Sep 19
Capital Flight From The Country Rises Sharply PDF Print E-mail

Experts wants govt to act not limit with commitments

 

By Apu Ahmed

Illegal outflow of fund or capital flight whatever it is called it becomes a major cause of concern for Bangladesh.  Every year, on an average, some $5.3 billion to $7.5 billion was siphoned off from the country in 2005-2014 with up to $8.97 billion or about Tk 72,000 crore drained out from the country in 2014. Steps should be taken immediately to stop the trend as the amount laundered every year was huge compared to the export earnings and foreign assistance. It would be equivalent to one-third of the country’s export earnings and five times the foreign assistance.

GFI Findings

Washington-based Global Financial Integrity released a report early this month that showed that the trend of ‘Illicit Financial Flows to and from Developing Countries: 2005-2014’. GFI estimated that illicit financial outflows from the country was rising. According to the study, 9-13 per cent of the $70.07 billion international trade of the country was laundered mainly by traders from the country in 2014. The amount of laundered money in 2014 by traders was estimated ranging from $4.96 billion to $7.88 billion or the highest 88 per cent through trade misinvoicing––over-invoicing in import and under-invoicing in export. Illicit financial outflows or money laundering is estimated $53.54 billion at the lowest and $75.84 billion at the highest (12-17 per cent) in the 10 years, it said. The country’s total volume of international trade was $446 billion in the period.  At the same time, Bangladesh also experienced a significant amount of illicit financial inflows ranging from $4.06 billion to $12.58 billion which was 6-18 per cent of total trade in 2014, the study said. Some $17.85 billion to $53.54 billion of illegal money entered the country through under-invoicing in import and over-invoicing in export in 2005-2014, it added.

Experts Views

Economist and experts said that overall trend of money laundering from the country was rising due to lack of investment friendly environment, loopholes in duty structure and scope of earning illegal money. Former adviser to caretaker government Mirza Azizul Islam said that the government needed to take steps to improve the environment for investment and stop the scope of generating illegal money. Government agencies including the Bangladesh Bank, the National Board of Revenue and intelligence agencies have to work together to prevent money laundering as amount laundered every year was huge compared to the export earnings and foreign assistance, he said. The statistics shows that the amount is being laundered every year is equivalent to one-third of the country’s export earnings and five times the foreign assistance, he said.  Analysing the report, Centre for Policy Dialogue research fellow Towfiqul Islam Khan found that the trend of money laundering from the country was rising as the country’s estimated rank was 24th among 149 countries in the year. In the previous report published in December 2015, Bangladesh ranked 26th in illicit financial flow in 2004-2013 as some $55.87 billion was laundered from the country during the period. According to the report, every year, on an average $4.9 billion was siphoned off from the country in 2004-2013. He said that the average amount of laundered money indicated that the trend was rising despite a fall in illicit financial outflows in 2014 compared to that of 2013.  In 2013, which was a very turmoil year over national elections, the highest $10.04 billion was laundered from the country. He said that the government should take steps to curb trade misinvoicing for reducing money laundering. Better and proactive engagement at international level is also needed to prevent illicit financial flows, he said.

Junior Minister

State Minister for Finance and Planning MA Mannan said that Bangladesh Bank will probe the alleged siphoning off some Tk 73,000 crore in parliament. The government will provide all-out cooperation so that rise in such activities in the future can be prevented, he said while replying to a supplementary question from Jatiya Party MP Pir Fazlur Rahman in the House in the absence of Finance Minister AMA Muhith. Terming the lost amount a big one, Mannan said the looting of such an amount of money is possible from only a large or growing economy. "We're not rejecting the claim of siphoning off the money. It has come to our notice. The Financial Intelligence Unit (FIU) of our central bank will collect information in this regard." He also said the government must take cautionary measures to prevent such looting. The junior minister, however, said many misleading information alongside good ones also come out in this age of free flow of information.

Senior Minister

Finance minister AMA Muhith said that he would announce measures in the upcoming national budget to check growing capital flight from the country. He, however, did not elaborate the measures he would announce during the announcement of the national budget for the fiscal year of 2017-18 on July 2 in parliament. He was talking to reporters after attending meetings before the annual general meeting of the Asian Development Bank in Yokohama, Japan on May 4. Muhith, however, said that there would be no crackdown on persons who sent money illegally to foreign countries including Malaysia. Budgetary measures might include incentives for investment in the country, he said. Though Muhith appeared to be suspicious about the estimate of illicit outflow of fund from the country by the Washington-based research organisation, he, however, agreed that capital flight was affecting the private investment in the country. He said some loopholes in the system have been identified that result in outflow of fund. He said that he would finalise the budgetary measures after going back home.

No More Silence

This is not the first time that the GFI published the report. In 2015, it released its study report. But before GFI publishing its report it was highlighted by the local newspapers that the country’s investment was suffering due to the capital flight. The affluent people who amassed money over the years by the help of incentives like tax break and cash subsidy were not making investment in the country. It was also reported that millions of dollars were sent illegally in Malaysia for availing of The Second Home Facility there. However, the present government has not taken any steps. Now the policy makers felt the necessity of doing something like they felt in the past. People of the country believe that they would not remain silent after realizing the necessity of doing something. They want to see the policy makers translating their commitments.