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.]

Bangladesh Bailout: Repeat Of Pakistani Incident

Recent dealing of macro woes kept people in the dark without clues

Bangladesh Bank claims in December Bangladesh is going to receive $1.8 billion as credit and budget assistance. This addition will not lower further the forex reserve, Bangladesh Bank believes. Asian Development Bank(ADB) will give $400 million as assistance and IMF may endorse $680 million as second tranche of the $4.07 billion credit. And Bangladesh is pretty confident that it is likely to get the second pack.

Despite the improvement in current account balance, inflation is still high,around 10%. Exchange rate of taka against major currencies like USD and Pound sterling has not yet been stabilized. The loans and assistance we are receiving may be a condition of IMF's ongoing support. IMF Special Drawing Right (SDR),a special reserve asset comprised of several currencies (USD,Pound,Euro,Yen,Yuan), may be transferred toward other causes like aiding countries in dire financial situation. IMF in its website acknowledges that¹:

->SDR Department participants with strong external positions have historically used some of their SDR holdings to help countries in need. For instance, during the current crisis, several countries have used part of their SDR holdings to expand the IMF’s concessional financing by scaling up the IMF’s Poverty Reduction and Growth Trust’s (PRGT) loan resources. …
->We are also exploring other options for voluntarily channeling SDRs from members with strong external positions to support poorer and more vulnerable countries to help their recovery from the pandemic. Depending on the priorities of the membership, a new Resilience and Sustainability Trust could be considered to facilitate structural transformations, including greener recoveries from this crisis, for resilient and sustainable growth in the medium term. Another possibility could be to channel SDRs to support lending by multilateral development banks.

ADB being one of the development institutions as prescribed holder of SDR may be using IMF SDR to assist Bangladesh in addressing its budget deficit. Richer countries sympathetic towards Bangladesh may be using their SDRs to provide soft credit to bail out Bangladesh.

One of the conditions set by IMF to get the next credit pack is that reserve should be $18 billion by December 2023. As per BPM-6, Bangladesh's net reserve stands at $19.40 billion at the end of first week of December. As Bangladesh sells dollar from its reserve, downward pressure on reserve still remains. Meanwhile, we witnessed that Bangladesh leased Potenga Container Terminal to Saudi Red Sea Gateway Terminal (RSGT) for 20 years. Similar incident took place in Pakistan when the country leased its Karachi port to UAE for $220 million in June². Later Saudi Arabia came into the scene. It perked $2 billion in Pakistan central bank to get it vital IMF loan³.

The strange behavior of one specialized bank and its Saudi shareholder lent credence to the argument that Middle Eastern countries may play a role in achieving the second credit pack from IMF.In November 2023,the bank lent a huge some of money to a fraudulent group ,which laundered the money in a Middle Eastern country, and put the whole banking sector in a precarious situation. It was the Saudi exchange house that charged higher rate for USD in recent weeks. Last week, exchange houses in the UK charged higher rate for Pound. It indicates that the exchange houses abroad are stockpiling taka to gain more from appreciation of taka in the event of IMF loan approval / significant interest rate hike. They have this prior information.

Back in October last year,I penned a piece titled “Macro-Woes”⁴ where I highlighted how strategic relations shape economy, citing Saudi money perking in Pakistani bank with strings attached. I strongly believe the Parliament comprised of MPs with popular mandate should have the last word on making strategic decisions. Few regimented people in a close door meeting making key decision about strategic relations is not good for the country while leaving the people in the dark. At the end of the day ,country and people bear its consequences. And our constitution does not allow such kind of decision making as Parliament’s approval is required for any military engagement with other country besides multilateral initiative. Strategic decision making including forming alliance to wage war is a political matter, not a military one. Political matter should be solved by political stakeholders. Anyway, the way Bangladesh is addressing its macroeconomic issues hints that it is similar to the way Pakistan has dealt with its recent macro woes.

Notes And References

1. ”Questions And Answers On Special Drawing Rights(SDRs)”,IMF.For more read at https://www.imf.org/en/About/FAQ/special-drawing-right
2. “Cash Strapped Pakistan To Lease Part of Karachi Port To UAE For $220 Million”, NDTV,June 22,2023.For more read at https://www.ndtv.com/world-news/cash-strapped-pakistan-to-lease-part-of-karachi-port-to-uae-for-220-million-4144226
3. “Saudi Arabia Gives $2 Billion as IMF Bailout To Pakistan, says Country’s Finance Minister”,Reuters,July 11,2023. For more read at https://www.tbsnews.net/world/global-economy/saudi-arabia-gives-2-billion-imf-bailout-pakistan-says-countrys-finance
4. “Macro Woes”, Rezaul Hoque,October 28,2023.https://hoquestake.blogspot.com. For more read at https://hoquestake.blogspot.com/2022/10/macro-woes.html?m=1

Is Bangladesh Bank Really Independent?

Meddling in decision making Yields result no one seeking.

Bangladesh Bank raised the policy rate by 50 basis points, detailing its inflation containing measures in the monetary policy statement for July-December. However, the increase may not be good enough to contain the inflation. Real interest rate is still negative( -4.26% for deposit and -1.35% for lending)¹. This means inflation is still higher than nominal interest rate. And we need to raise the interest rate high. Many argue inflation is hovering around 15%. Rate charged by unofficial money lenders could be a good indication of the market rate.

Central bank's argument of injecting $13 billion into market and mopping up Taka in the last one year sounds hollow as inflation officially is around 9.94%. It is not clear how it oozed the demand pressure.

Another thing I discussed earlier following the MPS in January is that Bangladesh Bank flaunts export receipt growth as an indication of demand increase of Bangladeshi items abroad². However, inflationary pressure is still there and prices of lower end items that Bangladesh export in bulk quantities also rise. Bangladesh Bank's own figure on policy rates of advanced countries show an upward trend since December 2022(see picture). Of course demand for Bangladeshi items is in rise in other countries, but the growth in export receipt does not account fully the growth in demand. Inflation played a role here and ratio between export earnings and volume could have yielded a better picture. Cargo handling through Chattogram port also declined significantly in recent months.

Policy rates of advanced countries (Source:MPS,Jul-Dec,2023,Bangladesh Bank)

Bangladesh Bank labelled the decision to downgrading the credit rating of Bangladesh by Moody's as a geopolitical one. Why did some banks based in Dubai and Singapore lower the credit limit and increase loan conditions for Bangladeshi banks if this is so? Both UAE and Singapore have good relations with Bangladesh and affluent Bangladeshis in general pick up the two countries as second home. Singapore is one of the top five investor countries.

Central bank also claimed that it takes decision independently and there is no political intervention.

Central bank is run by prudent and competent personnel. Their integrity and commitment to run an organization is not questioned here. Unfortunately , it is no distant island in Bangladesh’s command and control political atmosphere. On some occasions, past actions revealed how its independence was compromised:

• Bangladesh has long been following multiple exchange rates. Gaps in the rates discouraged bringing foreign currency home and played a conducive role to send foreign currency abroad. Many economists argued this mismatch plus incentives on remittances went in favor of speculators and money launderers. And future depreciation of Taka will benefit opportunists who willfully delayed bringing their earnings at home. It is naïve to say Central bank is ignorant about this fact. I think political pressure held it back from taking the right stand.
• In November last year, while an IMF team was in an official visit to Bangladesh, a little known Nabil Group swindled around Tk 90 billion from several Islamic banks.Till date,whereabouts of the money is not known.This plundering shook depositors' confidence so much that many were prompted to withdraw their money,leading to a liquidity crisis in the Islamic Banks. To address the crisis, central bank provided Tk 147.90 billion credit to the troubled Islamic banks through promissory demand note³.Govt literally printed the money and injected it into the ailing banks⁴. Troubled banks were not able to manage loans from other banks. I think this supply of fund through promissory demand notes was a political decision to restore depositors’ confidence. Similarly it is not clear how Nabil Group managed to get such a huge loan evading Bangladesh Bank radar. Clearly, independent decision making power of Bangladesh Bank is compromised here too.
• Bangladesh Bank recently approved application of Nagad Finance PLC to operate as another non-bank financial institution⁴. It will finance Nagad,set up in 2019 and country’s leading mobile financial services operator. Regulations prior to 2022 clearly stated that MFS operators work as subsidiary of a bank. Nagad is an exception. It is not subsidiary of any bank.Later MFS regulations 2022 allows non-bank financial institution to operate mobile financial services(see pictures). Approval of Nagad Finance hints strong political lobbying.Bangladesh Bank intervened when age limit of a managing director of a specialized bank crossed a threshold limit.But here we see a multibillion Taka company operates year after year not meeting vital criteria and regulations have been changed for its smooth operations.Political objectives here influenced the actions.
  

  MFS Regulations 2018

  

  MFS Regulations 2022

Apart from that Equity And Entrepreneurship Fund (EEF) and EEF for ICT have been misused on several occasions. Often it was found that external influence played a role in some cases.

Bangladesh Bank cannot act freely in the present context. Its exercise of sovereign decision making power has been limited in recent years as political intervention is more frequent. Despite cautious optimism and adherence to contractionary monetary policy , inflationary situation may spiral out of control if central bank kowtows before political pressure.

Notes And References

1. Monetary Policy Statement, July-December,2023,Bangladesh Bank
2. "Will MPS Attain The Goals?",Rezaul Hoque,January 20,2023.For more read at https://hoquestake.blogspot.com/2023/01/will-mps-attain-goals.html?m=1
3. "Receding Trust In Banks",Rezaul Hoque, https://hoquestake.blogspot.com,January 13,2023.For more read at https://hoquestake.blogspot.com/2023/01/receding-trust-in-banks.html?m=1
4. " Inflation Woes Remain",Rezaul Hoque,April 15,2023.https://hoquestake.blogspot.com,For more read at https://hoquestake.blogspot.com/2023/04/inflation-woes-remain.html?m=1
5. "Nagad Finance PlC Gets Bangladesh Bank Approval",bdnews24.com,May 17,2023.For more read at https://bdnews24.com/amp/story/business%2F42fo8053ep

[Update:This piece has been updated by me on June 23,2023 at 10:07, at 12:50 and at 13:12 Bangladesh Standard Time. Updates include: 10:07: references 12:50: screenshots of the Mobile Financial Services Regulations 2018 and 2022 and inclusion of phrase "...and regulations have been changed for its smooth operations.Political objectives here influenced the actions." at the end of the para highlighting Nagad Finance PLC issue 13:12: screenshot of policy rates of advanced countries and correction of "since April 2023" to "snce December 2022" in para discussing export growth and demand for Bangladeshi items]

Crisis In Banks Deepens

New banks fall into liquidity trouble Instead of recovery, woes become double. Regulations on management board reform Unlikely to become the new norm. Last few weeks have been happening weeks for Bangladesh financial sector. Bangladesh Bank issued new regulations on the appointment of directors and chairman in the management board of public banks,which are at the heart of bank scam1.Earlier people with little credentials occupied the post and approved loan to projects that do not qualify for it. The result is piling up of Non Performing Loan(NPL) which is jeopardizing stability of the whole banking sector. Government even concluded initial talks with the IMF for a credit of $4.5 billion to finance budget deficit in the wake of high oil price and ongoing war in Ukraine and bad economic management.Earlier only public and some private banks are in crisis. But now banks that operate islamic banking are also in liquidity crisis. Depositors have lost their trust in them and queue behind bank booths to withdraw their deposits.But some islamic banks do not have enough money to meet depositors' demand. Crisis unfolded into these banks after one Nabil Group took Tk 90 billion loan from Islami Bank,First Security Islami Bank and Social Islami Bank. The group followed fraudulent means to unhook the loans. It floated several shell companies and then applied for loans. Addresses provided are later found hoax and all of them appeared to be sister concerns of the Nabil Group,which operates agro-processing and food grain import business in Rajshahi. Islami Bank gave Tk 70 billion to the group and First Security Islami Bank and Social Security Islami Bank provided the rest2. On some occasions, documents were not scrutinized thoroughly. So the blame puts squarely on the new management board of Islami bank, which is mostly formed by members backed by a local business conglomerate. The conglomerate itself took several loans from the banks and invested abroad. Rumours are rife that it even purchased a five-star hotel in Singapore. It is highly likely that the credit becomes another incident of money laundering. As soon as the news broke, clients’ trust on islamic Banks erodes and many opt to withdraw their deposit. It is translated into these banks' depleted deposits. Situation is so grave that the biggest one, Islami Bank offers 8% interest rate to Mobile Financial Service (MFS) operator Nagad,which is already marred by corrupt practices3. Furthermore, Islami Bank Bangladesh and Social Islami Bank along with Pubali Bank Limited received Bangladesh Security And Exchange Commission's nod to issue bond in a bid to raise Tk 21 billion from stock market.The islamic banks will use the fund to meet the acute liquidity crisis4. It appears clearly that islamic banks also face liquidity crisis. New banks fall into such crisis. In general, banking sector instead of recovering falls into deeper crisis. Serious trust deficit translates into depleting deposit and foreign banks’ refusal to LCs issued by local banks. Luckily, IMF in its upcoming board meeting in January may take a decision on approving first instalment of credit, taking into account recent central bank's decision of management board reform. But only time will tell how much it will help the cash-strapped govt and the ailing banks. Notes And References: “Rastrayatto Banker Chairman Note Lagbey 10 Bochhorer Oviggota(Public Bank Chairman Must Have 10 Years Experience)”,jagonews24.com,December 24,2022. https://www.jagonews24.com/m/economy/news/820089 “Nasty November for Islamic Bank “ ,Sanaullah Sakib,Daily Prothom Alo,November 24,2022. https://en.prothomalo.com/business/local/x60ivy2cbn “ Aat Percent Sude Amanat Chai Islami Bank (Islami Bank Offers 8% Interest On Deposit)”,Daily Prothom Alo,P-13,December 29,2022. “Lendene Goti Firchhey Na,Bond Chharbe Tin Bank(No Pace In Transaction, Three Banks To Issue Bond)”,Daily Prothom Alo,P-13, December 28,2022. Subscribe to: Posts (Atom) About Me Rezaul Hoque Hi, this is Rezaul from Bangladesh. Single,Male.Born in 1981.This website is created as an alternative to, and complements,https://rezaulhoque.wordpress.com. Here I share my analyses on various issues including economics and governance. In addition, I also share my weekly news review on the incidents that took place in past one week. I do not make money out of my content. I do not receive any govt social security benefit or any kind of perks. I do not belong to any political group or university or foreign cultural institute.I do not work for any media outlet. Nor do I represent any security agency or private organization. Praises or blame for the contents of this website should be attributed to me and not to my former employers. ©Rezaul Hoque All the contents(including claimed web programs of individual content) are copyright protected. Without prior consent, reproduction of any of the contents,be in part or full, in any format or platform is not allowed. 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