Removing weeds in business
Saturday, 7 July 2007
Qazi Azad
BAD news can actually be a piece of good news depending on the nature of its implications. One such news, an agency report, was published in this paper last Monday. The story said revenue earning from the Hilli Land Port (HLP), which is located in Hakimpur upazila of Dinajpur, fell drastically to Tk 0.805 billion in the last fiscal 2006-07 against a fixed target of Tk 1.015 billion. This earning from the land port in the preceding fiscal was Tk 0.816 billion, exceeding the target of Tk 0.672 billion by 21.37 per cent.
One might regard the revenue shortfall of the port as a loss on reading the story up to that point. But on reading the rest of the story, the same person would be delighted to know that this loss is actually a gain. The story said local businessmen of Hilli blame customs officials and employees of the HLP for connivance with some unscrupulous local businessmen and some Indian exporters in increasing the export prices of some imported items during the first half of the last fiscal. It says, corruption and irregularities at the port have come down to the lowest level ever after the imposition of the emergency. Most of the unfair businessmen, who earned millions of illegal money through evading taxes, using false letters of credit (LCs) and other unlawful means in connivance with customs officials over the years, have stopped importing goods from India through the port and they are absconding, the story said quoting local people.
Evidently, there are three specific allegations in the news story against the particular section of local businessmen. These are tax and duty evasion, inflating export prices of products imported and the use of false LCs. On categorising the alleged offences on the basis of their degrees of unfavourable impact on the national economy, the last two are unquestionably very serious. The first offence of evading duty and tax could be regarded as less injurious to the domestic economy had there been no concurrent allegation of importing the goods also at inflated export prices. If these two offences were simultaneously committed in regard to the import of the same goods, it implies that money in excess of their real prices was transacted in foreign exchange across the border and that less duty was paid in spite of the lower volume of actual import. The country was thus deprived in two ways, once in regard to the value for its money paid against the imports and then through tactful payment of reduced tax and duty against them.
The accusation regarding false LCs means capital was flown out of the country as intermittently as such fabricated import documents were used if no exchange of goods took place against the amounts involved.
The National Board of Revenue (NBR) and the Bangladesh Bank may jointly investigate into these allegations, which are apparently very serious charges. If capital was actually flown out using false LCs, the payment at the receivers' end could not be done without certifications from the Bangladesh side by some official agency-a bank or the custom authorities, about the receipt of goods. If the LCs were entirely fake, it might be so that the fraudulence was indulged in to deceive customs officials at the port for purpose of paying less duty and taxes against the goods brought in, and the actual payment against the goods was made through smuggling of equivalent amount of foreign exchange or some products having demand in the exporter country.
It may be also that the goods bartered from this side by the unscrupulous elements were imported goods and the local duty regimes on their imports in this country were lower than that in the particular exporter country. The smugglers on both sides, who posed as or may be actually unscrupulous businessmen, availed of the cross-border duty differences to unethically make their fortunes. A joint investigation, as proposed, may enable the NBR and the central bank to identify the local culprits involved in and to bring them to book. It will also warn custom officials at Hilli and other land ports to resist from conniving with culprits. The eventual benefits to accrue from it to the economy will be significant.
The fact of gradual increase of foreign exchange reserve with our central bank since the proclamation of emergency and an apparent concurrent increase in remittances from the expatriate workers, in spite of the exchange rate of the local currency remaining steady, tends to suggest that instances of outward flight of capital and smuggling have significantly reduced. This reality itself offers a justification for suspecting that the criminal charges raised from the Hilly Land Port may not be at all baseless. In other words, there is a clear circumstantial evidence for initiating the proposed investigation.
We are now passing through a time that calls for enforcing proper monitoring of import of industrial raw-materials, intermediate products, machine and spares and the local manufacturing activities for a reliable information on the health of our national economy. An actual decline or total halt of flight of capital through fake LCs and of import of products at inflated export prices may now create a false impression that import of industrial raw-materials, intermediate products and machine and spares has reduced resulting in a deceleration of manufacturing activities. It would unnecessarily cause public anxiety and uproar.
The Ministry of Finance and that of Commerce and of Industry and the Bangladesh Bank may jointly decide which of these agencies would do the monitoring in the different areas in order to ensure the accuracy of the information. The system, which they would agree on, should be put into effect soon. The information to be gathered by the agencies to be tasked for, should be regularly publicised, if possible at the end of every month, to reassure the nation that things in the manufacturing sector are progressing well.
The export figure, which has been showing a steady improvement, is not a reliable information about the status of manufacturing in our situation as 86.23 per cent of our total export earning comes from the export of only five items-garments, frozen food, raw jute, jute products and leather. The economy, which is thus basically a supplier of items for domestic consumption, should be observed carefully for being sure that it is growing.
BAD news can actually be a piece of good news depending on the nature of its implications. One such news, an agency report, was published in this paper last Monday. The story said revenue earning from the Hilli Land Port (HLP), which is located in Hakimpur upazila of Dinajpur, fell drastically to Tk 0.805 billion in the last fiscal 2006-07 against a fixed target of Tk 1.015 billion. This earning from the land port in the preceding fiscal was Tk 0.816 billion, exceeding the target of Tk 0.672 billion by 21.37 per cent.
One might regard the revenue shortfall of the port as a loss on reading the story up to that point. But on reading the rest of the story, the same person would be delighted to know that this loss is actually a gain. The story said local businessmen of Hilli blame customs officials and employees of the HLP for connivance with some unscrupulous local businessmen and some Indian exporters in increasing the export prices of some imported items during the first half of the last fiscal. It says, corruption and irregularities at the port have come down to the lowest level ever after the imposition of the emergency. Most of the unfair businessmen, who earned millions of illegal money through evading taxes, using false letters of credit (LCs) and other unlawful means in connivance with customs officials over the years, have stopped importing goods from India through the port and they are absconding, the story said quoting local people.
Evidently, there are three specific allegations in the news story against the particular section of local businessmen. These are tax and duty evasion, inflating export prices of products imported and the use of false LCs. On categorising the alleged offences on the basis of their degrees of unfavourable impact on the national economy, the last two are unquestionably very serious. The first offence of evading duty and tax could be regarded as less injurious to the domestic economy had there been no concurrent allegation of importing the goods also at inflated export prices. If these two offences were simultaneously committed in regard to the import of the same goods, it implies that money in excess of their real prices was transacted in foreign exchange across the border and that less duty was paid in spite of the lower volume of actual import. The country was thus deprived in two ways, once in regard to the value for its money paid against the imports and then through tactful payment of reduced tax and duty against them.
The accusation regarding false LCs means capital was flown out of the country as intermittently as such fabricated import documents were used if no exchange of goods took place against the amounts involved.
The National Board of Revenue (NBR) and the Bangladesh Bank may jointly investigate into these allegations, which are apparently very serious charges. If capital was actually flown out using false LCs, the payment at the receivers' end could not be done without certifications from the Bangladesh side by some official agency-a bank or the custom authorities, about the receipt of goods. If the LCs were entirely fake, it might be so that the fraudulence was indulged in to deceive customs officials at the port for purpose of paying less duty and taxes against the goods brought in, and the actual payment against the goods was made through smuggling of equivalent amount of foreign exchange or some products having demand in the exporter country.
It may be also that the goods bartered from this side by the unscrupulous elements were imported goods and the local duty regimes on their imports in this country were lower than that in the particular exporter country. The smugglers on both sides, who posed as or may be actually unscrupulous businessmen, availed of the cross-border duty differences to unethically make their fortunes. A joint investigation, as proposed, may enable the NBR and the central bank to identify the local culprits involved in and to bring them to book. It will also warn custom officials at Hilli and other land ports to resist from conniving with culprits. The eventual benefits to accrue from it to the economy will be significant.
The fact of gradual increase of foreign exchange reserve with our central bank since the proclamation of emergency and an apparent concurrent increase in remittances from the expatriate workers, in spite of the exchange rate of the local currency remaining steady, tends to suggest that instances of outward flight of capital and smuggling have significantly reduced. This reality itself offers a justification for suspecting that the criminal charges raised from the Hilly Land Port may not be at all baseless. In other words, there is a clear circumstantial evidence for initiating the proposed investigation.
We are now passing through a time that calls for enforcing proper monitoring of import of industrial raw-materials, intermediate products, machine and spares and the local manufacturing activities for a reliable information on the health of our national economy. An actual decline or total halt of flight of capital through fake LCs and of import of products at inflated export prices may now create a false impression that import of industrial raw-materials, intermediate products and machine and spares has reduced resulting in a deceleration of manufacturing activities. It would unnecessarily cause public anxiety and uproar.
The Ministry of Finance and that of Commerce and of Industry and the Bangladesh Bank may jointly decide which of these agencies would do the monitoring in the different areas in order to ensure the accuracy of the information. The system, which they would agree on, should be put into effect soon. The information to be gathered by the agencies to be tasked for, should be regularly publicised, if possible at the end of every month, to reassure the nation that things in the manufacturing sector are progressing well.
The export figure, which has been showing a steady improvement, is not a reliable information about the status of manufacturing in our situation as 86.23 per cent of our total export earning comes from the export of only five items-garments, frozen food, raw jute, jute products and leather. The economy, which is thus basically a supplier of items for domestic consumption, should be observed carefully for being sure that it is growing.