Dr Khondaker Golam Moazzem on whether capital machinery imports resulting in capital flight, published in The Financial Express, on Saturday, 9 November 2013.
Some economic indicators may turn worse on political chaos
FE Report
The performance of a number of key economic indicators, showing a downward trend in the recent months, might turn worse in the days ahead, mainly due to restive political programmes over poll-time government, analysts told the FE Friday.
The 18-party alliance, led by main opposition BNP, Friday called a fresh spell of 72-hour shutdown from tomorrow (Sunday).
Some economic indicators, like — classified loans, investment, consumer price index (CPI) inflation and remittance inflow, have deteriorated in the recent months.
The amount of classified loans marked a rise of more than 8.0 per cent in the third quarter (July-September) of 2013 over that of the previous quarter.
The CPI inflation stood at 7.46 per cent during July-September period against the projected target of 7.0 per cent in the current fiscal year.
The analysts also said the situation is unlikely to improve during the next interim government period. Because they will perform only routine jobs, and will not take any major step to tackle the ebbing trend of the key economic indicators.
Policy Research Institute of Bangladesh (PRI) executive director Ahsan H Mansur told the FE that the indicators will not improve until a ‘lasting’ government comes to power through the next general election.
“I think that the ongoing downward trend of different indices will continue until an acceptable and lasting government is formed through the election.”
Common people will face the brunt of the situation, he added.
Bangladesh Institute of Development Institute (BIDS) director (research) Zaid Bakht told the FE that the present political chaos is the main reason behind the deplorable condition of the key indicators.
“Undoubtedly, the ongoing political chaos over poll-time government is the main reason,” he added.
Meanwhile, analysts put question marks on some rising indicators, like – rise in import of capital machinery and investment in national savings.
Capital machinery import surged by over 15 per cent during the last quarter ending September.
Earlier, Global Financial Integrity (GFI), an international body, estimated the annual average capital flight from Bangladesh at US$1.4 billion between 2001 and 2010.
According to Centre for Policy Dialogue (CPD), the trend of capital flight surges during the election year.
Capital machinery import is duty-free and hence there is adequate scope for over-invoicing in their import values.
CPD additional director Khandker Golam Moazzem said: “There is substantial scope of capital flight through import of capital machinery.”
He said: “It is very interesting that the existing industrial units have been facing troubles amid political chaos, so how can import of capital machinery rise for setting up new industries and expansion of the old ones.”
On the other hand, investment in the national savings stood more than Tk 20 billion in the July-September quarter.
They said many people are now investing in saving instruments due to lack of investment opportunities in productive sectors.
He said they are now investing in savings schemes, as they feel uncertainty and risk in pouring money into productive sectors.