Bulging deposits with Swiss banks

That the illegal outflow of fund from the country has been increasing, instead of declining, is borne out by the latest data, showing a 41 per cent year-on-year increase in the deposits made by the Bangladeshis with the Swiss banks in 2014. This also clearly indicates that the actions, promised by the various government agencies and the central bank to help stop laundering of funds out of the country, have  either not been put in place or are still ineffective to stem the outflow of funds. The trend of the flow of Bangladeshi funds to the Swiss banks during the last 10 years, starting from the year 2005, has been erratic. It was US$105 million in 2005. The flow of funds fluctuated in the remaining years to reach its highest level in 2014 at $545 million.

But the most disturbing feature is that during the last three calendar years the amount of deposits with the Swiss banks had been going up consistently and at a rapid pace. In fact, the Swiss banks are not the only places to attract funds from Bangladesh. It is suspected that funds, even in greater volumes, are flowing to other destinations in South Asia, Southeast Asia and North America. In this age of advanced communications system, it is hard to stop anyone from illegally transferring funds from one territorial limit to another. Even the most stringent foreign currency regulations have been found to be not effective enough to restrict the illegal flow of funds.  

The factors such as internal political situation, investment climate and scope for generating black money are, in one way or other, concerned with, or influence, the outflow of capital from a country. Politics was very much troubled in recent years and is now going through a phase of uneasy calm. Apart from the troubled politics and fears about instability, on real or perceived grounds, factors such as poor infrastructure, inefficient and cumbersome bureaucratic process, etc., have been other pressing constraints to raising the level of investment of funds in productive sectors of the Bangladesh economy. In fact, the private sector investment has stagnated even under liberal credit market conditions.

Going by the trend of the year-wise deposits with Swiss banks, one has reasons to believe that internal political situation has a bearing on the outflow of funds. The flow usually went up during the years of political instability. It is widely believed that the funds that are taken out of the country through legal as well as illegal channels, are ill-gotten ones. Though the law provides scope for whitening such funds at home, the holders of the same demonstrate little interest in availing themselves of the opportunity. And a section of them feel it safe to keep their tainted money in foreign banks and make investment in countries of their choice.

Despite all the talks and campaigns against graft and consequent accumulation of black money, corruption continues unabated. Unless and until the sources of black money generation can be effectively plugged, it would not be possible to reduce the incidence of capital flight. More importantly, ensuring long-term political stability and removing other hurdles to making investment might encourage the owners of large funds, black as well as white, to make use of this money in the productive sectors of the domestic economy, thereby helping to reduce the extent of outflow of funds.