There’s no such thing as a free lunch

Back in the mid-nineteenth century in the US, it was a common practice in bars to offer customers a “free lunch” as long as they bought a beer or any such alcoholic drink. The free meal included salted ham, cheese and crackers, for which the customers would surely order a beer to drink with such salty food. And the clever bar owners would cover the cost of the meal with the price of the drinks. So there really is no such thing as a free lunch. Later the Nobel Prize winner for economics, Milton Friedman, even wrote a book by that name. The bottom line is to get anything, you have to pay a price. What is free to the apparent eye, will have to be paid for by someone now or later, whether it is economic decorum or offence.

The list of economic offences over the last decade or so is long indeed. Many have glossed it over as the inevitable costs of development, nothing to sweat over. But now it is seen that there is no escape from past misdeeds and the brunt must be borne. The chickens have come home to roost. Even though it is common knowledge, some of the misdeeds have been broadly presented here.

Default loans have gone up by five times in just a matter of 12 years. The default bank loans in the country now exceed Tk 1 trillion (Tk 1 lakh crore). And a substantial amount of this has been siphoned off abroad. According to the Washington-based research organisation, Global Financial Integrity, around USD 6 billion was siphoned out of Bangladesh in 2015 by means of underhand business manipulations. In Bangladeshi currently that amounts to around Tk 500 billion (Tk 50 thousand crore).

Money has been sent out of Bangladesh in two ways. One way is by over invoicing when importing goods. The other way is under-invoicing when exporting goods. This money could have built quite a few Padma bridges and metro-rails. And the government is being deprived of import duty and income tax.

At a recent meeting of the Executive Committee of the National Economic Council (ECNEC), the construction costs of the coal-fired Matarbari power plant project was increased by Tk 158.70 billion ( Tk 15 thousand 870 crore) and the time extended by three and a half years. Matarbari is no exception. The costs and time of all projects, including the Padma bridge project, have been unimaginably increased. The objective of development projects is to increase national resources. But such inflated costs and extended deadlines, decrease rather than increase resources.

The share market crashed in 2010-11 and the manipulators made off with Tk 50 billion (Tk 5000 crore). Small investors were devastated. The share market in Bangladesh saw a similar crash in 1996. Awami League was in the government at that time too. The same trend continues now. The prime minister’s private industry and investment advisor Salman F Rahman himself has said that the shares of non-productive companies and closed factories are being manipulated in the share market under the very eyes of the Dhaka Stock Exchange (DSE). But DSE is doing nothing. DSE brokers are manipulating the market and increasing the share prices of closed companies in front of DSE.

As a result of such manipulations investors are losing everything. Investors are turning away from the share market.

The time has come to pay for these financial discrepancies. The problem is, others are having to bear the brunt of these misdeeds. Those who are liable for these underhand manipulations are out of reach – in Canada, America or Europe. The liability has fallen on the shoulders of the innocent public. Let’s see how the cost of these financial misdeeds are being covered.

In order to keep up its unreined spending, the government has cut down the interest rates of saving certificates (Sanchay Patra). This has been done in order to cut down on the government’s loan expenditure lessens. It is the hapless low-income retired persons who are bearing the brunt.

The price of diesel and kerosene has recently been increased by Tk 15 per litre. The reasons behind this have been shown as increased oil prices in the international market, BPC’s losses and smuggling to neighbouring India. The fact of the matter is that the government needs funds to continue with its economic injustice. And this has been done, bypassing the public hearing process of the Bangladesh Energy Regulatory Commission, which in itself is a paper tiger. The price of oil has increased the burden on everyone from the farmers to the middle class citizens. Increased inflation is inevitable.

I do not say that the price of fuel oil will always remain static. Oil prices always fluctuate in the international market. According to Macrotrends, the price of unrefined oil per barrel in 2021, 2020 and 2019 was USD67.74, USD39.68 and USD 56.99 respectively. So the questions is, if the increase in international market prices are being used as an excuse to push up the price of fuel here, why weren’t the prices slashed when the international prices were nearly halved in 2020? And now where is the profit made by BPC at the time?

Let me share my own experience. In 1991 the Energy Regulatory Commission still hadn’t been formed. The finance division and the energy ministry together would determine the price of fuel oil. I worked at the National Board of Revenue at the time. Fixing the price of oil was in no way a part of my duty, even though the matter of duty and taxes did have a role in determining this price. Dr Akbar Ali Khan had just been shifted from being the NBR chairman to become the secretary of the finance division. He summoned a meeting which I joined as a representative from NBR. It was decided at the meeting that I would prepare a position paper on the matter. A general manager of BPC would help me with information on import costs, shipment costs and other details, while the finance division would provide me with information on possible subsidies. Being requested by my former boss and out of my own interest, I agreed to take up the task.

I presented three different price estimates at the next meeting and one was taken up. I used the Lotus 1-2-3 programme at the time to create a model of projected fuel costs. In this model, if you entered the average import costs, local and international transportation costs, duty and taxes, subsidies and other relevant data, it would automatically determine the price of fuel oil. I suggested this to be used to determine the price of fuel a few times every year. Everyone at the meeting, including the energy secretary Syed Abdus Samad, praised me highly, but till today this proposal has not been implemented. Yet in neighbouring India and many other countries such formulas are being used to regularly adjust the price of oil.

If the share market is to be revived, those responsible for the last two crashes must be brought to book in order to restore the faith of the investors. Also, party affiliates must be dropped from the commission leadership and replaced with professionals with strong backbones. Interest rates on deposits and loans must be determined by the market. Inflations must be decreased to reduce interest rates. Under the social safety net programme, there must be special arrangement for investing in saving certificate (sanchay patra) for retired persons and members of the middle class as well as charitable organisations.

The reins must be pulled in economic offences and government expenditure. Loan defaulters must be brought back to the country and given exemplary punishment. The people are tired of paying for the free lunches of the beneficiaries of economic offences. This must come to an end immediately.

* Muhammad Fouzul Kabir Khan is a former secretary and economist