Have businesses changed mind?
Wednesday, 13 May 2009
Shamsul Huq Zahid
Bangladesh is a land of surprises. Its people have an uncanny ability to produce surprises, quite frequently. Last Saturday, if the media reports are true, it was business leaders' turn.
Contrary to what they have been saying all those years--- the government does not have any business in business, the business leaders at an exchange of opinion session on that day suggested government intervention in the market with a view to ensuring the supply of essentials at fair prices during the coming holy month of Ramadan. The apex trade body, the Federation of Bangladesh Chambers of Commerce and industry (FBCCI) organized the event in Dhaka.
Their failure to sell imported essential items, including edible oils, at officially 'dictated' prices, reportedly, prompted the businesses to come up with such a suggestion. They might have also wanted to make the government familiar with the ground realities as far as procurement and marketing of essential items are concerned.
Nevertheless, the present government, which is pledge-bound to keep the prices of essentials within the reach of the common man, it seems, has gracefully accepted the suggestion of the businesses and initiated a few actions already. The cabinet committee on economic affairs last Monday availed itself of the provision concerned in the public procurement rules to allow the procurement of five essential items from markets at home and abroad by the state-run Trading Corporation of Bangladesh (TCB) without floating tenders.
Nobody would contest the government's good intention behind its market intervention policy. For it is designed to ensure the availability of essential items at fair prices during
the holy month of Ramadan when almost all the edible items become costlier defying the basic economic theory of demand and supply. There is no denying that the consumption of certain essential items goes up during the month of Ramadan. But in spite of their adequate supply in the market, the prices move upward.
Consumers accuse the businesses of price manipulation. However, the latter are found to be least bothered by such accusation as they go on asking more-than-usual prices of essential items.
But can the TCB alone handle the gigantic task of meeting the countrywide demand for the five essential items at fair prices? If the outcome of similar drive launched by the immediate past caretaker government in 2008, when prices of most food items skyrocketed, is any guide, the move to import and sell food items during the Ramadan by the TCB is unlikely to create any major impact on the market.
The authorities must be aware of the organizational limitation of the TCB which was about to be wound up in the recent past. With a skeletal staff and having virtually no outlet of its own, it will have to depend on others, including dealers, for the sale of five essential items among the consumers. This may give rise to a very tricky situation for the government. Besides, the TCB would only be able to manage sale of essential items in some major cities, including Dhaka. But what is about millions of consumers living in other parts of the country?
Actually, under free market economy, business is the domain of the private sector people. But the suggestion by the businesses to activate the TCB to help keep the prices of essentials within the reach of the common consumers would be construed as their 'inability' to be fair with the consumers.
The TCB is not supposed to sell essentials at subsidized prices. If it does so, it will cost the public exchequer heavily. As such, the TCB under the given circumstances is likely to sell goods at cost prices, inclusive of operational costs. The consumers would have been happy to buy the same from the traders had the latter charged a little bit of extra amount as profit.
Barring the demand and supply factors, the 'greed' factor on the part of some unscrupulous sections of businesses plays the most important role in the price-level of commodities in the market. Unless and until such businesses involved in the procurement and marketing of goods decide to be fairly rational in fixing their profit margins, no amount of government monitoring and persuasion would help the prices to remain within the reach of the common man. The immediate past caretaker government even employed coercion to bringing down prices, but failed utterly.
Leaders of different trade bodies, from time to time, promised to do their best to rein in the soaring prices of a number of essentials. But, in practice, they did hardly succeed in doing this, they do not control the day-to-day operations by businesses.
While blaming the traders for the sudden price rise of some essentials, one cannot ignore the fluctuations in commodity prices in the international market and consequent effects of the same on the domestic market. However, consumers are found to be highly critical of the traders' propensity to hike prices of commodities instantly at home in response to any increase in the prices of the same in the global market while sticking to the old price level in the event of any opposite development taking place in international prices.
Lots have been said about the mismatch in the prices of goods between the primary procurement and the wholesale levels and the wholesale and the retail levels. The reasons for such mismatch are also not unknown. Yet there have not been meaningful efforts to remove those. The government does need to address those issues as early as possible.
Bangladesh is a land of surprises. Its people have an uncanny ability to produce surprises, quite frequently. Last Saturday, if the media reports are true, it was business leaders' turn.
Contrary to what they have been saying all those years--- the government does not have any business in business, the business leaders at an exchange of opinion session on that day suggested government intervention in the market with a view to ensuring the supply of essentials at fair prices during the coming holy month of Ramadan. The apex trade body, the Federation of Bangladesh Chambers of Commerce and industry (FBCCI) organized the event in Dhaka.
Their failure to sell imported essential items, including edible oils, at officially 'dictated' prices, reportedly, prompted the businesses to come up with such a suggestion. They might have also wanted to make the government familiar with the ground realities as far as procurement and marketing of essential items are concerned.
Nevertheless, the present government, which is pledge-bound to keep the prices of essentials within the reach of the common man, it seems, has gracefully accepted the suggestion of the businesses and initiated a few actions already. The cabinet committee on economic affairs last Monday availed itself of the provision concerned in the public procurement rules to allow the procurement of five essential items from markets at home and abroad by the state-run Trading Corporation of Bangladesh (TCB) without floating tenders.
Nobody would contest the government's good intention behind its market intervention policy. For it is designed to ensure the availability of essential items at fair prices during
the holy month of Ramadan when almost all the edible items become costlier defying the basic economic theory of demand and supply. There is no denying that the consumption of certain essential items goes up during the month of Ramadan. But in spite of their adequate supply in the market, the prices move upward.
Consumers accuse the businesses of price manipulation. However, the latter are found to be least bothered by such accusation as they go on asking more-than-usual prices of essential items.
But can the TCB alone handle the gigantic task of meeting the countrywide demand for the five essential items at fair prices? If the outcome of similar drive launched by the immediate past caretaker government in 2008, when prices of most food items skyrocketed, is any guide, the move to import and sell food items during the Ramadan by the TCB is unlikely to create any major impact on the market.
The authorities must be aware of the organizational limitation of the TCB which was about to be wound up in the recent past. With a skeletal staff and having virtually no outlet of its own, it will have to depend on others, including dealers, for the sale of five essential items among the consumers. This may give rise to a very tricky situation for the government. Besides, the TCB would only be able to manage sale of essential items in some major cities, including Dhaka. But what is about millions of consumers living in other parts of the country?
Actually, under free market economy, business is the domain of the private sector people. But the suggestion by the businesses to activate the TCB to help keep the prices of essentials within the reach of the common consumers would be construed as their 'inability' to be fair with the consumers.
The TCB is not supposed to sell essentials at subsidized prices. If it does so, it will cost the public exchequer heavily. As such, the TCB under the given circumstances is likely to sell goods at cost prices, inclusive of operational costs. The consumers would have been happy to buy the same from the traders had the latter charged a little bit of extra amount as profit.
Barring the demand and supply factors, the 'greed' factor on the part of some unscrupulous sections of businesses plays the most important role in the price-level of commodities in the market. Unless and until such businesses involved in the procurement and marketing of goods decide to be fairly rational in fixing their profit margins, no amount of government monitoring and persuasion would help the prices to remain within the reach of the common man. The immediate past caretaker government even employed coercion to bringing down prices, but failed utterly.
Leaders of different trade bodies, from time to time, promised to do their best to rein in the soaring prices of a number of essentials. But, in practice, they did hardly succeed in doing this, they do not control the day-to-day operations by businesses.
While blaming the traders for the sudden price rise of some essentials, one cannot ignore the fluctuations in commodity prices in the international market and consequent effects of the same on the domestic market. However, consumers are found to be highly critical of the traders' propensity to hike prices of commodities instantly at home in response to any increase in the prices of the same in the global market while sticking to the old price level in the event of any opposite development taking place in international prices.
Lots have been said about the mismatch in the prices of goods between the primary procurement and the wholesale levels and the wholesale and the retail levels. The reasons for such mismatch are also not unknown. Yet there have not been meaningful efforts to remove those. The government does need to address those issues as early as possible.