Finance Minister AMA Muhith is deeply frustrated by the current state of investment in the private sector. In fact, an investment-drought has gripped the economy in recent years. In such a situation, anyone holding the portfolio of the ministry of finance has reasons to be worried since without a sizeable investment by the private sector, which has emerged as the main engine of growth, the country can hardly achieve the expected level of annual economic growth. Â
The finance minister's frustration surely would get intensified further by the newspaper reports on the rise in the volume of deposits made by the Bangladesh nationals in various Swiss banks. Instead of making investments in their home country, Bangladeshis concerned reportedly are taking their riches out of the country using legal and illegal routes and stashing the same in banks and financial institutions of alien countries, including Switzerland.
However, the transfer of funds by Bangladesh nationals to what are generally dubbed 'safe havens' is nothing new. The practice has been on for years. It could be that both value and volume of such transfers have increased in recent years. The data released recently by the Switzerland's central banking authority, Swiss National Bank (SNB), do confirm the rise in transfer of wealth from Bangladesh, at least, to Swiss banks.
Bangladesh is not alone to witness the surge in the capital flight. Two other South Asian nations--- India and Pakistan --- are also having the same experience. However, the rise in deposits in Swiss banks in the year 2013 from three South Asian countries was in contrast to the general global trend. Money held in Swiss banks by clients from across the world declined in 2013 to a record low of 1.32 trillion Swiss francs (about US$ 1.56 trillion).
Deposits from Bangladeshi clients of the Swiss banks increased by 62 per cent to Tk 30 billion (three thousand crore) in 2013. The amount is not that big in comparison with the funds that the Indian and Pakistan nationals have stored in the Swiss banks. Yet there are reasons to be worried.
In the context of higher deposit of funds against accounts with the Swiss banks by Bangladeshis, one surely has sufficient reasons to believe that the outflow of funds to other destinations has also increased. There was a time when people who amassed wealth, legally or otherwise, used to keep a large part of it with the Swiss banks that were infamous for maintaining strict secrecy. Now the situation has changed. Because of international pressure, the Swiss banks have opened up, to some extent.
Moreover, the scopes and opportunities to invest illegally earned funds are also available with other countries. Despite the existence of anti-money laundering measures in most countries, the inter-country transfer of funds through informal and illegal channels has been going on unabatedly. Every country, developed or developing, is embracing foreign investors with open arms. A few of them are luring investors from other developing countries with incentives such as 'second home' scheme, residency and citizenship. A good number of Bangladeshis have already swallowed the baits offered by countries such as Malaysia and Canada and made investment in those countries. And, in most cases, the individuals concerned have taken recourse to illegal ways of transferring their funds. Â
Now, the million dollar question is: why should Bangladeshis be transferring more funds abroad now than before?
The money deposited in foreign banks and funds invested in commercial and industrial establishments and real estate by Bangladesh nationals are otherwise of both hues, white and black. A good number of Bangladeshi expatriates earning fat amounts make deposits in foreign banks and invest in real estates. The amount involved in such deposits and investments does not vary much year-on-year. So, there are some other reasons for sudden surge in deposits in Swiss banks.
In the case of Bangladesh, India and Pakistan, one factor---corruption--- is common for accumulation of unearned income at the level of politicians, civil servants and businesses. There are times when the intensity of corruption rises with the political masters becoming the willing partners in the vice. Another factor is political instability. Bangladesh confronts bouts of political instability with intervals. In the case of Pakistan, the same has become part and parcel of its existence. India, fortunately, does not face this kind of problem.
Corruption has been on the rise in Bangladesh in recent years. Political instability centring around the immediate past general election created a sense of insecurity and fear of extra-constitutional forces coming to power. So, holders of ill-gotten wealth, possibly, felt it safe to transfer funds abroad and escape 'harassment' in the event of any unwanted change at the helm of the country's political power.
There are both formal and illegal ways of transferring funds abroad by Bangladesh nationals. Some people take recourse to under and over invoicing for the same. The widely used practice is known as 'hundi'. One can transfer millions of dollar at a time using the 'hundi' channel.
Now that the central bank has strengthened its anti-money laundering mechanism and put in place a financial intelligence unit, it should not be that difficult to reduce the extent of money laundering through formal banking channels. But the central bank can do little in combating corruption and restoring a healthy and stable political environment. Those are the tasks meant for the politicians who always promise the electorates the moon but never live up to the same.
zahidmar10@gmail.com
Of fat Swiss bank accounts, graft and political instability
Shamsul Huq Zahid | Published: June 23, 2014 00:00:00 | Updated: November 30, 2024 06:01:00
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