Collapse Of Regulatory System

Three incidents lay it bare, Regulatory system provokes a sense of despair.

Three incidents recently brought to fore collapse of regulatory system in Bangladesh. First one was put forward by the US President Donald Trump who alleged that USAID had granted $29 million to a 2-men-run NGO in Bangladesh in a bid to strengthen democracy. In Bangladesh, NGO bureau that oversees NGO activities and foreign funding of local NGOs denied presence of such NGO and acceptance of fund. Transparency International Bangladesh also echoed similar stance. NGO bureau is under the auspices of Prime Minister's office but rumor has it that its foreign financing approval is given by the military intelligence. The money for the project here came during the tenure of previous regime. USAID gave the money to Democracy International and which NGO in turn received the money still remains a mystery.

I do not think the US President made such allegations without evidence. He must have documentary evidence that led him to disclose the thing publicly.

If the allegation is true, it proves how this oversight of NGO activities completely broken and how corrupt practices swallow purpose of NGOs. Misappropriation of climate fund is an apt example. Both govt and TIB's findings divulged nitty-gritty of it (Read "Climate Commitment Or Enhancing Corruption?" published here on February 16,2024).

This again proves how lack of transparency of the security establishment led to spread of corruption in other sectors. In this case ,the NGOs. If there were proper accountability in place ,then this money would not end up in this way in the hands of some opaque NGO.

Another incident is the chronic crisis of soybean oil amid tariff waiver on soybean oil import. Previously, at the wholesale level, soybean oil transaction was taken place without any money receipt. I do not know whether this practice is still being taken place. I touched the issue couple of times here. Only handful of big groups including an Army-run subsidiary operate this industry. One of the groups laundered money abroad with blessings from security establishment and jeopardize the supply chain by disrupting the supply. Another group is under the scanner of the Anti Corruption Commission. All the business conglomerates engaged in soybean oil business have media outlets. This way they can shape the narrative. I earlier discussed here why it is bad for consumer welfare when a company has significant market share in the input market as well as in the final output and in the media( read "Enforce Laws To Protect Consumer Rights" published here on September 4,2019).

Routine functioning of Bangladesh Competition Commission (BCC) is absent here. It recently published an announcement, seeking complaints from people. Intervention of BCC is needed in the soybean oil market. It should convene an audition ,inviting representatives of big groups and ask them explanation for the rising prices of bottled soybean oil. This will at least give the market a signal that government is functioning.

Another incident is the attack on an administrator of a Mobile Financial Service(MFS) provider and his subsequent resignation. The administrator was appointed by the govt in the scam-ridden MFS(Read "What Does Nagad Ownership Row Reveal?" published here on September 12,2021, and "BB Detects More Suspicious Transactions" published here on March 19,2022).This attack unveils govt cannot consolidate its grip over trouble-ridden entity. Parallel administration is still strong, challenging govt's authority.

The three incidents are an eye-opener that the regulatory environment is in tatters and requires serious overhaul. Without proper regulatory set up, govt cannot ensure routine functioning, let alone carry out ambitious reforms.

Anarchy In Kitchen Market

Anarchy in kitchen market
Swells pockets of the few.
Duality in dealing the issue
Makes the debate renew.

There has been anarchy in kitchen commodity prices. Edible oil prices garnered lots of attention and causing most worries to a typical household. I still remember more than a year ago I bought soybean oil at a price Tk 105/liter. Later the price rose to Tk115/liter. And now it is being sold at the retail shop at Tk 173/liter. Situation is so dire that head of a consumer rights protection body under the Ministry of Commerce even accused that a vested group plundered Tk 1000 crore from the market in a matter of a week by raising the oil prices¹. His accusations have gained some attention as edible oil production ,import and distribution are done by handful of groups. Moreover, it is found that on too many occasions edible oil at wholesale and retail level is being sold without furnishing any money receipt. Authority suspects hoarding and business malpractices. Government has even set the factory gate price at Tk 143/liter². Despite all the efforts, soybean oil prices show no sign to go back to Tk 105/liter or below level.

I have not seen before that head of department of consumer rights protection expressed his concerns about malpractices in kitchen commodity market.

The price increase came at a moment when Minister of Commerce assured the countrymen of a stable edible oil market during the fasting month of Ramjan,which will begin two weeks later³. As people here consume more fried items at break-of-the-fast time, edible oil prices soar at that time. Many like me suspect this price hike is deliberate to keep the promise made by businessmen to the Minister of Commerce so that oil prices remain stable during the month of Ramjan. Moneymaking from high edible prices during the fasting month is only scheduled ahead. And government may later take credit for containing the situation and keeping the market stable.

Malpractices and fraudulent activities in the business already costing Bangladesh economy dearly. Despite many corona incentives and ease in regulatory restrictions, ailing banks did not get back on track.Loan scams,corruption of management board and frauds almost plundered the Bangladeshi banks. Government’s review of policy on loan rescheduling and incentives to the businesses did not improve the situation. The result is 10 banks suffer from capital shortage.Of them,two specialized banks borrowed at a high interest but lent at a lower interest in a bid to comply government agricultural policies⁴.

During the corona outbreak, e-commerce scam did a tremendous blow to government,which has been reeling from a series of financial scams. It is assumed there will be less fraudulent incidents. But there is hardly any pause in such crimes.

Last week police nabbed a man for swindling Tk 400 million from 300 contractors giving fake work contract in a railway bridge to be constructed over river Jamuna. He even opened an office at posh residential area of Baridhara⁵.

Just two weeks ago Police caught a group of thieves who took care of the ATMs of a private bank. They regularly stole clients money by manipulating ATM machines.

Many fear that part of the soft credit and incentives distributed after the pandemic were misused and laundered abroad. According to Bangladesh Bank, bank deposits increased by TK 869 billion in 2020(November-July). But in 2021(November-July), bank deposits increased by TK 463 billion⁶. That means growth in bank deposits declined in post-pandemic period when economic activities were resuming. Moreover, high demand for US dollar last year supports the belief. Even government used the Forex reserve to supply dollar,$7 billion approximately, to the banks to ease the high demand. Later IMF raised serious objection about such use of Forex reserve and not reflecting it on the actual figure of Forex reserve⁷.

These are indications that govt is not at ease with the economy. The ongoing war in Ukraine further worsened the situation. Each year Bangladesh exports $420 million worth of garments to Russia.Due to war,that stream of revenue is stopped abruptly,causing worries to Bangladeshi exporters[**]⁸. And the country is also a major source for wheat procurement. Ensuing high fuel prices require that government raise subsidy to ensure its energy and food security.

It appears that kitchen market has become a lucrative source to make windfall gains for some quarter. And it is happening right under government’s nose. Onion price hike still rankles the Bangladeshis. Despite being perishable and hard to store, onion registered a high price. The unusual hike already raised serious questions about functioning of our market and government failure to deal with it. Recent edible oil price hike again brought to surface those questions.

Notes And References:

1 “Soyabean Teler Barti Dam Niye Ponero Diney Ek Hajar Koti Taka Hatiye Neya Hoyechhey: Bhokta Odhikar Songrokkhon Odhidoptor(TK 1000 Crore Pocketed During Soybean Oil Price Hike : Department Of Consumer Rights Protection)”,Kadir Kollol,BBC Bangla, March 09,2022. For more read at https://www.bbc.com/bengali/news-60680866

2 “Teler Dam Beshi Rakhae Dokan Silgala(Shop Closed For Charging High Oil Price)”,Daily Prothom Alo(Page 6),March 06,2022.

3 “Soybean Oil Price Won't Be Hiked In Ramadan: Commerce Minister”,The Business Standard, for more read at https://www.tbsnews.net/economy/bazaar/soybean-oil-price-wont-be-hiked-ramadan-commerce-minister-377818

4 “Muldhono Hariechhe 10 Bank(10 Banks Lose Capital)”,Daily Prothom Alo(Page 9),March 11,2022.

5 “Tinsho Thikadarer Chollish Koti Taka Atmasat(TK 400 Million Embezzled From 300 Contractors)”,Daily Prothom Alo(Page 6),March 11,2022.

6 “Korona-Poroborti Bank Babosthapana(Post-Corona Bank Management)”,Mueed Rahman,Daily Jugantor,February 06,2022. For more read here[*]

7 “Forex Reserves Overstated By $7.2 Billion: IMF”,Jebun Mesa Alo,The Business Standard, October 23,2021. For more read at https://www.tbsnews.net/economy/forex-reserves-overstated-72bn-imf-319909 [*]

8 “Bangladesh Garment Exports To Russia Stuck”,Maritime Gateway,March 10,2022. For more read at https://www.maritimegateway.com/bangladesh-garment-exports-to-russia-stuck/

[Note:This piece has been updated first on March 13,2022 at 10:03 AM and later on March 15,2022 at 10:30 AM Bangladesh Standard Time(BST).
*First updates include references to stalled garment exports to Russia and IMF concerns over misuse of Forex reserves.
**Second update include inclusion of a phrase on stalled Bangladeshi export to Russia.]