It is puzzling to see why our custom officials and other security agents are catching the so-called gold smugglers on a regular basis at the country's airports.
Who are these gold smugglers and what do they do? They are, in most cases, the incoming Bangladeshi passengers from overseas, who stayed long abroad and while returning home, bring some gold bars with them. But they are caught because they bring more gold than what laws allow them to bring in. The incoming passengers with more than prescribed amount of gold are termed gold smugglers, and their gold is confiscated. They also face criminal charges.
The catchers - the custom officials - feel proud of nabbing the smugglers and they love to publicise their heroic and patriotic performances in the media. The so-called smugglers lose their gold and also get imprisonment if bad luck has it. But it is more regrettable and frustrating to see that up till now no one from the high-ups in policymaking raised this question as to why the holders of gold are caught at all. Why do they keep bringing in gold unlawfully? Why is gold prohibited to be held by investors as an asset in Bangladesh?
Let a few straight questions be asked: why do gold smugglers smuggle in gold into Bangladesh? Definitely for making money. When can money be made? When there is a gap between demand for and supply of, in this case, the gold. Why does the gap exist? Simply because, the authorities do not allow the demand and the supply to be matched. In Bangladesh, though holding gold as an asset is not lawful, holding gold for personal use is legal. Personal use of gold is not regulated by anyone whereas supply of gold is strictly regulated. Here arises the mismatch. Taking advantage of the gaps, many people want to make quick bucks by filling those with smuggled gold.
In Bangladesh, internal gold price is determined by the jewellers. There is no openness in demand and supply of gold. As a result, whether gold price in the international market goes up or down, it does not affect gold price in the country. In other words, gold market is neither competitive, nor transparent, leaving a room for making abnormal profit from this market.
There is no supervisory body to see the gold market. It is said that the ornament-makers add 'khad' or impure metals with gold ornaments and sell those to customers in the name of pure gold. As a result, gold buyers always lose and gold sellers always win. Gold price came down in the international market by almost half, but in Bangladesh, gold buyers saw little decline in price. Why? Because, gold price is fixed by the gold sellers' association. Is not fixing of price unilaterally unlawful? Interestingly, nobody raises this question here. Now the basic question needs to be raised is, why has gold import been kept unlawful so long? Why are the people of Bangladesh not allowed to hold gold side by side with other assets?
In most other countries of the world, gold is no more a prohibited asset to be held by investors. People in those countries can hold gold or so to say other precious metals, in the asset portfolios. They buy and sell the gold as they do just in case of other assets including common stocks, real estates and foreign currencies. One argument put forward is, if gold is allowed to be held by the citizenry freely then people will opt more for gold holding than any other assets and since Bangladesh does not produce gold, it will have to import huge amount of gold to satisfy people's demand. This will result in drainage of huge amount of foreign exchange. Bangladesh's policymakers think, if gold is allowed to be held freely, there will be shortage of foreign exchange, and they do not want to allow this unproductive metal to be held at the expense of so much foreign currencies. But this is an old thought. Time gave in to the new thought that gold is just like any other asset like local currency, foreign currency, equity, real estate etc. Asset prices sometimes move together and sometimes move in the reverse way.
Investors increase or decrease holding of one asset against another depending on how they perceive the future movements of the prices of the assets. In fact, investors hold assets, because they want to make profit from future movements of its prices. A few years back, gold price went up to a record high in the international market. Now it has come down greatly. Investors are shifting their investments from gold to other assets. The reverse trend will come back again, but nobody knows when.
In Bangladesh, we strongly believe that restriction on gold holding should be liberalised. Let people be allowed to hold gold bars along with other assets. Once gold market is liberalised, smuggling will not be there. It is erroneous to think that if gold market is made free, our foreign exchange reserve will be dried up.
In the absence of freedom to diversify the investment portfolios, investors by and large opt for land purchase, which in no way is more productive.
Also, if more taxes are levied on gold imports, smuggling will be more profitable. Smuggling thrives in a situation when something remains prohibited but enjoys heavy demand from investors or users.
A better way of putting an end to gold smuggling is to make gold market free by linking it to the international gold market.
The writer is a Professor of Economics, University of Dhaka, abuahmedecon@yahoo.com
© 2026 - All Rights with The Financial Express
