Commentary: Capital flight is not development
The report covering 150 countries highlighted Bangladesh position at 28 in a low estimate while based on a high estimate the country position in capital flight stands at 21 away from 51 in the previous list sometime ago.
What appears to be quite devastating is that the country lost about $75 billion from 2005 and 2014 in illegal transfer mainly using over invoicing of trade bills and other unrecorded transfer.
The highest outflow occurred in 2013 ahead of the Parliamentary Election as political uncertainty and violence had gripped the nation. Over $8.97 billions were illegally transferred on high estimates in that year; which is about Tk 73,000 crore in local currency and enough to build three Padma Bridges.
Economists fear political instability may again flare in the run up to the next Parliamentary Election in early 2019 and Bangladesh economy is likely to suffer yet another spate of worst capital flight again. The point is that people making illegal money fear the safety of their ill-earned income and prefer to move out this money using protection of corrupt government people at all levels.
Bangladesh is a country of immense potentials but the volume of capital flight suggests corrupt leadership and an equally inefficient and corrupt bureaucracy is halting back its growth as a prosperous nation. .
Even Awami League General Secretary and Communication Minister Obaidul Quader last week warned party men of unsafe future as they are spilling up illegal money. Though he uttered the warning demanding partymen to avoid factional fights and work hard for the party to keep it in power, his warning of safety against illegal money lost no point to the nation.
It is no secret that big business houses and politically powerful people are regularly transferring money they acquire by illegal means such as facilitating government deals and supply contracts. We have a system of government where corruption is growing faster than anything. The informal economy is much larger than we have ever thought about.
Experts blamed political leadership as complicit to the crime and government regulatory bodies such as Bangladesh Anti-Corruption Commission (ACC), Bangladesh Bank (BB) and National Board of Revenue (NBR) to name a few is no match to hold it in check
Big money laundering cases in recent years from the State owned banks and even robbery of Bangladesh Bank fund and the shadow identity of persons involved in such cases suggests government leaders are not in the dark about who are doing it and where they are moving out the money.
Many Customs Officials are complicit to misuse of import bills for illegal transfer of fund. What is surprising is that the ACC is very powerful to dig out big financial crimes but only going after small people to make their own fortune. BB and NBR have their own intelligence wings to check capital flight and yet the money is regularly going out to raise the question why they are failing.
We have a growing debate weather the government should formally allow big businesses to transfer fund to make investment abroad. But the reality is that many business houses have already set up industries; particularly garment factories abroad or bought real estate to raise question how they moved out money.
So capital flight is not anything to have suddenly emerged; what is surprising is the volume of money leaving the country while the government is indifferent about it. It appears that Bangladesh economy has lost the protected border as illicit money is flowing out and also coming into the country.
What is sensational is that if Bangladesh lost 6 to 9 billion in 2014 through illegal transfer, around $4.06 billion also entered the country illegally to suggest that there is no control over the underground economy.
Free flight of capital does not mean economic or political stability. Such transfer of money abroad cannot be seen also as faith in the government’s ability to create confidence among our investors. That has not stopped the government to claim credit for development.