Financial sector weaknesses are a warning sign

Let’s begin with the talk of the town -- money being siphoned out from Bangladesh. Media reports speak of billions of taka being laundered over the past few years. These allegations are nothing new. But do you see any improvement in the situation?

We may not know the precise figures when it comes to money laundering, but from anecdotal evidence we see the amount is huge. No one is denying that money is being laundered. This is a global problem. The question is, are we taking steps to halt it? We have laws to prevent money laundering and we have institutions for the purpose too. But nothing is being implemented. Money laundering takes place when there are loopholes. Those with money and power, can do this. If you don’t have power, you can’t.

What is the source of this power?

I can point out two sources. One is financial capacity. If I have money, only then can I launder it. The other is connections with power. Unless we block these loopholes and strengthen the institution, this will continue, no matter what stringent laws we put in place.

There are very few instances were money launderers have been punished. Many of their names have appeared in the media, some have even been mentioned in the Panama Papers. Is it that hard to take action against them?

Yes, this has been discussed. While the information may not be complete, some things have surfaced. Then there is Begumpara in Canada. It is not that they haven’t been identified at all. But then what? We have come to a halt midway.

Why have we halted?

We have halted perhaps because they are extremely powerful people. They are influential people in the society. Perhaps we have failed to display the strength required to take measures against them. We reach a certain point, then halt.

Had we dealt with this matter from the very start, it would not have taken on such massive proportions. If one escapes punishment for misdeeds, then others are encouraged to further. This is a part of culture that has grown in our society of not being punished for dishonest deeds.

When we speak of money laundering, the state of the country’s banks comes to the fore. There are allegations that massive sums of money have been siphoned out of the banks and there are huge default loans too.

The state-owned banks have long been ailing. To tell the truth, we haven’t done much to improve the health of these banks. Those complicit with this, were somehow or the other involved with the power structure. Now there are innumerable private sector banks. These banks are affiliated with some group or the other. All of these are powerful groups, involved in business. But we have not bothered about keeping the banks under any regulatory framework so they can operate smoothly. We did not pay attention to good governance. These private banks are looking after the interests of their owners. The owners are resorting to all sorts of means to take loans from these banks. These banks are not liable to the people, but only towards a certain group. Looking after their group interests has become their main objective.

There are allegations that the banks are being looted too.

Yes, when vested interests are involved, they will use the banks for their own interests. There are news reports  that say a certain bank was good, but its capital has been drained out. Who is responsible for this? You cannot just blame the bank owners only. There are so many institutions. The banks are supposed to operate in some sort of regulated system. So I repeat, there are laws, but we have failed to apply them properly. We created the scope.

So are you saying that the authorities that are supposed to be in control, have also failed?

To some extent, for sure. That is why we have regulatory institutions and framework, so they are protected. The banks’ money is the people’s money. The Bank Company Act was passed. Look back at its history. An amendment was placed in parliament and it was passed immediately. This was a regressive step. There are many such examples. Why is this happening? The people for whom all this is happening, are being facilitated.

So do you have apprehensions about the banks?

Look at the credibility of the banks. The standards are falling. As a result, many from outside will not accept the LCs. That means the financial sector is weakening. This is a warning signal for us. After all, the financial sector will have an even strong role in the development towards which we are headed.

Alongside globalisation, we are becoming attached to the global financial sector too. We cannot proceed with ailing banks or an ailing financial sector. We will fall flat on our faces. I do not think there will be any feel-good factor in the future. You can’t have dreams with an ailing financial sector.

So do the events in the financial sector indicate that all is not well on the economic front?

Given the present circumstances, I do not see much hope in the economic sectors. We will become even weaker in the days to come if we continue in this manner, that is, concealing the weaknesses in the economy, failing to address the weakness, failing to take action.

Unrest prevails over the forthcoming election. This has given rise to fears for the economy. How do you see the overall economic situation?

Our economy has positive achievements, it has success. Our economy has grown. But, at the same time, we are at crossroads. We now must go to the next phase. So long agriculture, readymade garments, remittance had been the drivers of our economy. Can these take us to the next phase? That is a vital question.

Why this doubt?

The doubt is because we can take to the skies in a plane, but that can’t take us to the moon. The engines of economy that have brought us so far, are not enough. The readymade garment sector is a strength. But can this industry take us where we want to go? China and a few other countries used to be dependent on the garment industry, but that industry is no longer their driving force. These are called footloose industries and go to countries with cheap labour. We must keep in mind, wages are rising here too.

Do we have the correct environment and circumstances, or the preparation, to go to the next level of the economy?

To go to the next phase, we have to go to an advanced technology-dependent economy. But we do not have advanced technology. So what do we need? The easiest way to avail technology  is to join the global value chain. For example, Toyota makes its spare parts in various countries of the world and then assembles the cars in Japan. Their technology goes to various countries. But have we been able to join the value chain? We haven’t been able to take up joint investment in the high-tech sector.

On paper we talk a lot about all sorts of facilities and so on to attract investment. But why are the investors not coming? But the days ahead cannot be a replication of the past. We have to fix our institutions and our policy framework. We have a big lacking in this area and that is why despite all the facilities we mention on paper, we fail to implement this.

Do you think Bangladesh’s policymakers are headed in the right direction? Are they thinking correctly?

From what they say, it seems they have the will. We talk about policies, but the problem is in implementation. After the country’s independent when we were at the initial stages of development, institutions had little role to play. But along with development, quality of institutions has also become important. Unless we can strengthen these, we will not be able to move ahead. We do not have such institutions. Therein lies a major weakness. I am talking about economic institutions. But if these are to perform, then social and political institutions have to perform at the same time. One cannot be isolated from the other.

We are going through political tensions at present. Do you think that the situation can spur off an economic crisis too?

Crisis may be a strong word. It is relative. There is crisis on one hand, and promise on the other. These are conflicting. Everything depends on how fast, how effectively and how efficiently we can take measures to address the weaknesses that have cropped up. There are all sorts of crises in our domestic economy. There is the serious concern about inflation. There are weaknesses in the foreign currency market, in the banking system. The bottom line is whether we are taking steps to address these. While not in all areas, there are many areas which are disheartening.

Correct measures must be taken in the banking sector so that those who are involved in irregularities get the message that this will no longer do. We have not managed to deliver that message. We say that we want to do this, but our actions do not match our words. Or, we have failed to do as much as required. We take a step forward and two backwards. An uncertainty, a state of flux prevails. That is why a clear message cannot be delivered. There can be many reasons behind why this message cannot be delivered?

Such as?

There may be involvement of power. They may be so powerful that even the state cannot take a strong stance in this regard. In our country, the groups that are close to the powerful are the ones that are strong. There is cronyism in all areas. When one of these groups joins hands with the other, they become powerful. Unfortunately, that is probably what has happened in our country. They have become immensely powerful. As a result, they surpass the law in all sorts of ways. We must break this and emerge.

You mentioned inflation. Sri Lanka very rapidly brought their inflation down to one digit. Why can’t Bangladesh manage its inflation? Where are the shortfalls?

Inflation has fallen in India too. What does inflation depend on? Look back over the past few months Even the price of commodities that has no reason to rise, has risen. In economic terms, all sorts of explanations may be offered, like prices have risen because rising prices in the global market. But why will prices rise with no logical reason? To my mind, a major reason is that various business groups are working behind this inflation.

So there is a lacking in ethics in this area?

We have steadily been discarding ethics. The economy must certainly have an ethical standing. Protecting the interests of certain groups cannot be ethical. Upholding public interests is ethical. Our economic institutions are steadily becoming weak. Their efficacy is diminishing. They are unable to carry out their responsibilities. This is true about our economic institutions, our social institutions and our political institutions too.

There is an election coming up ahead. We see political unrest. Everyone agrees that, given the local and the global circumstances, there are hard times for the economy ahead. What should be done?

In countries like ours, there is a lot of uncertainty generated before the elections. That is reality. Investors bide their time to take decisions in such circumstances. I feel that things will come to a standstill in various areas in the days ahead. The next six months or so are critical for us. If we can fail to keep things at an acceptable level and things slide from bad to worse, we will face further trouble.

We must think how active we can keep the economy. We must take up a short-term view, look into what can be done immediately. There is pressure on the economy. People are suffering from inflation. Overall, we are going through adverse times. We need to keep a watch out so things do not deteriorate. We have excessive uncertainty. This is the time to gather strength to overcome this.

Thank you.

Thank you too.