Published in New Age on Friday, 19 June 2015.
Bangladeshi money in Swiss banks grows by 36pc in a year
Capital flight blamed
Aminul Islam
Deposits by Bangladeshi citizens in banks in Switzerland rose by 36.55 per cent in 2014 compared with the amount in 2013, indicating that economists may be right about capital flight from the country.
Latest data of the Swiss National Bank released on Thursday showed that the total deposits by Bangladeshi citizens soared to 508 million Swiss franc (or Tk 4,299 crore) from 372 million franc or (Tk 3,236 crore).
The Swiss central bank, however, has not revealed how many people deposited the money. The SNB report on assets and liabilities of Swiss banks is available on its web site.
Although deposits by Bangladeshis rose in the Swiss bank, Indians’ money in the banks declined by 10 per cent in 2014 after the Narendra Modi government clamped down on the secrecy wall of Switzerland’s banking system, reported the Press Trust of India.
Economists have been saying for the last few years that capital flight from the country has increased because of rise in political tension, lack of investment opportunity and corruption.
Centre for Policy Dialogue distinguished fellow Debapriya Bhattacharya on Thursday told New Age that the deposits by Bangladeshis in Swiss banks rose because of political uncertainty in the country.
‘A CPD study has already showed that the capital flight increases in pre and post election year. The January 5 [in 2014] elections has not settled the political uncertainty. That is why capital flight, which soared in pre-election 2013, has continued to rise in 2014,’ he said.
Amid political unrest, Bangladeshi citizens’ deposits rose by 65 per cent year-on-year in 2013, just before the one-sided general elections, showed SNB data.
A BB official said that the amount of deposits by Bangladeshi citizens might be more as SNB’s official figures did not include the money that Bangladeshis or others might have in Swiss banks in the names of entities from different countries.
Debapriya said capital flight was taking place through under and over invoicing, while the un-repatriated money of Bangladeshis staying overseas was also being deposited in foreign banks.
He said capital flight was also taking place through illegal import of gold as there is no record of the huge quantity of gold that is imported.
Former interim government adviser Mirza Azizul Islam told New Age that the deposits in Swiss banks or banks in any other country were rising because of capital flight from the country.
‘The business sector has been struggling for long because of political unrest. Capital flight is taking place because of poor business environment,’ he said.
He said capital flight was mostly taking place through the import of capital machinery.
According to the latest BB data, the import of capital machinery registered 20.81 per cent growth in the first 10 months of the FY15 compared to 21.14 per cent growth during the corresponding period the previous fiscal, despite sluggish business environment in the country.
The import of capital machinery increased to $2.52 billion in July-April of the FY15 from $2.09 billion in the first 10 months of the FY14.
Bangladesh Bank executive director Mahfuzur Rahman said that the deposit rise in Swiss banks might not necessarily be related to any capital flight from Bangladesh.
‘We need to consider that the money might be deposited by non-resident Bangladeshi citizens,’ he said.
When asked about the central bank’s position on money laundering, Mahfuz said, ‘from our side, we have plugged the gap in capital flight through the banking channel.’
Debapriya, however, said that the central bank was shying away from its responsibility by saying that NRBs were depositing the money in Swiss banks. ‘Besides, why are the NRBs depositing their money in Swiss banks without sending it to Bangladesh or depositing it in the country where they live?’ he asked.
According to a recent CPD study, 62.5 per cent of entrepreneurs who were surveyed agreed that money laundering was taking place through the formal banking system in Bangladesh.
Mahfuz said that Bangladesh Bank had been trying to sign an agreement with the SNB for the last few years for tracing the money deposited by Bangladeshi citizens, with no response. ‘Even in an EGMONT Group meeting held last week in Barbados we requested the Swiss authorities to give us access to information about Bangladeshi citizens’ deposits,’ he said.
He said although Switzerland was a member of EGMONT Group, it was not providing the information because of its local law. ‘In the Barbados meeting, Bangladesh and many other countries requested Switzerland to change the law so that secret banking deposits can be accessed,’ he said.
He said central bank and the National Board of Revenue were working together to stop irregularities in cases of under- and over-invoicing.
Economists at different times said that Switzerland was not the only country that has received Bangladeshi money, as Canada, Malaysia and the UAE are also preferred destination of Bangladeshis.
BB officials said businessmen sent their money to foreign countries as many of them earn illegally and because of lack of safety, while politicians and bureaucrats who earned money through illegal means did the same fearing a government changeover or takeover of a regime.
According to SNB data, money held in Swiss banks by their foreign clients from across the world rose to 1.5 trillion Swiss franc($1.6 trillion) in 2014 from the record low of 1.32 trillion Swiss franc (about $1.56 trillion) at the end of 2013.