Article: Illicit capital flight a big threat to fiscal discipline

Article - Media
12875

Illicit capital flight a big threat to fiscal discipline

Newage, 17 July 2021

ILLICIT capital flight remains a consistent problem for the economy despite the government’s avowed position against this. The problem has increased, as economists say, because of an apathy on part of the authorities to curb money laundering and a criminal collusion of people in the agencies responsible for ending such capital flight. Although the government has introduced a scope for the private sector to invest abroad, businesses and individuals have continued to exploit the weak regulatory oversight to launder money. Since 2015, when the government allowed the private sector to invest abroad on certain conditions, only $327.14 million, or Tk 2,774.14 crore, has been invested, as the first report of the Bangladesh Bank on outward foreign direct investments says, in foreign countries through the formal channel. But the total amount of money laundered and invested in foreign countries by Bangladeshi businesses and citizens is many times higher than the amount invested through the formal channel. A US state department report published in November 2020 says that Bangladeshis’ investments across the world exceeded $3 billion by 2018, which is about 75 times higher than the legally invested amount.

A number of recent local and global reports have highlighted the increase in money laundering, which bleeds the national economy more than other forms of corruption. A Global Financial Integrity report says that about $61.6 billion were siphoned out of Bangladesh in 2005–2014, which is equivalent to 20 per cent of the gross domestic product in the 2020–2021 financial year. The Transparency International, Bangladesh reported in 2020 that some $3.1 billion, or Tk 26,400 crore, was illegally remitted from Bangladesh every year. Much of the laundered amount is siphoned out of Bangladesh through trade misinvoicing. A Global Financial Integrity report in 2020 showed that Bangladesh suffered a ‘value gap’ to the amount of $7.53 billion on an average every year in 2008–2017. Trade misinvoicing takes place when importers and exporters wilfully falsify prices in import and export invoices to illicitly transfer value across international borders, evade taxes and customs duties, launder proceeds of criminal activities, circumvent currency controls and hide profits offshore. An earlier Global Financial Integrity report ranked Bangladesh in the second position in South Asia in illicit capital flow. All this points to a flawed financial governance that has already impeded sustainable development.

Read Full Article

12875