Dealing with ethereal syndicates
Wednesday, 3 February 2010
Shamsul Huq Zahid
The evil called 'syndicate' of unscrupulous traders has again been identified for the unabated rise in the prices of essentials.
The parliamentary standing committee on commerce ministry last Sunday held a 'syndicate' of 20 to 25 unscrupulous traders responsible for the ongoing bout of price spiral.
The chairman of the committee told a press briefing that the committee had suggested the government to take stern measures against ' dishonest syndicates". It has also recommended for enacting a tough law to rein in unscrupulous businessmen.
Blaming 'syndicates' for price upswing is nothing new. Politicians, ministers, economists and media do very often held so-called syndicates responsible. Even top business leaders sometimes do admit the existence of syndicates. But until now the syndicates have remained more or less ethereal entities.
None has ever seen or touched syndicates. That, however, makes the job of criticizing the 'syndicates' rather easy. There remains little possibility of any hit-back or retaliation.
Two university teachers, though poles apart in their political ideologies, do very often air their identical views on 'business syndicates'. It would be worthwhile to recall the proceedings of a function organized by a forum of professional journalists in the middle part of 2006.
At that function one of them had wanted the government to declare syndicated trading illegal through the enactment of a law, if required.
His colleague, however, came out with a startling estimate on the money the 'price-terror syndicate' had 'looted' in 2005. He claimed that the syndicate members had amassed an estimated Tk. 287.10 billion during that year!
Amazed by the rare disclosure, one reporter wanted to know from the economics teacher the basis of his estimate. Pat came the replay that the estimate was based on the gap between the 'should-be-price' of commodities and the prices of the same prevailing at that time.
No wonder the economist in question, however, also had once estimated the size of the black money in the country.
But what does the word 'syndicate' mean?
According to Wikipedia, the word 'syndicate' comes from the French word, syndicate, which means trade union. And there are several forms of syndicates, namely, crime syndicates, media syndicates, bank syndicates and lottery syndicates.
Dictionary.com says syndicate is a group of individuals or organizations combined or making a joint effort to undertake some specific duty or carry out specific transactions or negotiations.
The second definition somehow comes nearer to what people tend to think about syndicates in Bangladesh. It is widely believed that some unscrupulous importers or wholesale traders through an unwritten understanding manipulate the prices of essential commodities at unreasonably high level with a view to making undue profit.
There is no denying that traders, by nature, are profit-hungry. They would avail themselves of every opportunity to maximize their profits. In Bangladesh, because of lax administration and poor application of laws and rules, such opportunities are galore and traders do make best use of them to earn more than what is due.
But one might feel tempted to know about the number of syndicates active in the trading of essential commodities. For instance, the prices of lentil, edible oils, rice, onion, garlic, ginger and many other essential items have been on the higher side in recent months. An importer or wholesaler who deals in edible oil has nothing to with onion business. Similarly, an edible oil refiner, obviously, should not have any interest in trading of rice.
So, for reasons of hiking the prices of every essential item, there should be one individual syndicate. The assumption, therefore, of the commerce ministry standing committee chairman that a syndicate of 20 to 25 dishonest traders is trying to destabilize the market does not seem that tenable. If the syndicate theory is true, one syndicate cannot dictate the prices of so many commodities at a time.
Having said this, it is, however, difficult to rule out the existence of price manipulators. It is most likely that they resort to manipulation through some sort of understanding. Such manipulation usually takes place in the case of imported commodities.
There is no denying that the consumers are facing terrible hardship because of the recent rise in the prices of a good number of essential commodities. And reasons for the increase in prices are both domestic and external. But in many cases, the extent of rise in the prices of a commodity in the domestic market is more compared to that in the international market.
Since the government could not make much headway in convincing the traders to make rational profits, it should constantly monitor the international prices of commodities, make an estimate of the landed cost of each of the imported essential items and publish the same for public consumption either through the ministry of commerce or the Trading Corporation of Bangladesh (TCB). Such disclosure is likely to create a psychological pressure on the business community to behave rationally.
Since the parliamentary standing committee chairman on commerce ministry has stated that a syndicate of 20 to 25 traders is behind the price manipulation, the onus is on the government to identify and punish them in accordance with the law of the land.
It is widely believed that 'business syndicates', if there is any, can hardly operate in the market without blessings from the influential quarters, within or outside the government. So, the link between the market manipulators and the influential quarters needs to be snapped.
While trying to locate the sources of trouble in the market, the government would also have to identify the factors contributing to market imperfection and deal with those efficiently.
Zahidmar10@gmail.com
The evil called 'syndicate' of unscrupulous traders has again been identified for the unabated rise in the prices of essentials.
The parliamentary standing committee on commerce ministry last Sunday held a 'syndicate' of 20 to 25 unscrupulous traders responsible for the ongoing bout of price spiral.
The chairman of the committee told a press briefing that the committee had suggested the government to take stern measures against ' dishonest syndicates". It has also recommended for enacting a tough law to rein in unscrupulous businessmen.
Blaming 'syndicates' for price upswing is nothing new. Politicians, ministers, economists and media do very often held so-called syndicates responsible. Even top business leaders sometimes do admit the existence of syndicates. But until now the syndicates have remained more or less ethereal entities.
None has ever seen or touched syndicates. That, however, makes the job of criticizing the 'syndicates' rather easy. There remains little possibility of any hit-back or retaliation.
Two university teachers, though poles apart in their political ideologies, do very often air their identical views on 'business syndicates'. It would be worthwhile to recall the proceedings of a function organized by a forum of professional journalists in the middle part of 2006.
At that function one of them had wanted the government to declare syndicated trading illegal through the enactment of a law, if required.
His colleague, however, came out with a startling estimate on the money the 'price-terror syndicate' had 'looted' in 2005. He claimed that the syndicate members had amassed an estimated Tk. 287.10 billion during that year!
Amazed by the rare disclosure, one reporter wanted to know from the economics teacher the basis of his estimate. Pat came the replay that the estimate was based on the gap between the 'should-be-price' of commodities and the prices of the same prevailing at that time.
No wonder the economist in question, however, also had once estimated the size of the black money in the country.
But what does the word 'syndicate' mean?
According to Wikipedia, the word 'syndicate' comes from the French word, syndicate, which means trade union. And there are several forms of syndicates, namely, crime syndicates, media syndicates, bank syndicates and lottery syndicates.
Dictionary.com says syndicate is a group of individuals or organizations combined or making a joint effort to undertake some specific duty or carry out specific transactions or negotiations.
The second definition somehow comes nearer to what people tend to think about syndicates in Bangladesh. It is widely believed that some unscrupulous importers or wholesale traders through an unwritten understanding manipulate the prices of essential commodities at unreasonably high level with a view to making undue profit.
There is no denying that traders, by nature, are profit-hungry. They would avail themselves of every opportunity to maximize their profits. In Bangladesh, because of lax administration and poor application of laws and rules, such opportunities are galore and traders do make best use of them to earn more than what is due.
But one might feel tempted to know about the number of syndicates active in the trading of essential commodities. For instance, the prices of lentil, edible oils, rice, onion, garlic, ginger and many other essential items have been on the higher side in recent months. An importer or wholesaler who deals in edible oil has nothing to with onion business. Similarly, an edible oil refiner, obviously, should not have any interest in trading of rice.
So, for reasons of hiking the prices of every essential item, there should be one individual syndicate. The assumption, therefore, of the commerce ministry standing committee chairman that a syndicate of 20 to 25 dishonest traders is trying to destabilize the market does not seem that tenable. If the syndicate theory is true, one syndicate cannot dictate the prices of so many commodities at a time.
Having said this, it is, however, difficult to rule out the existence of price manipulators. It is most likely that they resort to manipulation through some sort of understanding. Such manipulation usually takes place in the case of imported commodities.
There is no denying that the consumers are facing terrible hardship because of the recent rise in the prices of a good number of essential commodities. And reasons for the increase in prices are both domestic and external. But in many cases, the extent of rise in the prices of a commodity in the domestic market is more compared to that in the international market.
Since the government could not make much headway in convincing the traders to make rational profits, it should constantly monitor the international prices of commodities, make an estimate of the landed cost of each of the imported essential items and publish the same for public consumption either through the ministry of commerce or the Trading Corporation of Bangladesh (TCB). Such disclosure is likely to create a psychological pressure on the business community to behave rationally.
Since the parliamentary standing committee chairman on commerce ministry has stated that a syndicate of 20 to 25 traders is behind the price manipulation, the onus is on the government to identify and punish them in accordance with the law of the land.
It is widely believed that 'business syndicates', if there is any, can hardly operate in the market without blessings from the influential quarters, within or outside the government. So, the link between the market manipulators and the influential quarters needs to be snapped.
While trying to locate the sources of trouble in the market, the government would also have to identify the factors contributing to market imperfection and deal with those efficiently.
Zahidmar10@gmail.com