For offsetting syndication

Md Rezaul KarimbrThe absence of a mechanism of the government or the financial institutions to have a timely assessment of what quantity of foodgrains needs to be imported affects the domestic market and the consumers in more than one way. A timely assessment would help disseminate the information for timely import either by the private or the public sector to avoid a crisis or the scope by the traders to manipulate the prices.brNeither the government nor the private importers could plan in time what they had to do by way of imports before the prices could soar in the international market.brProper market monitoring would also empower the government to foil the designs of syndicates, if they try to exploit the market to the disadvantage of the consumers. brThe following suggestions could be useful for the government to keep a stable market by offsetting syndicationbr1. The law enforcement should protect the market from syndication at the root level.br2. The government should assist farmers by giving them logistic support including instruments for the better cultivation.br3. The government should go for a price control law.br4. The government should subsidise essential commodities.br5. The government could reduce tax on essential commodities.br6. The government should simplify the export and import system. br7. The government should take serious steps against middlemen.br8. The government should fix the price of all essential commodities.brEarlier, importers used know from the Trading Corporation of Bangladesh (TCB) how much it plans to import and from the food ministry how much stock it holds. That information helped them calculate how much they need to import. But as the TCB became inactive in 1990s and the government discontinued the practice of keeping food stocks or buffer stocks, this calculation is difficult to make.brA number of importers said that as no market-oriented institutional mechanism to predict the import demand quantity exists, they (the importers) usually calculate the requirement on last year's imported quality and price fluctuations. This information gap is further complicated by the failure of the ministries of food and agriculture to forecast with sufficient accuracy how much foodgrain the country is going to produce in a given season or year.brAt the same time, there is also no system in place to update on weekly basis such information so that the importers can know imported stock there in the country and in the import pipeline with the expected arrival schedules. Misinformation as well as information gap have increased the risks of food import business with no one knowing the import demand or how much other importers are importing.brIn the absences of such information, the risk increases substantially for the grain importers. The increased risk prompts the banks to charge higher interest and provide the loan chiefly to large importers to minimise their risks. Because of increased capital cost, higher risks and scarcity of capital, small players started to withdraw from food import business. It facilitated the domination of the big players in the food import market.brOn the other hand, the increased risks made the importers conservative about what quantity to import. brThis results in import of less than the needed quantity. It creates a feeling of shortage in the food market with the obvious impact on prices. Besides, whenever local production falls short, the price instantly shoots up.br Another significant but often ignored factor is lack of statistics of how much food comes through informal trade.br The food production and consumption figures of India show that since 1990 food consumption increased at much higher rate than the food production growth rate which, ultimately made India a net food importing country in 2006.brFood import from India through informal trade has been decreasing continuously over the last decade.brIndia's sudden and recent ban on export of some food items prompted a price increase in Bangladesh. As informal trade quantity differs affecting cyclical supply shortage in the market, this can nullify the various measures adopted by the government to prompt price spiral at intervals.brActions of the government and the regulators often worsen the situation. The Bangladesh Bank (BB) recently started to monitor the food import quality. It asked the banks to provide loans to small importers and reduce lending rate against credits given for food imports. But since the importers do not know what quantity other importers are importing and what is the total effective market demand, new importers stay away and the existing importers continue to import in conservative quantities.brThe government decision to import food through the Bangladesh Rifles (BDR) did not help the situation because the government did not declare the quantity it planned to import. The importers were unable to calculate the demand-supply gap in the market after the import by the BDR. brIn this uncertain situation, it is logical for importers to curtail their imports as they are doing. No wonder, the supply side remains a concern with the price flaring up at regular intervals.brWhat can be the solutions Obviously, a market-oriented solution is sustainable and predictable to protect the interests of the consumers was as well as the businessmen. A market-oriented solution for the first and third constraint is to mitigate the risk of importers by providing credible predictions or close to accurate information about demand and supply and also the seasonal factors. An independent private think-tank, possessing the expertise to do the calculations can be entrusted with the job. Government institutions cannot do it because they lack the expertise. The private think-tank should publish the statistics and continuously update it every two months. The government should finance the activity. Initially this statistics can be provided at no cost to the importers and the banks but gradually they could be charged by the government for the service.brFor the second constraint, in short run, the BB can regularly publish how much imported stock already arrived and now much is in the pipeline with scheduled arrival dates. brOn the long term, the government needs to initiate necessary steps to establish an electronic commodity exchange market. brFor a land-scarce overpopulated country like Bangladesh, increase in food production alone cannot ensure food security. Bangladesh also desperately needs these two institutional mechanisms to protect the interests of farmers, consumers and businessmen. The government has an undeniable role to facilitate the process and, at the same time, work to increase the agricultural land productivity.brThe National Board of Revenue (NBR) chairman recently said that reliance on donor agencies and the donor countries made us more indebted than ever before. Per capita debt burden on each citizen stands at US$140.00 as of now. And it would take 40 years to unburden the crippling vicious debt cycle which keeps on mounting each year.brPay-day lenders are common in poor neighbourhoods across the US cities.brIn Virginia, pay-day lenders can charge $15 fee per each $100 advanced. For example, if a pay-day loan business advances a borrower $300 for seven days, the lender may charge him or her up to $45 for obtaining the loan (which equates to an annual rate of 782 per cent). A borrower can borrow a maximum of $500 under the Virginia law.brBorrowers say they are often encouraged to re-borrow the borrowed money if they cannot make the repayment on pay-day.brLenders say they serve borrowers, who have nowhere else to turn when in need of emergency funds to pay for car repairs, a medical crisis, utility bills, funeral costs and other expenses. Critics of pay-day lenders say borrowers get in trouble when they are unable to repay the first advance and take out another loan, with an additional fee, to cover the first. Pay-day loans are akin to throwing a rock to people who are drowning.brIf you learn about this industry, if you are a person concerned about humanity and the world around you, you cannot look at yourself in the mirror and do that work, say the criticbrPay-day lenders do not check credit histories or care whether customers borrow more than they can afford considering their next paycheck.brFor payday lenders, the best customer is the repeat borrower. Borrowers are encouraged to keep borrowing, paying fees each time, until they can no longer pay. That's when the harassment begins.brPayday lending is a form of loan sharking. Payday lenders stress customers patronise payday tenders of their own free will.brIs not this free enterprise at work That has been the excuse of every rip-off scheme ever devised.brSimilar is the case in Bangladesh's relationship with the international lending agencies. A few lucky 'brown sahibs' enjoying tax-exempt benefits and salaries in Washington, DC, are suddenly flown in and shrewdly slipped into power through the barrel of the gun at the directives of the 'white sahibs,' their mentors, to raise oil, gas and other utility prices and to skyrocket prices of essentials beyond the reach of commoners. These international loan sharks do not even spare the savings of people in Bangladesh and other developing countries, accrued over generations. They are now asking the brown beneficiaries of the World Bank (WB) and International Monetary Fund (IMF) groomed with perks and privileges over three decades along the Potomac to pay them back with Bangladesh's hard-earned money! Instead of buffering savings schemes, they are now pressing for risky ventures like stock market and vulture capital.brWould the next democratically elected government break out of this vicious debtdeath-trap and take the slaves to task for running the show at the bidding of foreign masters.brCan the nation expect the well known dailies to publish editorials on these issuesbr1. What is the government doing to maintain the food store buffers Should not the government keep sufficient food in its stocks to absorb temporary bumps or spikes in the market and to face natural calamities 2. Is the government co-ordinating information on import of essential food itemsbr3. Why cannot the government provide interest-free loan for food import until the prices stabilisebrIf the import of essential items is a joint responsibility of the government and the private sector, why than there should not be co-ordination between importers associations, the government agencies and the private sector think-tank bodies.brIt is said that due to anti-corruption drive, many importers, scared to import, are keeping a low profile. It would be the government's responsibility to come up with creative solutions to bring the importers on board and to smoothen this disruptive process.brIf the prevailing price is sufficiently higher in Bangladesh, why the importers would not be willing to take the risk. If the government has disrupted the process with obstacles, it is the responsibility of the caretaker government (CTG) to remove these obstacles.brMany areas have been similarly disrupted with this gung-ho get all the corrupt drive. The CTG players need to take the results into cognigance and take responsibility for their actions. Running a country like Bangladesh is no job for amateurs. The country is willing to pay a price for removing corruption, but not at the expense of food, or its soaring costs, which has a severe effect on millions of the poor in the country.brContribution of the WB and the IMF to economic problems of developing countries need an evaluation. Ignorance and arrogance of fat-cat bureaucrats of the two institutions enjoying attractive salary and benefits, is well known. They may or may not have sufficient knowledge about given situations but they are known to impose decision. They are also known for their efforts to protect the interest of the larger share and vote holders. The Group of Seven (G7) holds 40 per cent vote and share. These are probably the causes for the unpopularity of these institutions. Many Asian countries affected by the 1997 currency crash want to float their own Monetary Fund.brTighter monetary policy usually tends to affect the emerging economies because of external factors -- currency fluctuations to weaken the net exports. In the current context, if exports are driven by strong global demand, currency appreciation will not necessarily weaken the net exports. The governments could assist the exports by clearing bottlenecks in the ports. A tight monetary policy that fails to affect the exchange rate would probably dampen investment without doing much to cut inflation. brAn understanding, based on personal conversations, however, show that there was no grand conspiracy by the WB or IMF when they give advice on such issues. It is more likely that they do it out of their ignorance of local conditions.br Businesses may import more to make less profit and contain the spiralling prices.brThe activities of business forums do need to be geared up and it may help to reduce syndication.br Import of non-branded essential commodities may discourage the syndicates.brConfidence of the business leaders should be built to disappoint the syndicates.brProviding facilities for import, storage and marketing the essential goods may help the govt. to reduce the syndication in business policy.brSupplies of essential commodities to the flood and natural calamity -affected area should be streamlined to curb the role of syndicates.brReduced price in the international market and adequate supply should help bring down the prices of edible oil and sugar prices.brGovernment should continue open market sale (OMS) of food stuff for low income group.brThe Bangladesh Bank has to keep a careful watch so that inflation does not jump further. Once business confidence returns inflation may jump further.brFood prices have jumped in the country due to the galloping prices in the world market, but there is no evidence of price manipulation. It has not happened alone in Bangladesh. Essential commodity prices have also increase in other countries. Price in Bangladesh is not increasing more than that of other countries. brGovernment should invest more in agriculture to increase yield per acre in the country and reduce poverty.brMajor reforms are needed in the revenue administrations to double its revenue collection. Subsidy may be given to the poor. Bangladesh has to move away from generalised subsidy to targeted subsidy so that the poor can benefit.brBangladesh needs to develop corporate bond market, the key to industrial expansion of any country. brProper distribution system is needed to control the prices. Governmental intervention can also bring good results.brLoss of rice field threatens food security. Rapid industrialisation is threatening the world food security. As rice fields are being lost to development, growth of cities and new industry, is threatening the country's food security.brAt the current trend of arable land loss, rice production in Vietnam -- one of the world's largest exporters of the food staple -- was expected to fall by about 1.0 million tonnes of rice per year. In five years, the loss is expected to equal current rice exports. It means it will not have extra rice for export in the long run. Vietnam's urbanisation and industrialisation were necessary but agriculture remains the country's strong point. Vietnam plans to build new industrial zones in hilly areas and on exhausted farm lands.brAgri-credit should be distributed properly throughout the country. The Bangladesh Bank may issue a circular and guide-line to the commercial banks to hold sufficient funds for disbursing agricultural credit throughout the country.br To foil syndication in the context of Bangladesh, the government may take a decision to develop good relations with import dependent countries and it will help to minimise social unrest.