MASUD KHAN
Despite their substantial role in the economy through employment, taxes and global best practices, multinational companies (MNCs) remain largely absent from Bangladesh’s stock exchanges. As the Bangladesh Securities and Exchange Commission (BSEC) seeks to broaden market participation, it is crucial to understand why MNCs are reluctant to list and what reforms might change that.
At the heart of the issue are concerns about control and governance. MNCs are globally structured to maintain tight parent-level control. Local listing would require dilution of ownership, appointment of independent directors and adherence to regulatory disclosures that often conflict with global policies. Added scrutiny from minority shareholders and local regulators introduces complications for internationally compliant MNCs.
The compliance burden also discourages listing. Bangladesh requires full-format quarterly financials, while international standards allow condensed interim reporting under IAS 34. These excessive requirements add little value and may clash with confidentiality rules of global listed groups.
Access to capital is rarely a concern. MNCs typically finance operations through retained earnings or intercompany loans at rates as low as 2 to 4 percent, while local borrowing costs exceed 10 percent.
Bangladesh’s equity market is retail-heavy, with largely uneducated investors and prone to speculative trading, with low institutional depth. MNCs fear mispricing, reputational damage and distorted valuations. Liquidity is thin; offloading even a 10 percent stake can take months, complicating exit options. The absence of a derivatives market deters sophisticated institutional investors who are unable to hedge their price risks.
Tax incentives are poorly designed. Listed companies with at least 10 percent public float receive a 2.5 percent corporate tax rebate. However, for an unlisted MNC, the effective tax rate difference from a local unlisted company is only 2.5 percent.
BSEC has recently announced a joint taskforce with the Bangladesh Bank and the Financial Institutions Division to examine why large firms, especially MNCs, are not listing. The taskforce excludes private-sector stakeholders, MNCs, investment banks and business chambers. Early public signals suggest an inclination towards mandatory listing requirements based on turnover or borrowings. Even the suggestion of such compulsion undermines investor trust and regulatory predictability. Globally, no major economy mandates listings for MNCs.
To reverse this trend, tax incentives must be both meaningful and accessible. Along with the current 2.5 percent rebate, another 7.5 percent corporate tax reduction for listed MNCs (5 percent for 10 percent and an additional 5 percent for a further 10 percent public float) would provide real motivation. Tax laws must also clearly reflect rights and protections under Double Taxation Agreements, with explicit provisions on dividend and capital gains treatment. Arbitrary reopening of audited tax filings without credible grounds should stop.
Bangladesh should streamline regulatory procedures by aligning financial reporting rules with global norms, accepting condensed interim reports under IAS 34, and offering a fast-track “green channel” listing route for compliant firms. The listing process must be made more efficient and transparent.
The country must also work to develop a deeper base of long-term institutional investors, such as pension funds, insurance companies and mutual funds, to improve price stability, increase market depth and reduce volatility. A derivatives market, such as futures or options, should be developed to help sophisticated investors manage their risk exposure.
Flexibility in listing structures such as Depository Receipts, dedicated foreign investor boards, dual listings and regional cross-listings can allow MNCs to access capital without losing control or duplicating compliance. These models are gaining popularity in liberalised financial hubs such as Dubai, Singapore and Saudi Arabia.
Crucially, private-sector voices must be brought into policymaking. Without trust, no reform will succeed. By building confidence through clear incentives, regulatory consistency and inclusive dialogue, Bangladesh can unlock its capital market potential not through coercion but through conviction.
The writer is the chairman of Unilever Consumer Care Limited