The Financial Express

The goings on of profiteering

| Updated: November 02, 2021 21:20:46

The goings on of profiteering

The free-market theories eschewed by mostly western economists are fast proving to be a guise under which developed economies seek to penetrate barriers and further milk the developing world. Years of frenetic wrangling over the World Trade Organization's (WTO) windows of opportunity resulted in an agreement grudgingly conceded by the developing countries. With the same competitive costs that were once alluring eating into and causing stagnation, the developed world wants changes, comically so. The United Kingdom (UK) now encourages investment in its stated policy of going green moving 180 degrees away from previous muscling for fossil fuel extraction and the consequential industrialisation to smoothen the flow. The United States has raked in a massive $26 trillion dollar debt that includes investments in renewable energy, doubling down from the previous administration's journey towards increasing dependence on fossils while demoting renewable energy.

Caught in between has been the developing world. Countries such as Bangladesh has pushed hard at energy generation through expensive quick rentals using diesel. The move towards utilising coal has, thankfully been pulled back though existing plants will continue to function. Just as the Rooppur nuclear power plant trundles into gear, we are told of another such initiative in the pipeline. Despite being one of the lowest carbon emitters, the country has found few friends to fund adaptive, preventative and mitigation measures to address the already visible effects of climate change. Beefing up of the stock exchange to raise funds and investments for development has been one such factor. Repeated assassination of the exchange by sudden pull-out by overseas investors has been the main cause why the exchange has never functioned as it should have.

The obvious manipulators have made merry. The recent decision by directors of an insurance company to off-load their shares has created panic and a selling spree. Of little importance has been that the company concerned hasn't actually taken off in performance. Some years ago there was pressure on the government to open up the services sectors such as insurance and audit firms to foreign investors. The government stood its ground and instead encouraged joint-venture initiatives. It's just as well that it did. The activities of some of the world renowned securities, audit and indeed, banking institutions that triggered a collapse in the world economy provides beef to the argument.

The parallel decision to grant greater leeway to local business has allowed for admirable growth. The question is whether it is time to draw in the leash. Export business, online enterprise and banking have all failed to hold their own in times of stress. That's after all the stress tests followed. Begging bowls for stimulus came out last year. The government complied. Yet, even with remarkable rebounds by the export sector, there has been a foot dragging tendency towards repaying loan incentives at low interest rates. Online business has exploded. This touted as the most promising sector is now reeling in the face of unrealistic debt-equity ratios, utilising consumer advances to fund the business and siphoning off of moneys. It has taken the High Court to appoint a group of administrators to figure out Evaly debacle. It doesn't say much for governance that consumers actually protested against such a move in the fear that such a group would die a natural death in the quagmire of the law.

Despite repeated injection of funds by the government a number of banks and non-banking financial institutions are in precarious conditions. So much so that the anticipated mergers haven't taken place. Directors, mostly guilty of either taking or causing loans to be released without properly evaluated business cases, haven't been taken to task. The blame has gone mainly to the paid executives, some of whom are grossly guilty. By the time such cases are ruled upon by courts, too much water will have flowed under the bridge. In between depositors are left hung out to dry.

Business guidelines for all such online enterprises should have been framed before allowing them the licence to operate. Banking laws must be changed to prevent such spurious activity. Accountability must be ensured. For all the cajoling, persuasion and nudges to fund SMEs, banks have been tardy. Yet that's where the heart of the economy is in terms of turnover, repayment efficiency and employment.

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