A mismatch that cannot be ignored

A statistical mismatch is not an extraordinary issue. It does happen, in many cases. But when the gap in data compiled by different entities is very wide, there are genuine reasons to look into the reasons and also to be concerned.

Such a mismatch has come to light only recently over what is known as 'outward direct investment'. And the mismatch is too big to ignore.

The 2020 investment Climate Statement, published by the Bureau of Economic and Business Affairs of the US State Department has shown that until December 2018, the outward investment from Bangladesh was over US$ 3.0 billion.

The amount is not that big. Many developing countries do have a far bigger volume of investment in other countries. But what is truly troubling is the statistics available with the Bangladesh Bank (BB) on such investments. According to its estimate, the outward direct investment from Bangladesh until now is a paltry US$300 million.

The issue here is that Bangladesh has been pursuing a very restrictive policy in the matters of outward investment. The policymakers do feel that Bangladesh economy has not yet reached the stage where it can allow investment in other countries in a big way.

Such a feeling is not out of place since the country has been trying hard to attract foreign direct investment (FDI). It has been offering policy supports and incentives to allure foreign investors. Several economic zones are being established at different places of the country to attract the latter. Despite all the efforts, the average annual flow of FDI has remained confined to US$ 3.0 billion.

According to the US State Department's report, four countries--- China, the Netherlands, South Korea, the USA and Thailand--- together have drawn more than 90 per cent of the investment from Bangladesh.

As expected, the central bank people have expressed their ignorance about such an outflow of funds through unofficial channels.

But there should be no reason to be surprised about such investments abroad when billions of dollars are being taken out of the country every year, mainly through trade transactions. The Global Financial Integrity Reports have highlighted this fact on many occasions in the recent past.

It could be that the State Department's report has not been able to give the full picture of the investment of Bangladesh-origin funds in other countries. The volume of investment could be even bigger.

The destinations of a large part of the illegal funds worth billions of taka that have flown out of the country over the years are unknown. The truth is that none has bothered to know about it. Only recently, some people are heard talking about the retrieval of the illegally transferred money. But such utterances are made only for public consumption and nothing tangible is done to that effect.

Illegal fund transfer has a couple of dimensions, it seems. Some people do transfer their ill-gotten wealth abroad for the sake of their future safety and security. They use the money to build a safe refuge for themselves. But others do transfer their lawful funds using illegal routes since they are not allowed to transfer funds legally beyond a certain amount. These people are forced to take recourse to illegal routes.

If a part of the funds, taken out legally or illegally, is invested in productive activities abroad, it is not a bad development. The government has the option to look into such investments. The US State Department report might have the names and locations of the investment made by the Bangladeshi investors abroad. The Financial Intelligence Unit (FIU) of the central bank might be entrusted with the task of locating those investors and doing the needful. But finding them would be a tough task.

The companies or individuals involved in illegal fund transfers do deserve punishment under the laws of the land. But, as an initial step, the government might ask them to repatriate the profit back home and pay tax on the same.

The policymakers, however, do need to take a cautious yet relaxed approach towards investment by Bangladeshi entrepreneurs abroad. The government has already allowed some business houses to invest in several countries, including a couple in Africa. The government does need to keep track of the performance level of such investments and ensure repatriation of profit back home.

Such an approach will be needed when the country would attain the developing country status. With the attainment of the status, it would have to give up some trade concessions it now enjoys in many developed markets. To recover that loss, Bangladesh might be required to make investments in countries that have been enjoying such concessions.

[email protected]