Business insiders are cautiously enthusiastic about the sudden surge of Chinese investment in the stock market, mobile financial services as well as in e-commerce.
While the moves had been incubating for some time, the three major events that took place since April made the market abuzz.
Business leaders, trade analysts and economists think that the flow of new investment will bring changes in e-commerce and online payment with radical changes in terms of technology.
They said under the Chinese involvement, the stock exchange is likely to see changes towards good governance and new financial products.
However, they pointed out that regulators should be watchful and ensure sufficient safeguards for smaller local entrepreneurs in the field.
An untold amount
What the total amount of Chinese investment is, remains a matter of speculation at this point.
What is known is that Shenzhen Stock Exchange (SZSE) and Shanghai Stock Exchange (SSE), a consortium of Chinese stock market, is buying 25% shares worth Tk945 crore (equivalent to about $111.8 million in current exchange rates) from Dhaka Stock Exchange.
But bKash, the market leader in mobile financial services, has been quite tight-lipped about what Alipay, the Chinese mobile payment giant owned by Alibaba Group, is paying for 20% of its shares. This move was announced on April 26.
In a surprise move, Alibaba also acquired Daraz Group, a leading e-commerce company in Bangladesh. Daraz has the biggest market in Pakistan, where the daily Dawn’s sources said the entire purchase was made for something between $450-500 million. There is no word, however, on how much new investment will come into Daraz Bangladesh.
Why China has its eye on Bangladesh
With the economy showing a consistent performance and a steady GDP growth, and a rising middle income consumer class fuelling the domestic market, Bangladesh is becoming an attractive market for investors.
“Global retailers are increasingly sourcing their products here. As a result, Chinese investors are pouring money into Bangladesh considering the both global as well as the local market,” economist AB Mirza Azizul Islam told the Dhaka Tribune.
“Investment in e-commence by Alibaba is a very positive sign. It proves that Bangladesh has greater prospects in the emerging e-commerce and online payment business,” said Fahim Masroor, managing director of e-commerce company ajkerdeal.com.
In Bangladesh, the e-commerce industry has been registering a double digit growth for several years now. There are about 2,500 e-commerce sites and over 7,000 Facebook pages with a yearly turnover of Tk1,700 crore.
“Here, e-commerce is based on Facebook. Investment by Alibaba will establish real e-commerce in the country and help take it to rural consumers,” said Fahim Masroor, managing director of e-commerce company ajkerdeal.com.
He dismissed concerns that big investment might swallow up smaller, local businesses.
“Alibaba’s target is to bring small businesses to a common platform then make it viable together,” he added.
Exciting new technology
In both e-commerce and mobile payment, the Chinese are expected to bring in new technical know-how and help with upgradation of technology.
“E-commerce and mobile financial services are emerging and new in Bangladesh. Joining hands with a global giant like Alibaba will help us get the technical skills and use new technology,” Centre for Policy Dialogue Research Director Dr Khondaker Golam Moazzem said.
Joint venture is a key to move forward with the help of giant as they have the vast experiences, he added.
“A big part of e-commerce transactions is done through bKash. Investment in bKash is therefore a positive sign for the industry, as they will be able to focus on reaching more people in the rural area,” former e-CAB president Razib Ahmed said.
Mobile financial services have seen a sharp rise in Bangladesh in the last couple of years. As of March, total active account holders stood at over 20 million and the daily average turnover for the industry is Tk1,011 crore.
Big fish problem?
“If Alibaba jointly works with the Bangladeshi e-commerce, it will be better for them but there are risks for new entrepreneurs, especially small ones, who will not be able to compete with this giant,” said Razib.
Another big risk is for the local goods manufacturers in the e-commerce market, who might face intense competition from cheap and diverse Chinese products.
Razib said policymakers need to have specific focus on employment generation for local workers, and protection for local companies, he added.
“DSE badly needs technological upgradation and introduction of derivatives in the market. New investment will help with these needs,” said Khondaker Moazzem.
Upon completion of share purchase, the consortium will take position in the DSE board and take part in decision making, which would improve good governance, since the Chinese bring a lot of experience.
Participation of Chinese consortium as a strategic partner will also increase DSE’S exposure to the global market and investors.
“It is partially right that business goes to big investors, and the challenge is protecting the rights of small players. The government should not allow 100% ownership in case of joint ventures, so that the control remains in the hands of Bangladeshis,” said the economist.
Since Ant Financial will provide bKash clients with more convenient and secure digital financial services, it will bring maturity to the sector, he added.
“Along with its investment, Alipay brings the best payment technologies built by thousands of engineers and the knowledge of applying those technologies to economies like China which went through a massive transformation in recent years,” said Kamal Quadir, CEO of bKash.
Such track record makes Ant Financial a fitting partner for bKash since Bangladesh too has a large population of 160 million and an economy that is advancing rapidly. This investment opens many new opportunities for bKash and demonstrates the confidence a world-class player is placing in Bangladesh, he added.
