Flaws In Our Market

Imperfection lies in the market, Collective efforts needed to make it perfect.

The basic ingredients of a perfectly competitive market have not been functioning well for a long time in Bangladesh. Let us take a look at key characteristics of this kind of market(source:Investopedia):

• All firms sell identical product.
• All firms are price takers,not price influencers.
• Buyers(as well as sellers) have complete or perfect information about the product being sold and prices charged by each firm now,earlier and in the future.
• Capital resources and labor are completely mobile
• Market share does not influence price
• Firms can enter or exit the market without cost.

There is however imperfection in every market and industry and pure competitive market is an idealized state. Nevertheless, govt,consumers and industry all thrive to achieve a perfectly competitive market or at least try to get as close to such an idealized state. Now let us see how these characteristics are violated in Bangladesh.

All firms are price takers is only possible when there exists a large number of buyers and sellers. Except kitchen market, most of the markets including consumer good market consist of few firms,which influence price. That means there is not too many sellers. Industry or market where initial investment is too high does not expect large number of producers. Utility, aviation can be presented as an example. But other industries which require relatively fair investment do not see enough market players. That means a good amount of entry barrier is put in place, deterring the entry of new firms. Biased govt policy,which is prevalent in this part of the world,is behind fostering the entry barrier. Rice,soybean oil market could be an apt example. International market prices are falling and current rate tells a price around Tk 46/kilo. But it is selling at much higher rate. Reason is unknown. But if govt considers consumer interests then awarding more permits to rice importers may make an impact. In the soybean oil market, few conglomerates were allowed to operate and in the change of events they showed their colors,creating a difficult situation to deal with. Moreover, proper documentation at the wholesale level of soybean oil market is not maintained, as I mentioned here several times. Tacit support to this kind of practices by the govt in the past contributed to the anarchy in the soybean oil market.

Flawed macroeconomic policy in the past led to higher policy rate hike later,[causing] barrier to new entrants in any industry. At the same time, exit from an industry is not that easy because many lending institutions sued many firms for not paying back the credit.

Capital resources and labor are not perfectly mobile here. In the past, credit often went to the projects that were not viable and that promoted creed loyalty over merit. Moreover, unaccountable development projects by govt limited private sector's access to credit as large part of bank's money went to finance these public projects. Similarly, politically motivated thrust sectors witness destruction of productive capital. Labor engaged in these sectors ,which are not so productive. There are just few companies in the consumer good market. So workers have little choice to go elsewhere.

Lack of information persists in the market. Consumers and small producers do not get the complete picture of the production cost. Moreover, motif of harvesting an industry often leads to narrative manufacturing. This disinformation/ lack of information prevents the consumer from making right choices and small producers from taking appropriate steps. Lack of proper regulatory environment is also a reason consumers not getting complete information about an industry.

It appears that too few firms and lack of regulatory environment are the main obstacles towards a perfectly competitive market in Bangladesh. If regulatory setup functioned properly,we did not have misallocation of credit in the banks. Regular auditioning and intervention by BCC,CAB,BTRC,BERC and BSEC will let consumers know why there are few firms in the industry ,true cost of production, why firms are not paying dividends despite making profits and what the future fiscal and energy policy will be. Market is not created with perfect competition. It is the collective efforts that will lead it to perfect competition.

Change Means More Choices,Not Less

True change does not mean less choices, Competition raises through regulatory practices.

Perhaps the biggest victim of the present govt is the regulatory environment. Since this interim govt has an apolitical look, bureaucracy responsible for operations of regulatory bodies does not feel urge to function them. Regulatory bodies continued routine work during political govt. Even that is somehow stopped. Consumers are paying the price. Regime change is supposed to bring more options to consumers, giving them some comfort.

Yet experience so far is completely opposite. Let me share some personal experiences. Recent earthquake exposed once again that the mobile internet is terribly slow in the country.Except one leading operator,all the operators provide slow internet since January 10,2024. I desperately contacted in vain BTRC earlier to improve the service of mobile internet. Product prices have gone up,but speed is terribly slow. As I tried to post my situation at home on that frightening day, I found how slow the thing is. They however offered me free minutes to call the dear ones later. Meanwhile ,operators blame the govt for taxing them too much: Tk22-28 [goes] to govt for every Tk 100 spent on mobile phone services, the operators claim. Till July this year, there was some sort of public hearing at BTRC,even that is stopped. The biggest inaction is seen from the Bangladesh Competition Commission(BCC). It seems to stop functioning.

The dairy products of the local shops are overwhelmingly dominated by two brands: a govt-backed cooperative and an NGO-run subsidiary. [Govt-run] cooperative is still there because money can be appropriated without any accountability and a trade-union like atmosphere exists. The NGO-run subsidiary is there because they have other businesses in the neighborhood: Mobile Financial Services (MFS), microcredit business. These allow them to influence the local business environment and the supply chain. Microcredit agencies do not pay taxes. But the dairy brand does pay taxes.

This is where we badly need intervention of BCC. Those who are involved in credit/capital management businesses should not engage in any other business at all. In the USA, we do not see Citibank has a food subsidiary, tech company or an university. Even if it does have any,it should not possess a significant market share in the respective industry. Most of these subsidiaries control more than 50% market share at home. As the winter arrived, to my surprise, I found that only butter brand available at the local shop is that of NGO-run subsidiary. I do not have any issues with the brand. But I want more options. More choices mean more competition, low price, better quality. That is not happening around me.

Sometimes regulatory body feels awkward when top military bureaucrat's dear one,some advisors have lucrative professional engagement with NGO-run subsidiary.

Point is BCC does not need to wait for any complaint, it can intervene immediately whenever it sees capture of significant market share by a company, violating competition and consumer rights.

Consumers are paying the price from their pockets. Last year a tyre factory owned by a former ruling party MP witnessed vandalization. The tyre brand went out of the business, hiking the prices of tyres in the local market. The void is still not filled.

Another businessman cum politician,now in jail, owns a pharmaceutical company with global reputation and it had easy access to all the neighborhoods when Awami League was in power. Now some of its medicines are no more at the local market. Some of them are cheap and good in quality. So patients are forced to purchase the costly options.

The issues here are: first,it is indeed bad idea to finance lucrative businesses of politically exposed individual. Beximco's acquisition of GlaxoSmithkline operations here could have been stopped at the first place. It is a serious regulatory failure. Second, in the change of events ,regulatory body's intervention is needed to smooth operation of the troubled companies so that consumers do not get hurt and competition prevails.

Another business group currently under scrutiny for plundering a bank and laundering money abroad, is attempting to promote a new food brand. At one hand, authority remained mum when it plundered a bank. On the other, authority allows it to venture upon new businesses while taking a complete opposite stance against other groups with opposite creed. This kind of double standard should be avoided. Govt needs to mull about greater good of the consumer and business environment and its subsequent business should reflect it.

Competition and consumer rights are always less prioritized issues for any govt. By fixing the two , we could fix many issues including the political ones. Unfortunately regulatory bodies take a hit instead of becoming more active during the interim govt. I highlighted here before in many pieces(See"Growing Unease:Revenue & Inflation" published here on December 06,2024), companies and institutions that have capacity to mobilize resources at the ground and have political aspirations should be subject of intense scrutiny and regulations*. Somehow conflict of interest and inaction of bureaucracy hold back the regulatory body to function properly. Competition at the market cannot be ensured unless the regulatory bodies do the routine work regularly. I think the constitution and the Parliament should empower the bodies so that a fair play ground prevails for all and consumers can get more choices. Any true change means more choices,not less!

[*Update: this piece is updated by me on November 25,2025 at 9:10 AM Bangladesh Standard Time. Update includes reference to seeking regulations on institutions that have huge capital and political aspirations.]

Regulation Or Retribution

Failure to deliver regulatory action Often creates wrong perception.

Bangladesh's inflation in general still remains elevated, above 9% for April. Though food inflation declined from 8.93% to 8.63% , this reduction means little as the heat of inflation gives a heavy blow to the people. Meanwhile, chief advisor's special economic assistant in a program made it clear that govt may unsubscribe the ongoing IMF credit program if the IMF [stresses] on continuing the reforms set by it.

The May 6 meeting between the two fell through as a last ditch attempt. The bone of contention is the free exchange rate. Currently, Bangladesh follows a crawling peg system (I have serious doubt about calling it a crawling peg), but the IMF wants it to be fully aligned with the market.

The IMF program started during the time of a govt that deemed corrupt and dysfunctional but it wore the attire of a "democratic regime". Current govt lacks the popular mandate and should not unsubscribe the credit program. I personally think the IMF credit program is more important and beneficial to us than any corruption-prone climate fund arrangement. Our banking act was overhauled, the central bank got back its sovereignty, journey of true reporting of economic data has began, exchange rate was liberalized, current account balance improved, pension fund got secured, abuse of social security spending declined, revenue collection increased manifold, loss-making public and private entities' balance sheet improved because of higher interest rate, NBR is likely to get more revenue from them, fuel price adjustment leads to lowering fuel prices, improvement in revenue governance and many more things since the IMF started the credit program.

Undoing it is a step towards going back to old days of unwarranted spending, costing the welfare of mass people and efficiency.

This kind of retributive stance over regulatory supervision should be discarded. When regulation requires proper attention , retribution casts shadow over it and derails the true objective of regulation.

Last week homicidal charges were brought against two directors of a leading advertisement agency, which has a significant market share in the industry. One of the directors were a former ruling party politician and minister and accused of killing 4 people. The other director is an actor and accused of a murder during the uprising in July. The latter's well-wishers denied the accusation as trumped-up charges and claimed he was a supporter of July movement. In addition, they claimed the two were targeted as the agency holds significant market share of the industry ( some say over 80%), sharing the social media post of another PR firm owner.

Now political vendetta should not be mixed up with market malpractices. If anyone is involved in market malpractices then the matter should be brought to the attention to proper regulatory authority ( in this case Bangladesh Competition Commission and the High Court). Rather, the political vendetta only validates the earlier malpractices in future years.

Bangladesh in 2012 introduced the Competition Act that 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 and oligopoly, combination or abuse of dominant position or activities adverse to the competition."

There are many business groups and media outlets whose ventures like streaming platform owns more than 70% market share, paper mills that control significant market share of toilet paper, broadsheet newspaper and exercise book. Even the dominant market player of the ceramic industry holds important portfolio of this govt. If govt is committed to true reforms, then they should be subject to BCC's scrutiny. So far we see that BCC gets more inactive under this regime.

There are things called brand reputation and brand loyalty. If a business group engages in controversial, unlawful act, then let the market and consumers do their act. Director of one of country's leading conglomerates was accused of killing a model. Later its brand in sanitary napkin , toilet paper market lost significant market share. Its consumer items met similar fate. Its shopping mall draws less crowd after the incident. It pays a hefty toll after the incident. Rumor has it that a party even extorted the group while the govt remained muted.

Govt should underscore regulatory stance instead of retribution. Regulatory action, which this govt is yet to deliver regularly,is the routine work of a normal and functional govt. Any malpractices deemed breaching regulatory environment should be dealt through regulatory actions. Retribution dampens the regulatory spirit and does not improve the business environment in the long run.