When freedom to own assets is curbed

Bangladesh like some other least developed countries (LDCs) is still restricting holding of assets by its citizens. A Bangladeshi can hold some assets, but not all. For example, the country does not allow gold holding as an investment vehicle or foreign currencies like dollars, euro etc. In Bangladesh, asset holding means holding cash money, stocks, owning lands and apartments or any other assets that are generated inside the country. Bangladeshis are not allowed to invest in foreign equity markets, nor in foreign real estate markets. As a result, the rich remain rich locally; their foreign asset holdings are seriously restricted by the state. They are barred from converting local assets into foreign currencies and taking them to other countries. But rich persons in other countries are global citizens in the sense that they can hold more than one citizenship, their assets are also easily transferrable from one country to another. The case is not the same with the Bangladesh citizens.
By regulation, wealth or asset transfer is prohibited in Bangladesh. But the restrictive regulations could not prevent the rich Bangladeshis from taking their assets abroad. What they do in this case is that they take recourse to underground or informal market mechanisms, which were there since long. The so-called black or underground markets for asset transfer and asset purchase are the consequential outcome of restrictive regulations on open asset holding and transfer. Naturally a man who owns more assets than what he needs locally, or if he thinks his assets will bring more returns if invested abroad, or if he thinks his assets will be more secure abroad, he will want to take a part of his asset holdings abroad, no matter how he does that whether legally or illegally.
Many Bangladeshis have kept money with the Swiss banks or transferred money for purchasing second homes in Malaysia or put more money in the accounts of sons and daughters abroad for study purposes. These people bypass the restrictive regulations of the Bangladesh Bank on money transfer. Is there any example of any rich Bangladeshi who could not take his wealth abroad simply because the government permission was not there? The Bangladeshi policymakers should ask themselves what led them to impose so many restrictions on citizens' asset holding and the transfer of those to a country or place of their choice. If asset holdings is liberalised, then the transfer mechanism also shall have to be liberalised. Restricting owning of assets like gold, foreign equity or foreign currencies does not bring any good to the country. Did we ask ourselves why so much of gold is being smuggled into Bangladesh? Why does the Bangladesh Bank treat gold import and holding illegal? Is there any economics behind such restrictions? There were old days when policymakers thought if gold import and holding were permitted, then foreign exchange would go out of the country. Old policymakers used to think, bringing in gold and holding it were some unproductive acts. But those were days of old policymakers and old thoughts. Maybe, a kind of restriction was necessary then when globalisation was not there and capital movement was not that free.
But today most of the countries of the world have already withdrawn restriction on gold holding by their citizens. They are also allowing citizens to invest and own equity and other kinds of assets abroad. The contradiction in our policy framework is that while the restrictive policies are preventing Bangladeshis from enjoying the freedom to own foreign equity and available assets like gold and other real assets, the same policies are permitting foreigners bringing in money for investing in the Bangladeshi assets like equities in the country's listed companies. That kind of investments is known as portfolio investment. Many foreigners or foreign funds have already earned a huge profit from such investments in Bangladesh's capital market. The fact is that the country's policy is going against the interests of its own citizens. When asset holding is restricted, then citizens do not have options to maximise returns from investments. Black markets grow to help the rich citizens get the money transferred abroad. Others who do not have enough money for re-routing a portion of their assets abroad by using black markets, spend more money on consumption or keep a portion of the income idle.
Globalisation has not only torn down the geographical barriers to trade and investment, but also opened up the global markets to choose from for asset holding. A person may live physically somewhere in the world or in one country but he can own assets globally. Globalisation and global investors are synonyms today. If our policymakers go on denying freedom to Bangladesh citizens as to which kind of assets they can hold and where, then they are doing injustice to the country's citizens. Restrictions on asset holding are also badly affecting our economy. Money is being smuggled out of our economy. One main reason for this is that money is not finding its better use within the economy. In the name of security reasons, rich Bangladeshis are taking their wealth aboard. To put a stoppage to such transfer of wealth, our acrimonious politics must be put behind. Good politics and social orders are sine qua non for keeping money home. By preventing gold import, we are only helping the smugglers and jewellery shop-owners. Small buyers of gold ornaments are paying much higher prices. On the other hand, gold smugglers are using the same foreign exchange which our policymakers are erroneously trying to save.
The writer is Professor of Economics, University of Dhaka.
 abuahmedecon@yahoo.com