Foreign Currency Crisis And Misuse Of Public Money

Uphill task of revenue collection Is marred with inefficient resource allocation.

Recently, platform of international air travel agencies appealed to the government of Bangladesh to release $323 million owed by the agencies. They made similar request to the government of Pakistan. Both countries are facing severe foreign currency crisis and subject of IMF budgetary assistance to fix their macroeconomy. Earlier Bangladesh Bank eased the rule of purchasing plane ticket with foreign currency, allowing local currency as a substitute. This was not the first incident many multinational companies had earlier reported that they had difficulties in repatriating their profit back home amid foreign currency crisis.

This issue is surfaced at a moment when Bangladesh Petroleum Corporation (BPC) owes Taka 30 billion as fuel bill to Biman Bangladesh Airlines,national flag carrier of Bangladesh. Petrobangla ,another public company ,on the other hand earned Taka 90 billion as interest by depositing VAT money into several bank accounts ,not giving a penny to the National Board of Revenue(NBR).The due payment is more than enough to clear travel agents' dues of $323 million.

Meanwhile, our interest payment on foreign loans has already crossed $2.57 billion for the current fiscal year. It is indeed putting huge pressure on resource allocation. Government has already requested the Russian government to postpone the scheduled repayment of Rooppur Nuclear Power Plant credit for two years. Delay in installing the transmission line ,which requires new assessment and foreign credit,is identified as the main reason.

Monitoring and Evaluation department of the ministry of planning has already shelved the proposed spending on line 5 of the Metro rail service network. It particularly questioned spending on Taka 60 billion as commitment fees and interest payment. Why don't we use the stock market to finance the metro rail project? European settlers in the United States used stock market to expand rail network across America. If people and companies are interested, they will buy stock of this rail network. This is also a measure of identifying the popular and viable routes. Per kilometer construction cost of such project reached a record level ,an unmatched example in the world. And for an electricity-run metro service, we the commuters pay a hilarious amount of fair, almost twice the fair of bus,which is lowered recently following fuel price adjustment. Using simple tiles instead of granite, staircase (and large service lift/no lift) instead of escalator and too many lifts,local materials instead of foreign materials, spartan stations instead of exotic stations, no station plaza instead of too many station plaza, local coaches instead of foreign coaches ,we could bring down the construction cost. I had the opportunity to ride on the Chennai metro,which is also viaduct-based. It is simple ,clean ,functional and cheap. This is what we want here. We have to cut our coat according to our clothes. Eye-dazzling look gives a comfort,but does not provide a relief to the inflation-battered pockets. And our companies should have greater role in these projects. Leasing out the management of metro service to third parties could bring down the operational cost and increase the revenue.

Inefficient use of resources is another worry. A public company provided 100,000 electronic voting machine (EVM) to the Election Commission with a price tag of Taka 38.25 billion. EVM machines were supposed to be operational for 10 years. But after 5-year 60% of them went out-of-service and the public company demanded Taka 80 billion to fix them. However,due to acute funding crisis the project did not see the light. Any private company could provide the EVMs at one-tenth of the cost and might save the public money. So we are witnessing acute funding crisis on one side,and inefficient use of public resources on the other. Government is unable to clear the dues of international air travel agencies,but wasting millions of tax payers' money through rickety public companies.

Joint Defense Production: Some Points To Note

Proposal floated in a seminar Ushers change in defense in particular.

Last week Indian High Commission organized a seminar and proposed joint production of defense equipment and sharing of technology. It is indeed a good proposal came from a neighbouring country that allowed private sector in defense article manufacturing. The country has a good track record of allowing the press to report on corruption on defense sector. This proposal if comes into fruition will boost the governance situation in our defense sector.

India has long ago offered a $500 million line of credit to import defense equipment from India. Bangladesh spent some of the credit to import bus, truck ,floating bridge and other nonlethal equipment. India continues to offer the line of credit. Recently, India offered to sell 105 mm light cannon to Bangladesh. In addition, maintenance ,repair and overhauling plant for the MI-17 helicopter fleet that Bangladesh set up with the assistance from the Ukraine will likely to get benefit from the Indian proposal. India has the license to manufacture some parts of this kind of helicopter and in future it is going to decommission large part of its MI-17 fleet, opting for the Western options as well as the domestic ones. Bangladesh on the other hand is going to induct more units of MI-17 helicopter as it is equipping both the BGB and the Police with this kind of helicopter. Sanctions on the Russian Federation mean Bangladesh will likely to hinge on India to procure future MI-17 units and its parts or produce the parts with Indian consent.

Indian private sector has long been operating in Bangladesh. In fact, it is the Indian private sector that opened up manufacturing and assembling facilities in the automobile sector in Bangladesh. Hero Honda first set up its motorbike assembly plant in Bangladesh. Later, other Indian and Japanese companies followed its step. Mahindra has a mini truck assembling plant in Comilla. Bajaj last year set up an assembling plant for three-wheeler after a Bangladeshi company demonstrated its ability to manufacture three-wheeler locally. Similarly, many Indian companies that researched and built prototype of Indian defense article for Indian Army but did not manage to get world attention may open facility for such equipment for the Bangladesh Armed Forces as well as for the world as Bangladesh has a very liberal and competitive export policy.

There are some hurdles in this endeavor. First, Bangladesh does not have proper policies and guidelines for engaging local / foreign private sector in defense article manufacturing. So we need proper guidelines and laws 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. India has Defense Acquisition Procedure(DAP) 2020 and the USA has Defense Production Act (DAP) 1950 and other laws and regulations to address the issues. In my piece“Need Policies For Domestic Defense Production” on November 30,2023,I highlighted the matter. Apart from that we also need laws to compensate individuals and groups who may fall victims of wrong policies / misconduct of any member of defense community.

Second, in our country public spending /resources often fall into wrong hand as proper check and balance mechanism is not in place. I have recently come across a documentary that reveals how agency people in a powerful country operate shadow company/front line company/think tank to misappropriate local resources and spy on others(Watch the docu).In Bangladesh, we witness how grand scale misappropriation of local resources/public spending often goes off the radar or seldom talk about at the highest level of defense community. Working with such front line companies at the end of the day will not bring any benefits.

Third, 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. Unfortunately, most of the Army run subsidiaries are not in the stock exchange. Many of them are overusing public resources. If subsidiaries like BOF,BMTF, Radisson ,Army Golf Club sell some shares to the public and the private sector ,then stakeholders will question about their spending and decision making and government will not have to spend much on these subsidiaries. Any Indo-Bangla joint venture has to make sure these subsidiaries sell shares to the private sector. It will be boon for our capital market.

It is indeed a good news that India has shown keen interest to joint defense article manufacturing. It will transfer technology and pave the path for other future foreign investment. Thriving motorbike industry is the example. Moreover,Bangladesh will be able to get greater market access to Indian consumer market and will augment its export volume in the country. The crucial aspect of this proposal is it will bring the necessary transparency and accountability that our defense sector currently lacks.