Wake Up BCC

Anti competition practices are on the rise, BCC should wake up and listen to the cries.

Despite having so many imperfections in various markets, few regulatory interventions have been taken by the govt. Consumers are paying a hefty price, emptying their pockets in daily transactions. It is indeed interesting that there are laws and institutions to address market imperfections and erosion in competition. Yet regular functioning of those institutions has not been noticed since the new govt took office.

Bangladesh in 2012 passed Competition Act 2012, which aims "to make provisions to promote,ensure and sustain congenial atmosphere for the competition in the trade, and to prevent, control and eradicate collusion, monopoly, oligopoly, combination or abuse of dominant position or activities adverse to the competition ".It also entailed creation of Bangladesh Competition Commission (Source: Bangladesh Competition Commission,Wikipedia).

Lack of competition can be conspicuously traced in the kitchen market. Consumers feel the heat. Take for instance, the pilaf rice market. The price of packed pilaf rice soared. Some shop owners alleged that big brands elevated the price in unison. Govt intervened by curbing the export quota of the pilaf rice so that price at the domestic market stabilized. The measure has yet to bring any fruit. BCC's intervention is required here to investigate whether any unholy collusion is taking place among the pilaf brands. Unfortunately, no such action is visible from this regulatory body , which was in fact a little bit more active during the interim govt.

Dairy market is another area where the market is concentrated into the hands of few brands. In a bit of surprise, one brand raised the price of milk by Tk 10 per litre last month. Other brands followed suit. Had there been too many brands in the dairy market, this price hike would not have happened. BCC may probe the matter and look into how much market share each brand possesses. In case of mobile operators,we notice how significant market share clause was applied to them by BTRC to curb their influence in the market. Such clause may also apply to the dairy market and a level playing field should be created for new entrants. Unless huge capital investment is required in entering a particular industry, a 25% or 30% market share by a company should set off the alarm bell for BCC. Based on the type of the industry, significant market share may be different for different industry. It is up to the BCC to determine the exact level of significant market share for a given industry.

Mobile Financial Service (MFS) is another market which is dominated by only two operators. MFS has been playing a key role in financial inclusion at the grassroot level. However, lack of competition in the sector clips the benefits and possibilities of new opportunities. BCC can initiate a study on what hinders new MFS operators to expand their operation. Based on the findings of that study, BCC can take steps to remove the obstacles. Since MFS spread to remote areas,ensuring fairer competition and welcoming new operators are major tasks that the BCC must take onus.

Another crucial area that created storm in the press is the oil refining business. Bangladesh Petroleum Corporation (BPC) usually imports,refines, stores and markets petroleum products in the country. Recently two conglomerates step in oil refining business. BPC under the instruction of Energy and Mineral Resource Division of the govt drafted a framework titled "Private-Sector Refined Fuel Import,Storage, Transportation, Distribution and Marketing Policy 2026" in haste. In that framework firms are required to have at least 1.5 million tonnes refining capacity and turnover of at least Tk 50 billion in each of the last three years. Critics allege that such requirements in the draft framework are deliberately customized to provide opportunity to only few big companies, shutting the door for smaller firms. This is a serious allegations that the BCC should pay heed and it should probe whether such arrangement allows participation of few. It is evident from this allegation that such arrangement violates "congenial atmosphere for competition" and allows "abuse of dominant position adverse to competition ". So far BCC remains dead silent.

Duties laid out for BCC clearly spell that BCC can initiate probe on competition-killing practices and activities on its own without waiting for any formal complaint. However, BCC have not played any active role in addressing adverse policy to competition in the incidents mentioned so far.

Eradicating market imperfections is important for two reasons. First, fairer competition addresses supply side constraints,checks unusual price hike and insulates consumers from the inflation. Consumer welfare is best ensured in a competitive market that is justly watched by bodies like BCC.

Second, govt revenue collection target best attained when there is perfect competition. Revenue shortfall is becoming recurrent incident while govt spending is on the rise. Imperfection and collusion in the market contribute to revenue loss. A fairer market may alter the situation by filling the govt coffer to the desired level. A level playing field for all the firms can attain that goal.

We have institutions and budget for them to function. Yet they fail to act when their action is needed most. When various institutions inside the country function to address people's woes, people get some platforms to make their concerns fall to the right ears. People want to see equal opportunities are created for all. This is common in a democratic society. People witness competition-killing incidents on the trot. BCC should wake up and act to make the markets more fairer.

Nano Loan For Fighting Inflation

Nano loan is used to pay bills and fees, Longer duration could make life at ease.

Bangladesh Bank launched an initiative to provide a maximum of Tk 10000 credit to interested [people] in order to pay utility bills, various fees, mobile recharge and to make bank deposit payment. The loan can be disbursed through apps of commercial banks. It can only be used [for] these selected services through mobile phone. No cash withdrawal of the loan is available for the moment. Banks' clients can take loan starting from Tk 50 to a maximum of Tk 10000. There will be 7-day,15-day and 30-day duration loans for now.

This latest initiative highlights the popularity of nano digital loan as well as govt's keen interest to make a cashless society. In recent weeks, govt took various campaigns to make popular the Bangla QR, a unique QR system that renders useless having multiple QRs. The idea is to make more and more people interested in digital payment method while doing the retail transaction. As the society becomes cashless, the digital economy offers more digital documentation and record of daily transaction. It will make future policy decision more realistic and give an idea on true impact of a policy at the ground level.

Central bank's latest utility bill loan has to be seen in this perspective. Digital nano loan is nothing new to Bangladesh. Earlier mobile financial service (MFS) providers had offered such loan with a ceiling of Tk 50000 in association of commercial banks. MFS apps on the mobile phone led the way to popularize the nano loan. Later commercial banks offer the loan through their own apps too. More than 95% of the disbursed loan is recovered while a tiny percent remains defaulted. A leading bank distributed Tk 50 billion among 1.5 million clients through the app.

However, popularity of such nano digital loan also invites fraudulent activities. Bangladesh Bank in one of its circular cautioned people about 31 nano loan apps which do not follow rules and regulations for operating such financial services. Such illegal nano loan apps charge exorbitant rate of interest and impoverished many innocent users who fell victims to their lure.

Now there are individual apps for nano loans offered by commercial banks. The MFS apps remain exception. If there is one dedicated app for digital nano loan where information of all nano loans will be available , then more people will get clear information about it and will have easy access to such loans. Bangladesh Bank can take the initiative.

Such nano loan can be thought of as providing extended credit to inflation-battered consumer. Problem with such loan is its smaller duration. Nano loan as an instrument against inflation requires longer duration. Say an individual can take a nano loan of Tk 10000 in a high inflation year to purchase food items or protein. He must at least have 1 or 2 years to repay the loan. Repayment period of 4 or 5 years will be even better. It will help him to cushion the adverse effects of inflation. It will not create extra burden on private employee with limited income during inflation. People seek such inflation assistance can get such loan against a registered id.

We have seen increasing use of nano loan for various purposes, from paying utility bills to paying children's educational expenses. However, shorter duration of such loan [makes] it an ineffective tool to fight inflation. Bangladesh Bank can alter this situation by making the duration longer for inflation-battered lower income group. This kind of digital nano loan should be viewed as a mean to regaining the lost purchasing power during high inflation.

La Semaine Dernière A Mes Yeux

(05 septembre --- 11 septembre)

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Ma Semaine Gastronomique

Date	Petit déjeuner	Déjeuner	Dîner	Snacks,Sucreries,Boissons et Fritures
05	Pain,Pomme de terre,Œuf	Riz,Petit taro chinois avec sec latya,Aïr poisson	Riz,Poulet,Sec latya,Latya,Ruhi,Poulet,Crevettes, Courge amère,Prunier tchuney	Gâteau, Laccha semai,Banane,Kalojamun, Sondesh,Yaourt
06	Pain,Pomme de terre, Œuf	Riz, Petit taro chinois avec sec latya,Aïr poisson	Paratha,Banane,Lait	---
07	Pain,Lentilles avec citrouille	Riz,Anguille en zigzag,Soupe aux lentilles,Pomme d'éléphant	Riz gonflé,Pois chiches	--
08	Pain,Citrouille, Œuf	Riz,Taro ,Citrouille,Anguille en zigzag,Soupe aux lentilles	Riz gonflé, Pois chiches	---
09	Pain,Pomme de terre,Œuf	Riz,Petit poisson,Courge amère avec haricot rouge	Pain,Courge amère avec haricot rouge	--
10	Pain,Pomme de terre	Pilaf,Petit poisson, Épinard	Pilaf, Épinard	---
11	Pain,Œuf	Riz,Tengra,Aïr,Courge amère	Paratha,Banane,Lait	--

La Semaine Dernière A Mes Yeux

(29 août --- 04 septembre)

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Ma Semaine Gastronomique

Date	Petit déjeuner	Déjeuner	Dîner	Snacks,Sucreries,Boissons et Fritures
29	Khichuri,Œuf	Riz,Petit poisson,Petit taro chinois avec prunier à cochon	Riz gonflé,Pois chiches,Tchira	Banane, Lait
30	Pain,Pomme de terre	Riz,Épinard Malabar ,Petit taro chinois avec prunier à cochon, Soupe aux lentilles	Riz gonflé, Banane	---
31	Pain,Pomme de terre	Riz,Épinard Malabar,Tengra	Paratha, Banane	--
01	Pain,Œuf,Banane	Khichuri,Tengra	Tchira,Banane	---
02	Pain,Banane	Riz,Gombo,Tengra,Soupe aux lentilles	Pain,Banane	--
03	Pain,Œuf,Pomme de terre	Riz,Petit poisson,Gombo,Sec latya avec tige d'arum,Soupe aux lentilles	Riz gonflé, Pois chiches	---
04	Pain,Banane,Œuf	Riz,Purée de Banane verte,Œuf,Soupe aux lentilles	Tehari rice	--

Distinct Role For Distinct Entity

Distinct role for distinct entity, Law is needed for defense accountability.

Govt is on the verge of setting up its second ordnance factory in Chattogram. Like the first one, the second one will be operated and managed by the Army. Land of a closed public textile mill has already been acquired in this endeavor. For far too long, production and distribution of defence article has been concentrated into the hands of the Armed Forces, which account for a large part of the public spending and which [are] the sole buyer of the defense article.

A clear distinction between producer of defense article and buyer of such article should be made for the sake [of] accountability and transparency in the defense sector, which lacks proper laws and regulations regarding such matters.

Without proper division of roles, such public facilities often become net contributor to leakages and misuse of taxpayer's money. In recent past, we witnessed how Bangladesh Machine Tools Factory (BMTF) supplied Electronic Voting Machines (EVMs) are at the heart of debate in uncontested election. EVM cost govt between Tk 40 billion and Tk 80 billion. Moreover, BMTF's participation deprived private sector of getting the work when industrial production requires govt support. Similarly, Sena Edible Oil's entry into soybean oil market did not bring down prices of edible oil through increase in the number of another entrant. Nor did it improve transaction transparency at the retail level. Army's soybean oil purchase from the open market would divert part of the public spending to private sector,which is capable of supplying oil at competitive prices if regulatory environment is maintained through Bangladesh Competition Commission (BCC) and consumer association platforms.

First the interim govt and then the incumbent govt created a post of defense advisor to highlight more the role of the defense sector. Yet laws and guidelines that will bring transparency and efficiency to the sector are not introduced. We badly need proper laws and guidelines to ensure smooth participation of private sector, constitutional protection for the press for reporting on corruption in the defense sector and to make strong parliamentary committee on defense to administer regular hearing on defense related issues.

I highlighted the matter in the piece "Need Policies For Domestic Defense Production", published here on November 30,2023 (for more read https://hoquestake.blogspot.com/2023/11/need-policies-for-domestic-defense.html?m=1). India has Defence Acquisition Procedure(DAP). DAP 2020 set up rules regarding engagement of private companies in defense production and reservation for them in some sectors, liberalization of licensing and test/trial policies, focus on indigenous content in defense article production. It also incorporates a strategic partnership model that allows Indian companies to manufacture hi-tech equipments at home and to partner with global companies to manufacture defense equipments under technology transfer agreement.

In the USA, Defense Production Act(DPA) 1950 allows US president to divert resources and engage private companies to produce defense article to comply national security emergency. The DPA also allows president to provide loans, subsidies to private sector so that private companies can expand their production capacity to address the security needs.

Bangladesh needs similar acts and procedures so that private sector may take the onus of defense production. Another good thing about engaging private sector is that private companies are subject to audit and stakeholders will keep a close tab on the spending and appropriate measures taken. So issues like misuse of money or cost overrun will be reduced and accountability is ensured.

Starting point could be procurement of [nonlethal items like] uniforms, boot,meal ready-to-eat and protection vest. Many private sector companies have the capacity to deliver such items at competitive prices than those facilities managed by the Army.

In future, such private procurement program could be extended to APC, training munitions, turret, LCT, patrol boat,propulsion systems, navigation systems, guidance systems,electronics, thermal imaging, drone engine etc. This will pave the path for FDI in defense sector in the country. In addition, many small,medium and large private defense companies will pop up to cater to the need of the Armed Forces. This private sector centric defense procurement program will retain part of the defense spending at home and boost industrial capacity of the country as well as building other ecosystem across different sectors.

Apart from domestic procurement, such defense articles can be exported later. The Army chief in a program told the difficulty he endured in exporting such articles abroad. As mentioned earlier, clear division of roles of different entities should be demarcated. The Army cannot be sole producer, buyer and marketer of defense articles. Under clear guidelines, public or public-private companies should be formed. Many of the companies will not have the required distribution and marketing ability to promote defense articles across the globe. In Bangladesh, there is example that can be replicated to address the problem.

Bangladesh's biggest public corporation Bangladesh Petroleum Corporation (BPC) nowadays is allowing private sector in oil refining business. Two conglomerates are setting up oil refineries. However, the distribution of petroleum products across the country requires huge logistic investment that each of the company individually may find too difficult to manage. So, Padma,Meghna and Jamuna,the three public companies which are listed in the stock market , retain the responsibility for the distribution and marketing of the petroleum products across the country. Part of the refining job that requires huge govt subsidy will be done by the private companies and public companies will keep distributing the petroleum products, which are costly for one individual company. As public companies are listed in the stock market, they have to bring out the regular audit of their activities.

In Pakistan, Global Industrial Defence & Solutions (GIDS) markets and exports defense products manufactured by different public and private arms manufacturers. Individually these companies cannot afford the marketing and promotion costs,but a dedicated platform like GIDS can bear such cost. So GIDS showcases Pakistani defense products across the globe. Bangladesh can float two or three promotion platforms like GIDS so that some entities focus on defense article production while some other entities focus on promotion and marketing of the defense products across the globe.

Another thing that is quintessential is that these entities should be registered in the stock market.companies registered in the stock exchange have greater transparency than those who are not registered. Stakeholders and shareholders ask about their decisions and seek explanation. As they want answers,the press often provide them information through regular reporting. I touched the matter in the piece "Joint Defense Production: Some Points To Note", published here on February 23,2024(for more read https://hoquestake.blogspot.com/2024/02/joint-defense-production-some-points-to.html?m=1).

Private sector engagement, transparency and accountability have long been overdue issues [in the defense sector]. Earlier absence of such policies had resulted in controversy, close quarter decision making, poor strategic outcome, leakages in public spending,less competitive market,misallocation of public resources and inefficient use of productive capital. [Now the economy is characterized by] growing budget deficit,low credit to private sector, falling output in the industrial sector, and growing unemployment. [Amid these], adoption and implementation of such policies will bring fresh impetus to the economy. A part of the defense spending will go to the private sector. New companies will be formed,jobs will be created. Investment will be made. Domestic and foreign technicians will engage in tech driven production process. And a new new export sector will be developed.

Above all people will get clear explanation about how taxpayer's money is being spent in the defense sector and how they and their livelihoods will become secure due to such spending.

La Semaine Dernière A Mes Yeux

(22 août --- 28 août)

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Ma Semaine Gastronomique

Date	Petit déjeuner	Déjeuner	Dîner	Snacks,Sucreries,Boissons et Fritures
22	Pain, Pomme de terre,Œuf	Riz,Koï poisson,Yardlong beans,Soupe aux lentilles	Riz,Bar eyed goby,Yard long beans,Soupe aux lentilles	Banane,Goyave
23	Pain,Pomme de terre avec lentilles	Riz, Koï poisson, Soupe aux lentilles,Gombo,Cumin noir	Riz, Koï poisson, Soupe aux lentilles,Gombo,Yard long beans	Banane,Goyave
24	Pain,Yard long beans,Œuf	Riz,Bar eyed goby,Gourde blanche	Riz gonflé,Gourde blanche	Banane
25	Pain,Gourde blanche, Œuf,Banane	Riz, Koï poisson, Soupe aux lentilles,Gombo,Purée de banane verte, Gourde blanche,Pomme d'éléphant	Banane,Pain	---
26	Pain,Banane,Œuf	Riz,Purée de banane verte, Koï poisson,Gombo,Soupe aux lentilles	Riz, Koï poisson, Soupe aux lentilles,Gombo,Purée de banane verte	---
27	Pain,Œuf	Riz, Bar eyed goby poisson, Soupe aux lentilles,Yard long beans,Pomme d'éléphant	Pain,Banane	Banane
28	Pain,Pomme de terre	Riz,Petit poisson,Petit taro chinois avec prunier cochon	Riz gonflé,Pois chiches	---

Indexation,Food Stamp & Extended Credit

Indexation, food stamp and extended credit, Growth should reach all before memory fades it.

Govt's decision to implement the 9th pay scale amid high inflation leaves difficult choices for the private sector. Several news reports indicate that govt allotted [Tk] 1.4 trillion for paying salaries and pensions of 1.4 million public servants and pensioners in the budget of FY 2026-27. The proposed [pay scale] requires [Tk 1.05 trillion] which current budget could not accommodate. Revenue collection is projected to have a deficit of more than Tk 1 trillion. Even if the govt is managed to implement the new pay scale, the sheer addition of this fixed cost to the budget will definitely drive up the prices of essential commodities, worsening the inflation.

There is no doubt that implementation of the new pay scale will increase the wages of private sector, increasing the urban minimum wage. But whether that increase in private wages will be adequate to offset the price increase remains a genuine concern for private sector employees. So the new pay scale [will] not only increase the prospect of wage hike in private sector, it will also increase the possibility of further hike in cost of living.

Public sector has national pay commission to deal with inflation. Private sector does not have such thing. They merely depend on collective bargaining power or the mercy of the owner. There are increments at the end of the year, but most of the time it is not enough to deal with the inflation.

In foreign countries, job contracts include indexation clause that allows adjustment to salary as per inflation level. So a private employee never feels the heat of inflation as his real income never falls. In Bangladesh, private companies or firms are not immune from inflation. Moreover, their financial position is not that good that they will offer such clause to employees to insulate them against inflation. Less inflation proof measures for firms plus the cost are holding back firms from offering indexation clause in job contracts.

An intermediate step between no clause and full indexation clause in the contract will be partial cover from inflation. Some job offers already include increment, which can be viewed in light of this intermediate step. This kind of mild contractual obligation one day will lead our firms to strong contractual obligation when economy fully develops and balance sheets of the companies improve. This sort of contract is badly needed for lower income group employees.

Govt can do more in helping the lower income group in the troubling times. Special deposit schemes for them in banks or group participation of lower income group individuals to treasury bill purchase at one hand augments their incomes, on the other protects them from rising inflation. Setting a certain limit on deposit or bill purchase will make govt intervention more meaningful. Say, a lower-income group individual can avail a special high interest bearing deposit scheme worth Tk 100000 in a high inflation year. Or 5 such individuals can purchase Tk 250000 worth of treasury bills by forming a group in a high inflation year. This kind of specially designed programs at one hand will make sure that benefits reach the target individuals ,it will stop govt leakages in social benefit programs on the other.

Food coupon or food stamp is another such program aimed at lower income group who cannot avail quality nutritious food in hard times. In USA, it is known as Supplemental Nutrition Assistance Program (SNAP). Interestingly such program was taken so that American farmers could sell their surplus produces to consumers who could not avail them. In the 1930s, during the Great Depression, number of the unemployed rose, many households lost their purchasing power, but there were ample of foods in the market. So the Federal govt came up with the food coupon plan that allowed the needy American households to purchase surplus farm produces. Govt set eligibility criteria like income level for the households to participate in the food stamp program. With the food coupons, households can buy dairy products,cereals, egg,milk,fresh fruits and vegetables. Later food stamps were transformed into Electronic Benefit Transfer (EBT ) card,some kind of debit card. Federal govt transfers the benefits to the card of a household belonging to a certain income group. The household uses the card to buy food from super market. EBT fraud is very rare and it is very effective in terms of fighting hunger, inflation and increasing farm sales.

I think govt should introduce this kind of food stamp program for lower income group who bears the most brunt of inflation. In the time of inflation, there is significant erosion in their purchasing power. Most of them reduce their protein consumption. A food card or special MFS account will greatly address their lost purchasing power issue. Say one individual deposits Tk 1000 into his food card or special MFS account,he / she will get Tk 2000 to buy foods. Food card/ MFS account will be used to buy meat,poultry products,milk,dairy products,wheat,rice,pulses and locally grown fruits. Sacrifice of protein consumption will be avoided due to food coupon/ cards. Meanwhile, food cards can also be viewed as sales booster for grocery items during high inflation. Usually sales of dairy products or protein items drop during high inflation. Revival of the loss of sales can be achieved through this food stamp. Moreover, many new firms, poultry farms,dairy products may pop up to cater to the need of the consumer class who gets the much needed cash transfer during the time of inflation. So food stamp is boon for both consumer activity and business expansion.

It will be particularly helpful in tackling urban poverty. Nowadays, TCB operations are stretching across the city. In addition, chain stores are scattering across the city. A lower income group household can show up at any of the TCB sale point or chain store and avail the protein products with the food card. Govt will use prevailing distribution facilities or commercial facilities without any further intervention. Use of MFS account can further extend the reach of the program.

The beauty of this program is instead of giving support both the agricultural producer and consumer at the same time,cash transfer to particular income group is helping both the farmer by increasing his sales and consumer by restoring his/her purchasing power.

Another way to cushion the adverse effects of inflation is to offer easy credit with long duration of paying back to lower income group. Since salaries are paid to the bank accounts or MFS account in the private sector , a private sector employee can be offered special credit by the govt during high inflation so that he can afford protein during this difficult time. Say the private employee of a certain income group can draw a credit of up to Tk 10000 in a high inflation year. He can pay back the money in 4/5 years at a special interest rate. It will not create extra burden on this private employee with limited income during inflation.

Growth, prosperity should be shared with people. It is highly unjust that lower income group who barely receives any govt support will only pay the cost of inflation. They never participated in the decision making process,often proved to be erroneous, that provoked the inflation. So why should they pay for something they are not responsible for? Meanwhile, they hardly receive any benefits when economy performs well. To accelerate the trickle down process, indexation clause, food stamp and extended protein credit programs should be introduced. These will not create any discrimination rather these will create fairer chances for all.