Thursday, July 19, 2018 | ePaper
Pol uncertainty looms
Economists fear unabated money laundering, fall in growth
Economists fear that a political uncertainty in the run up to next general election may result in a massive money-laundering and capital flight and this may in turn cause another round destabilization in the economy, lowering investment, business activity and growth.
Giving reactions to the Prime Minister's address to the nation on Friday in which she said the next general election will be held as per constitution, they said unless the government reaches understanding on election time government, political crisis will invariably hit the country. It happened also during the run up to last election causing huge money laundering and capital flight.
They apprehend the situation is very likely to replicate if a similar crisis hits the country again.
"We expect the election will be held peaceful manner with participation of all parties after reaching a consensus over election time government. But if a crisis arises again it would take a serious toll on the national economy," Dr Zahid Hussain, World Bank's lead economist in Bangladesh, told The New Nation yesterday.
He said political unrest earlier caused greater damage to Bangladesh's economy lowering GDP growth. It makes vulnerable exports, trade logistics service, small and medium enterprises, investment and day-to-day labourers. "These sectors may hit hard again due to a possible flare up of political unrest," he added.
According to a WB Study, Bangladesh economy suffered a loss of $1.4 billion because of election-related political unrest in 2013 when the nation's two main political parties fought over general elections.
Dr Zahid Hussain further said political uncertainty puts the economy at risk of capital flight. Disturbing political situations always encourage them for capital flight. They are taking out their money due to unfavourable political and investment climate.
Illegal capital flow mainly takes place through trade misinvoicing in import and export.
"The election slated for the fag end of 2018 could be one of the biggest challenge for Bangladesh economy if fresh political turmoil returns. It could push down the GDP growth," he warned.
Bangladesh's economic growth hit 7.28 percent last fiscal and the poverty rate came down to 22 percent from 41 percent in 2005.
"Money laundering usually picks up just ahead of an election year. Large amount of money was being taken out instead of being invested at home due to political uncertainty," said former Bangladesh Bank governor Dr Mohammed Farashuddin.
He said a staggering $9.66 billion had been siphoned off Bangladesh in 2013 alone, a sum that 35 times higher than 2012 figures. Similarly, the 2008 figures of money laundering were 60 times higher than that of 2007.
"Money laundering picked up in that periods because of election years," he added
"An improved political environment and better investment climate in the country could curb this illegal outflow of capital," said Dr Mohammed Farashuddin.
"Performance of key economic sectors usually experience a slow down during an election year. It also creates an occasion for sending dirty money aboard. It happens due to weak enforcement of law during the election year," Dr Ahsan H Mansoor, a leading economist of the country, told The New Nation.
He said influential political leaders and businessmen who made fortune during the tenure of incumbent government would find various techniques to drain our their illicit income abroad pushing up the money laundering. "Political uncertainty will have to be removed to prevent illicit capital flight," he observed.
Unrecorded capital flow from Bangladesh stood $61.63 billion between 2005 and 2014, riding mostly on misinvoicing, according to a report of Global Financial Integrity (GFI).
Dr Ahsan H Mansoor also noted that sectors key to the economy, including manufacturing, service, retail and finance, are at a risk of experiencing slow down in investments as investors wait for the elections season to pass.
So, 2018 might be rough year for the economy when elections being a concern, he added.
The economists urged all political parties to reach a consensus over the election time government immediately to avert a fresh political confrontation to help maintaining economic growth over seven per cent as well as welfare of the people.