, stimulant, or anti-sleeping drugs 

without consulting a physician. 

2. Dress well, groom yourself well, maintain a pleasant and positive 

attitude: This will increase your self-confidence, will improve your 

relationship with others, and will nurture a feeling of hope and 

optimism. This is very crucial for success. 

3. Study regularly: As opposed to studying 18 hours a day only one 

month before the exam, it is far more effective to study 2-3 hours 

every day throughout the term. Find time to study whenever you 

think is convenient for you. It is healthier to sleep early, and rise at 

dawn and study. 

4. Regulate your habits: It may not seem relevant, and certainly not 

easy, but you need to limit your usage of the mobile phone and 

internet. Excessive use of the cell phone and the net can turn into 

an addiction, which will affect your concentration in studies. 


5. Practice English: All your materials are in 

English, and you have to attempt your exams in 

English. Since it is not our first language, you 

should familiarize yourself with English as much 

as possible. Guaranteed spoken English courses 

are not often helpful. In addition to study 

materials, you should read English newspapers, 

watch English news channels and movies, and 

read English magazines and journals. Try to 

improve your vocabulary. 

6. Prepare Notes: Instead of just going through 

several books, prepare your own notes on the 

selected topics. By doing so you would have the 

practice to write the answer within a specified 

time, and also will be able to summarise all the 

points into a concise format. This will save time 

at the revision stage. 

7. Read a Standard everyday: Make a habit of 

reading one IAS/IFRS/ISA everyday. Once you 

have finished reading them all, you can start 

again from the beginning. BY doing this, you 

will not have to allocate extra time to read 

Standards immediately before the exams. 

8. Prepare a plan for your studies: Just like 

preparing an audit plan, it is beneficial to 

prepare a comprehensive plan for your studies. 

This can be done in the following way: 

• Decide which papers to attempt 

• Speak to your supervisor at office and give notice 

for study leave 

• Study the syllabus and scope of subject 

• Decide on the methodology: Self study, group 

study, library work, class attendance etc. You 

may use a combination of two or more. 

• Collect the study materials 

• Collect question papers and model answers 

• Study regularly 3-4 hours a day 

• In the last 2-3 weeks before the exam, attempt a 

past question paper every day 

9. Collection of study materials: 

Like audit evidence, your 

study materials should be 

current, relevant and reliable. 

For Law and Taxation Papers, 

you should collect the Bare 

Act in addition to text books 

and reference books. But 

many students neither know 

or read the Bare Acts and rely 

on materials and reference 

books. The Act is an essential 

element from which come the 

interpretation and the 

detailing of the legal 

requirements. And of course 

disputes in such 

interpretations take the form 

of case laws. You should also 

have the updated IFRS and 

ISAs, and cultivate the habit of 

reading the original Standards. 

10. Complete your syllabus: 

While appearing for 

professional exams, you 

should not leave any parts of 

the syllabus untouched. You 

cannot expect to pass if you do 

not attempt the full 100 marks. 

11. Do not burden yourself with 

too many reference books: It 

is better to read one book ten 

times, than to have ten books, 

and then not read them even 

once. Subjects like 

Accounting, Auditing, 

Taxation and Law are 

standardized, and thorough 

study one really good book 

will enable you to complete 

the whole syllabus. Then if 

you have the time and energy, 

you can try additional 

references. 

12. Use your time effectively: 

When you study, do it 

attentively. Do not study with 

the TV switched on. Avoid 

speaking on the phone, unless 

it is really urgent. 

70 



13. Take breaks: Do not study at a stretch for too 

long. Take a short 5 minute break every 1-1.5 

hours. During this time, do not watch TV or 

use the computer. Rest your eyes, stretch 

your legs, walk around a little bit, eat or drink 

something. In general, relax. Studying on an 

empty stomach will cause a headache. 

14. Take mock exams: Practice writing in exam 

conditions as much as you can,. Attempt 

mock exams at home. This will help you to 

estimate the speed and quality of your writing. 

15. Preparing for the exam: Start preparing for 

the exam 2-3 days before the exam starts. Buy 

your stationery and a stationery case. Get 

new batteries for your calculator. Photocopy 

your admit card and routine. Arrange your 

clothes for the exam days (wear something 

comfortable but not too old or shabby) and 

consult a doctor if you have any illness like 

influenza, toothache etc. It is better to start 

medication a couple of days before, rather 

than on the day of the exam. Don’t learn or 

read anything new on the day before the day 

of exam. All you should do is to revise what 

you have already done. 

16. On the Exam day: Rise early, have a good 

breakfast, drink plenty of fluids. Do not 

become nervous, trying to revise too many 

things in the morning. If you are a religious 

person, say your prayers. Start from home 

early, allowing for traffic jams, bad weather 

etc. If you are using public transport, carry 

small notes and change with you so that you 

will not waste time while trying to pay your 

fare with large notes. Make sure you have 

got everything you need. Do not attempt an 

exam on an empty stomach. 

17. During the exam: When you receive the 

question paper, spend some time to read it. 

First attempt the question you know best. This 

will create a good impression in the mind of 

the examiner. Write the question number 

and reference clearly. Always begin the 

answer to a question with one or two 

summary sentences. Begin a new paragraph 

for each point or idea. Attempt all questions. 

Underline key points. Write legibly. Do not 

write too small. 

18. Save some time for revision and tidying up: 

Keep at least 10 minutes for revision. Keep 

another 5 minutes for tidying up 

your script (signature, 

numbering, stapling 

additional scripts etc.). Do 

not speak to others during the 

examination. 

19. Be professional in your 

presentation: Presentation is 

the method of communicating 

your knowledge to the 

examiner in the most 

appropriate manner. 

Communicating your 

knowledge means that what 

you mean and know is exactly 

conveyed to the examiner. 

There should not be any 

ambiguity in the answers. 

This is a professional exam, so 

your approach and 

presentation should match the 

requirements of the question. 

If you are required to write a 

letter or report, make sure it is 

good enough to be presented 

to a Partner at your office. If 

you are preparing a set of 

financial statements, make 

sure it is in the correct format 

and sequence as per the 

accounting and reporting 

standards. 

20. After the exam: Do not 

distress yourself discussing 

your mistakes with anyone. 

What has happened has 

happened; it cannot be 

changed. Discussion will only 

spoil your other papers. Once 

all your exams are over, you 

should make a note of all the 

mistakes and drawbacks for 

future reference. Look them 

up before the next exams. 

Wish you all the best!! 

While everyone has their own particular 

effective method of studying, a few things 

work for all. 


Students’ 

Section 

1/15/ICAB-2010 28 March 2010 

CIRCULAR 

ICAB New Curriculum 

The Council ICAB in its meeting held on 23 March 2010 decided that from May-June 2010 onward, the 

following Examination Structure & Conversion Criteria would be followed by the examinees of ICAB in 

super-session of all previous Circulars issued in this regard. 

1. Examination Structure 

(i) The examinations structure shall comprise of 2-stages as follows: 

Professional Stage (PS) 

Advanced Stage (AS) 

Professional Stage examination shall again consist of 2 progressive level of examination as follows: 

1. Knowledge level 

2. Application level 

(ii) Professional Stage (Knowledge Level) i.e. PS (K) shall consist of 07 papers with examination duration of 1½ 

hours each except ‘Taxation-I’ which will be of 3 hours duration, as under: 

Subject Duration Marks 

(1) Assurance 1½ hours 100 

(2) Accounting 1½ hours 100 

(3) Business and Finance 1½ hours 100 

(4) Management Information 1½ hours 100 

(5) Taxation-I 03 hours 100 

(6) Business and Commercial Law 1½ hours 100 

(7) IT Knowledge 1½ hours 100 

700 

(iii) Professional Stage (Application level) i.e. PS (A) shall consist of 07 papers with examination duration of 2½ 

hours each as under: 


(1) Audit and Assurance 2½ hours 100 

(2) Financial Accounting 2½ hours 100 

(3) Business Strategy 2½ hours 100 

(4) Financial Management 2½ hours 100 

(5) Taxation-II 2½ hours 100 

(6) Corporate Laws and Practices 2½ hours 100 

(7) IT Application 2½ hours 100 

700 

(iv) Advanced Stage (AS) shall consist of the following 04(four) papers with examination duration of 3 hours each 

except Case Study which will be of 4 hours duration: 

72 



Students’ 

Section 


1. Financial and Corporate Reporting 03 hours 100 

2. Advanced Audit and Assurance 03 hours 100 

3. Business Analysis 03 hours 100 

4. Case Study 04 hours 100 

400 

2. Pattern of Examination: 

Pattern of examination for each paper will be as under: 

(a) Professional Stage (Knowledge Level) 

There will be 7 (seven) separate written examinations of which 6 papers will be held and assessed in 

short-form (short answer) questions except Taxation-I examination which will be held and assessed in 

traditional system. 

(b) Professional Stage (Application Level) 

There will be 7 (seven) separate written examinations in traditional system, all having 2½ hours duration. 

(c) Advanced Stage (AS) Integration: There will be 03 separate written examinations in traditional system, all 

having 3 hours duration, 

and 

01 Case Study written examination will be of 4 hours duration. 

3. Recognition of Examination Results 

Paper by paper pass has already been allowed in all levels from the examination of November-December 

2009 and it will continue. 

4. Maximum Attempts for each paper 

Students will be allowed a maximum of 06 (six) continuous attempts to pass a paper under new syllabus. 

5. Step by step Examination 

Students will be given the option to sit for one or more or all the papers of each level at a session. No 

examination for the next level will be undertaken before the previous level has been completed in entirety. 

6. Frequency of Examination 

Examination will be held twice in a year as per existing policy of the Institute. 

7. Commencement of Coaching Class on New Syllabus 

The Coaching Classes for the students under new Syllabus have been going on since January 2010. 

8. Commencement of examination under New Curriculum 

The last Examination of PE-I syllabus was held in November-December 2009. First Examination based on 

new syllabus for Professional Stage-Knowledge Level will start from May-June 2010. 

The last Examination under PE-II syllabus will be held in May-June 2010. The First Examination based on 

new syllabus for Professional Stage-Application Level will start from November-December 2010. 


Students’ 

Section 

The last Examination under PE-III syllabus will be held in November-December 2010. The First Examination 

based on new syllabus for Advanced Stage will start from May-June 2011. 

A student will be allowed to sit for the Case Study paper after completion of all other papers of Advanced 

Stage (AS). 

9. Paper by Paper Exemption with Conversion 

The Paper by Paper exemption with some conversion courses at the time of transition to new ICAB 

Curriculum would be as under: 

Paper-by-Paper Exemptions 

Exemption chart 

PE-I (paper or half paper 

passed) 

Financial Accounting (½) 

Cost Accounting (½) 

Taxation-I 

Auditing (½) 

Business Law (½) 

Information Technology 

Student takes conversion 

course comprising ... 

Preparing Ltd company 

accounts 

... and is allowed 

exemption for paper 

PS (K) Accounting 

PS (K) Taxation-I 

PS (K) Business & 

Commercial Law 

PS (K) IT Knowledge 

PS (A) IT Application 

Student must take 

PS(K) Management 

Information 

PS(K) Assurance 

PS (K) Business & 

Finance 

PE II paper passed 

Advanced Financial 

Accounting 

Advanced Auditing 

Corporate Laws & Practices 

Management Accounting 

Financial Reporting (½) 

Professional Issues (½) 

Taxation-II 

Financial Management 

Strategic Management 

Student takes conversion 

course comprising ... 

Principal differences 

between IFRS and 

Bangladesh GAAP 

... and is allowed 

exemption for paper 

PS(A) Financial 

Accounting 

PS(K) Assurance 

PS(A) Audit & Assurance 

PS(A) Corporate Laws & 

Practices 

PS(K) Management 

Information 

Student must take 

PS (A) Taxation-II 

PS(A) Financial 

Management 

PS(A) Business Strategy 

PS(K) Business & Finance 

PS(A) Taxation-II 

PS(K) Business & Finance 

PS(A) Financial Management 

PS(A) Business Strategy 

All AS papers 

74 



Students’ 

Section 

10. The students who have passed the Intermediate Examination and will not be able to pass PE-II by May-June 

2010 examination, will be required to appear at the following papers of Professional Stage Knowledge Level. 

After completion of the following papers, the students will have to pass all the papers of Professional Stage 

Application Level and thereafter the papers of Advanced Stage: 

i) Assurance 100 Marks 

ii) Business and Finance 

100 Marks 

iii) Management Information 

100 Marks 

Total: 300 Marks 

11. The Students who have passed Group “A” only of the Intermediate Examination under revised “C” Syllabus 

will be required to appear at the following papers of Professional Stage Knowledge Level. After completion 

of these papers, these students will have to pass all the papers of Professional Stage Application Level and 

thereafter the papers of Advanced Stage: 



100 Marks 


100 Marks 

iv) Taxation-I 

100 marks 

v) IT Knowledge 100 Marks 


12. The students who have passed Group “B” only of the Intermediate Examination under revised “C” will be 

required to appear at the following papers of Professional Stage Knowledge Level. After completion of these 

papers these students will have to pass all the papers of Professional Stage Application Level and thereafter 

the papers of Advanced Stage: 



100 Marks 


100 Marks 

iv) IT Knowledge 

100 Marks 


13. The students who have passed the Final Group-I Examination under “C” Syllabus or Revised “C” Syllabus 

will be required to appear at the following papers of Professional Stage and after completion of these papers 

the students will have to pass all the papers of Advanced Stage: 

i) PS (K) Business and Finance 100 Marks 

ii) PS (A) Business Strategy 

100 Marks 

iii) PS (A) Financial Management 

100 Marks 


14. The students who passed the Final Group-I Examination under “A” or “B” Syllabus will be required to appear 

at the following papers of Professional Stage and after completion of these papers they will have to pass all 

the papers of Advanced Stage: 

i) PS (K) Business and Finance 100 Marks 

ii) PS (A) Business Strategy 

100 Marks 

iii) PS (A) Financial Management 

100 Marks 

iv) PS(A) Taxation-II 

100 Marks 



Students’ 

Section 

15. The students who passed the Final Group-II Examination under syllabus ‘A’ or ‘B’, but did not pass Final 

Group-I, will be required to appear at the following papers of Professional Stage and after completion of 

these papers they will have to pass all the papers of Advanced Stage: 

i) PS (K) Assurance 100 Marks 

ii) PS (K) Management Information 100 Marks 

iii) PS (A) Audit and Assurance 

100 Marks 


16. The students who passed the Final Group-II Examination under syllabus Old-C, having passed Intermediate 

Examination under syllabus ‘A’ or ‘B’, but did not pass the Final Group-I, will be required to appear at the 

following papers of Professional Stage and after completion of these papers they will have to pass all the 

papers of Advanced Stage: 

i) PS (K) Management Information 100 Marks 

iii) PS (A) Taxation-II 

100 Marks 


17. The students who passed both the Final Group-II Examination and Intermediate Examination under syllabus 

Old-C, but did not pass Final Group-I, will be required to appear at the following papers of Professional Stage 

and after completion of these papers they will have to pass all the papers of Advanced Stage: 


ii) PS (K) Management Information 100 Marks 

iii) PS (A) Audit and Assurance 

100 Marks 

iv) PS(A) Taxation-II 

100 Marks 


18. The students who passed the Final Group-II under syllabus ‘A’ or ‘B’ and also passed Management 

Accounting (being exempted from rest of the papers) of Final Group-I will be required to appear at the 

following papers of Professional Stage and after completion of these papers they will have to pass all the 

papers of Advanced Stage: 


ii) PS (A) Audit and Assurance 

100 Marks 


19. The students who passed the Final Group-II under syllabus ‘Old-C’ having passed Intermediate Examination 

under syllabus ‘A’ or ‘B’ and also passed Management Accounting and Taxation-II (being exempted from rest 

of the papers) of Final Group-I under the syllabus Revised-C, will be required to appear at all the papers of 

Advanced Stage. 

By Order of the Council 


Secretary-ICAB 

ALL MEMBERS OF THE INSTITUTE 

76 



Students’ 

Section 

1/15/ICAB-2010 04 October 2010 

CIRCULAR 

In continuation of the Institute’s Circular of even number dated 28 March, 2010 regarding ICAB New 

Curriculum, the Council ICAB in its meeting held on 05 July & 19 July 2010 respectively resolved that the 

Examination Structure and Conversion Criteria as under would be followed by the examinees of ICAB: 

Eligibility for examination after registration: 

The students will be allowed to sit for the examination for the first time after 10(ten) months from the date of 

registration and this ten-month period will be counted from the date of registration up to the first day of May for 

the examination of May-June session and up to the first day of November for the examination of 

November-December session. 

Clarification of Attempts 

a. All the papers of Knowledge Level must be completed within 4 (four) years from the date of registration, or in 

06 (six) consecutive attempts counting from the first eligible attempt of the student concerned, whichever is 

later. Here an available opportunity to sit for any or more or all papers of Knowledge Level examination will 

be considered to be an attempt irrespective of whether the student concerned actually avails the opportunity 

or not (i.e. whether he/she actually sits for the examination or not); 

b. All the papers of Application Level must be completed within 3(three) years after the completion of Knowledge 

Level (i.e. in maximum six consecutive examinations after the completion of Knowledge Level); and 

c. All the papers of Advanced Stage (Integration +Case Study) must be completed within 3(three) years after the 

completion of Application Level (i.e. in maximum six consecutive examinations after the completion of 

Application Level). 

Old Stream Students 

1. PE-I Level: 

Students who: (i) have neither passed, nor got exemption from, any paper or half paper of PE-I level, or (ii) have 

either passed, or got exemption from, one or more full/half papers (but not all the papers) of PE-I level must 

complete: 

a. All the relevant papers of Knowledge Level by November-December 2012 examination (inclusive); 

b. All the relevant papers of Application Level within 3(three) years after the completion of Knowledge Level (i.e. 

in maximum six consecutive examinations after the completion of Knowledge Level); and 

c. All the papers of Advanced Stage including Case Study within 3(three) years after the completion of 

Application Level (i.e. in maximum six consecutive examinations after the completion of Application Level). 

2. PE-II Level: 

Students who have passed PE-I, but: (i) have neither passed, nor got exemption from, any paper of PE-II Level, or 

(ii) have either passed, or got exemption from, one or more papers (but not all the papers) of PE-II Level must 

complete: 


Students’ 

Section 

a. All the relevant papers of Knowledge Level by November-December 2013 examination (inclusive); 

b. All the relevant papers of Application Level within 3(three) years after the completion of Knowledge Level (i.e. 

in maximum six consecutive examinations after the completion of Knowledge Level); and 

c. All the papers of Advanced Stage including Case Study within 3 (three) years after the completion of 

Application Level (i.e. in maximum six consecutive examinations after the completion of Application Level). 

3. PE-III Level: 

Students who have passed PE-II, but: (i) have neither passed, nor got exemption from, any paper or half paper of 

PE-III Level, or (ii) have either passed, or got exemption from, one or more full/half papers (but not all the papers) 

of PE-III Level, and (iii) thus have not qualified as CA, must complete: 

a. All the relevant papers of Knowledge Level and Application Level by May-June 2014 examination (inclusive); and 

b. All the papers of Advanced Stage including Case Study within 3(three) years after the completion of 

Knowledge and Application Levels (i.e. in maximum six consecutive examinations after the completion of 

Knowledge and Application levels). 

The above students will be allowed to sit for the relevant papers of both the Knowledge Level and Application 

Level examinations in the same session. 

Note: Item No.1 will come into force immediately. Item No.2 & 3 will come into force immediately after the PE-II 

and PE-III level examinations are discontinued respectively. 

Conversion Course 

1. PE-I: Passed, or exempted from, Financial Accounting 

Attend and successfully complete a conversion course on “Preparing Limited Company Accounts” (30 hours), 

organized by ICAB to obtain exemption from PS(K) Accounting. 

2. PE-II: Passed Advanced Financial Accounting 

Attend and successfully complete a conversion course on “Principal differences between IFRS and Bangladesh 

GAAP and most commonly applicable BAS/BFRS” (30 hours), organized by ICAB to obtain exemption from 

Financial Accounting. 

Note: Students will be assessed by a combination of end-of-course test, attendance records and in-course test(s) 

by teachers. If on assessment a student does not pass, he/she will have to pass the re-sit test to be arranged within 

02 months after the end-of-course test. Students who do not satisfactorily complete the course will have to sit the 

main paper(s) for which they were working to obtain exemption. 

By order of the Council-ICAB 


Secretary-ICAB 

TO : ALL CA FIRMS 

ALL NOTICE BOARDS OF ICAB 

78 



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