Kazi Zahidul Hasan :
Economists on Saturday warned of a far-reaching consequence of capital flight on the economy unless efforts are made immediately to counter the illicit outflow of money from the country.
Quoting the latest report of Global Financial Integrity (GFI), they said, each year an estimated amount of $1.3 billion is disappearing from the country as unreported financial outflows, ending up in tax havens or rich countries. But the regulatory bodies are yet to come up with a better suited framework to address the menace.
“Illicit capital flight takes serious turn as political and public administration elite, wealthy individuals and multinational corporations take advantage of weak legislation and enforcement to funnel their ill gotten money and profit abroad,” Dr Salehuddin Ahmed, former Bangladesh Bank (BB) Governor, told The New Nation yesterday.
He said most of the capital has been siphoned off into Malaysia, a second home for the fortune of wealthy Bangladeshis, though some have liked Canada and the UK to avail the same facility. “Political elite and wealthy individuals have instigated the capital flight from their anticipation that the country is going to plunge a deeper political crisis again,” he said, adding “A loss in confidence has also led the businessmen, multinational corporations and foreign investors stripping money out from the country”.
Dr Ahmed mentioned that capital flight or illicit financial outflow will significantly undermine economic growth as it represents a major obstacle to mobilize domestic resources for national development.
When asked, he said, a policy response with application of stronger regulatory framework is imperative to fight against the capital flight.
Besides, the central bank should intensify its oversight and supervision on banks and financial institutions and strengthen its concerned department to curb the menace of money laundering or capital flight.
“Money transfer through illegal means is nothing new in the country. But, most worrying thing is that the trend now reaches alarming level,” said Dr Ahsan H Mansur, Executive Director, Policy Research Institute of Bangladesh.
Referring to the latest study of GFI, he said, capital flight from Bangladesh has increased three fold in the year 2012 from a year ago. “That means an illegal fund transfer is going on unabated from Bangladesh, posing a potential threat to her economic development,” he added.
If we analysis the trend of capital flight, we can see that a bigger sum of capital was drained out from the country ahead of election years 2006 and 2012. The trend indicates that the political elites and wealthy individuals used to launder a big amount of money showing a little confidence in the political stability of the country.
“They transferred the money abroad only to live peacefully there during the political changeover in Bangladesh,” he noted.
Dr Ahsan H Mansur further said that the flight of such huge amount is also an indicator that the regulatory bodies have little control over the transfer of the amounts by illegal means.
The means of illegal fund transfer were ‘Hundi, under and over- invoicing.
“This unaccounted transfer of money will harm the economy in the long-run as it will ultimately appear as loss of investments and revenue income for the government,” he said.
Dr Mansur, a noted economist of the country, said a strong political will from the part of government is necessary to prevent the capital flight. Besides, the government institutes should be decorated with capable and efficient people to make the government’s effort a success.
“Lack of good governance and corruption by political elites is leading to unabated money laundering or illicit outflow of capital from the country,” said former BB deputy governor Dr Khondaker Ibrahim Khaled.
A poorly developed financial system and absence of legal framework is also responsible for the capital flight, he added.
Dr Ibrahim Khaled further said, Bangladesh loses billions of dollars tax revenue each year as political elites, wealthy individuals and multinational companies used to laundered money taking advantage of weak legislation and enforcement.
They manipulate price and take advantage of loopholes in tax codes has remained less attention. And those who import or export goods can also export money by simply overstating the value of goods they import or by understating their export earnings.
The future looks bleak for the country’s growth story unless efforts are made to counter the illicit outflow of fund.
He also emphasized the need for capacity building of the concerned agencies with adequate legal frame work, awareness raising activities and media campaign to fight against the money laundering.
