Published in The Daily Star on Tuesday, 23 June 2015.
Syed Mansur Hashim
Over a ten year period from 2013, money laundered from Bangladesh stood slightly over US $13 billion. That is a staggering amount for a developing nation like ours. And this does not take into account the money laundered through the “hundi” system. From what has been made public by the Washington-based Global Financial Integrity (GFI), illegal flight capital from Bangladesh shows an increasing trend. Of the $13 billion mentioned, it is estimated that $2.67 billion was transferred to offshore accounts in 2006 when the country was facing severe political instability. We have been informed by the Swiss National Bank that deposits by Bangladeshi nationals have recorded a 36 per cent rise in 2014.
The culture of over-invoicing for import of capital machinery remains a major headache. According to data published by the central bank, the import value of such items from July to March of the current fiscal stood at nearly $2.93 billion which went up to $3.21 billion by April. The high value shown for the import of certain items like aircraft and helicopters, compression engines and other equipment, electric cables and transformers are areas that require closer scrutiny.
A recent survey conducted by Centre for Policy Dialogue involving 60 leading entrepreneurs as respondents in the ‘rapid business assessment survey’ elicited some interesting findings. Some 62.5 per cent of the respondents believe that money is being laundered through formal banking channels.
The five areas that have been identified as facilitators for flight capital from Bangladesh are: corruption in public sector, government instability, and limited access to finance, inadequate infrastructure and inefficient bureaucracy. All these are colluding to a steady deterioration in investment climate and business environment. If moneyed people lose confidence in the country being a safe place to do business and deposit money in foreign lands, this will be of little help to the economy to grow. That formal banking channels are being used to channel money abroad goes to show a lack of political will to stem the flow of monies as everyone benefits from such channels remaining in place.
Securing assets abroad by means of purchase of real estate and opening businesses abroad benefits those countries, not ours. When leading conglomerates in the country choose to invest in a factory in another country, it means a loss of employment opportunities for workers in our country. When hundreds of thousands of dollars are spent in tuition fees for children’s education in a foreign land, it is revenue lost for our education system. Needless to say that the bulk of these young men and women will not be returning to Bangladesh as provisions are being made for a life that does not include Bangladesh.
We hear about laws being enacted to go after laundered money. However, what we do not hear about is going after graft or making anti-corruption watchdog institutions more effective. The culture of corruption pervading public institutions raising the cost of doing business does not help matters. Nor does it help when bureaucracy becomes increasingly ineffective where efficiency is replaced by display of loyalty. When key infrastructure like cost effective and availability of power becomes scarce to the point of unavailable for new industries, in a country where channels of communication like inter-district highways lie in a state of dilapidation and internal waterways become unusable due to lack of navigability, is it really any wonder why new business is discouraged and lack of investment becomes chronic?
The sustained political impasse where major political blocs in the country fight it out in the streets is one of the major reasons that are prompting those who can afford it to relocate their finances abroad; the idea being not to make a profit rather to secure finances in both liquid and fixed assets. Several countries have taken advantage of the sense of insecurity to open up their markets for the uncertainty faced by the more prosperous sections of society. Several South-East Asian countries have reaped the bonanza by offering multi-year residency benefits to investors putting their money in sectors like real estate. Indeed, Bangladeshi citizens have poured in millions in property in Canada, Singapore, the United States, U.A.E and the U.K. Investments which could have benefitted our economy are now being in countries as far away as Belize and South Africa.
The overall unease business people are experiencing is going to be hugely detrimental for the country. The expansion plans for industry are not happening and will not happen if we do not go after the root causes of capital flight which includes political violence and uncertainty, as well as a general sense of insecurity. It is also because Bangladeshis from the more affluent sections feel it is the best way to secure their children’s future. No number of laws will be able to check the outflow of funds. Restoring faith in a system which does not work for entrepreneurs will not be easy. The prospect of foreign direct investment is all the rage these days. Yet, without domestic investment, the wheels of the economy will not move to reach the desired level of economic growth we have envisaged for ourselves.
The writer is Assistant Editor, The Daily Star.