Sep 24
Deposits By Bangladeshi Grows To Tk 5,553cr In 2016 PDF Print E-mail

By Apu Ahmed

 

Six disrupting factors contrary to the smooth economic development have been identified by finance minister AMA Muhith during the announcement of the most controversial budget in parliament on June 1. Low remittance inflow, high rate of savings certificates, lack of proper implementation of the annual development plan, dearth in medium and high skilled human resource and lack of reforms in economic and administrative areas.

 

Capital Flights Missing

 

Perhaps, the octogenarian Muhith forgets to include another factor unintentionally. It is known as capital flight with far destructive impacts on economy like us. One day after passage of the budget on June 29 the issue of capital flight hogged the headline of the national dailies when the central bank of Switzerland disclosed that deposits by Bangladesh nationals in Swiss banks made substantial rise in 2016. The increase was 19.21 per cent to CHF (Swiss franc) 667.40 million, equivalent to US$694.15 million or about Tk 5,553 crore in 2016. The amount was CHF559.25 million equivalents to $582.43 million or Tk 4,423 crore in 2015. However, the conspicuous findings of the latest Swiss central bank report is that the deposits in the countries banks by Pakistanis decreased by 6 per cent to CHF 1.4 billion and by Indians decreased by 45 per cent to CHF 675.75 million in 2016. Bangladesh is in pathetic position as deposit by its citizens in the Swiss banks has been continuing to rise since 2011.

 

Illegal Capital Flight

 

Since Bangladesh Bank did not give any approval to any Bangladesh nationals to send money abroad for the purpose of deposits in the Swiss banks it should be assumed that the money was sent there illegally.  Economists noted that deposits in Swiss banks were growing because of the illegal capital flight that hit the country’s main economic sectors. They pointed out that political uncertainty, lack of good governance and ineffective measures were major reasons for the growing capital flight. They also linked overpricing in large national projects, under- and over-invoicing of exports and imports and diversion of inward remittance for the others reasons. Former interim government adviser Mizra Azizul Islam said the illegal capital flight encourages crime and corruption, and discourages growth. Former Bangladesh Bank governor Salehuddin Ahmed noted that the existing political and economic situation was conducive to money laundering. Corrupt people were transferring their ill-gotten money to abroad taking advantage of the situation, he said, adding that the country had strategic deficiencies of measures to check capital flight.

Swiss Conditions

The Swiss National Bank has put condition to Bangladesh Bank’s repeated request to share information about Bangladeshi depositors between 2014 and 2015. The issue was revealed by finance ministry officials that the Swiss National Bank had agreed to provide information sought by Bangladesh Bank if only those were used as evidences in a court.  The Swiss response gave a blow to BB efforts to investigate into the matter further as launching legal battles against the Bangladeshi account holders in Swiss banks without proper information and through investigation was difficult. BB’s hunt for illegal investments by wealthy Bangladeshis in Malaysia, Singapore and Canada also drew a blank.

A BB investigation team visited Kuala Lumpur in 2014 to cross check reports that an increasing number of Bangladeshis were availing of the second home opportunities offered by Malaysia to foreign investors. The team received no cooperation.

 

Indian Experience

 

But the Indian government's sustained efforts seemed to have bore fruits as the money parked by Indians in Switzerland's banks halved. The issue of black money has been a matter of big debate in India and Switzerland has been long perceived as one of the safest havens for the illicit wealth allegedly stashed abroad by Indians. Switzerland has already begun sharing foreign client details on evidence of wrongdoing provided by India and some other countries, it has agreed to further expand its cooperation on India’s fight against black money with a new pact for automatic information exchange from next year. There have been several rounds of discussions between Indian and Swiss government officials on the new framework and also for expediting the pending information requests about suspected illicit accounts of Indians in Swiss banks. The efforts put by India showed its strong political will.

 

Capital Flight to Grow Further

 

Policy Research Institute executive director Ahsan H Mansur linked falling remittances to the rising demand among Bangladesh nationals to hold foreign currency abroad. Government cronies, businesses and the growing middle class are already nervous ahead of an election in late 2018 and want to keep money offshore. Between 2005 and 2014, uncounted flows from Bangladesh amounted to $61.6 billion, according to Global Financial Integrity, an American research group. It blames an estimated 90 per cent of these on trade misinvoicing. It also demonstrated that the capital flight from the country was much higher than foreign direct investment the country received. The FDI grew 4.38 per cent to $2.33 billion in 2016, according to United Nations Conference on Trade and Development. Bangladesh being an investment-deficit country is becoming an illegal capital-exporting country, said centre for Policy Dialogue distinguished fellow Debapriya Bhattacharya.

 

Adverse Impacts

 

The capital flight was affecting the local private investment badly. It is sad that the serious issue of wealthy individuals siphoning money to foreign countries instead of investing in domestic industry has been ignored by the successive governments. The massive capital flights are closely linked to the series of bank embezzlements that hamstrung the economy since 2009 and the consequent slow domestic investment scenario. The government could not improve investment climate due to political uncertainly and high cost of doing business, according to a World Bank report that put Bangladesh in the penultimate place in South Asian countries, only ahead of Afghanistan and behind of Bhutan, Nepal, Sri Lanka, India, Maldives, and Pakistan, said the economists. In the absence of private investment the country was gaining growth in joblessness with unemployment soaring. It has also been said that the desperate youths were taking perilous sea voyages to reach European shore while many looked for overseas jobs in the oil-rich Middle East countries despite low wage.