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The anti-graft watchdog Transparency International Bangladesh (TIB) recently expressed dissatisfaction over the absence of any gold policy in the country and its consequences. The TIB echoed what common people already knew: the absence of such a gold policy has left the entire gold market to manipulative tactics of smugglers and the persons associated with them. This leads purchasers of gold coins and ornaments to pay more and also deprive the government from earning due amount of revenue.
No research was undertaken in the past to let the people know of how much gold and gold ornaments is demanded annually by investors or users in the country and what is their market value. The TIB research, though minuscule, perhaps is the first of its kind. What this anti-graft watchdog found was that annually demand for gold ranges between 18 and 31 metric tons, most of which are coming to the country through smuggling, TIB researchers also found that a huge quantity of smuggled gold is being seized at airports by the customs officials and the government is losing a revenue amounting up to Tk.9.74 billion per annum because of smuggling. However, the TIB did not do any research on how much extra cost the purchasers of gold are paying back at home. That would simply be a staggering amount.
There is no competitiveness in gold market; there is no monitoring from any independent watchdog of the operation of gold market. The gold price at home is fixed up by the gold traders' association. We do not know in how many other countries gold prices, be that for ornaments or for industrial use are fixed up by the gold traders themselves. These types of price fixing are illegal under the present Bangladesh laws. There is a gold market, may be a big one, without any competition. One wonders how such a market can exist in Bangladesh's private sector. Gold traders are selling spurious products to customers but nobody is there to ask what they are selling.
The traders will not want a transparent gold policy as that will curb their opportunity of making exorbitant profit from gold trades. It is the government which is to come forward with a transparent gold policy in the public interest, as well as for collecting a huge amount of revenue from this trade. Had the gold market been made open, ornament and gold-related industries would have been set up in the country long ago. Such industries would have employed thousands of people as well. It could offer a good route for investment for middle and upper middle class people.
Taking advantage of the absence of competition globally in gold trade, some countries, including India, are exporting gold ornaments of huge amount and Bangladeshi expatriates are also buying gold from such sources. India alone exported gold ornaments of more than $ 40 billion in the last fiscal year. The country aims at taking the same beyond $ 50 billion in the next few years. Bangladesh has waited too long on this issue and we urge the country's policymakers to look into the gold market rationally.
Media reports say the Export Promotion Bureau has made a set of recommendations to the authorities for opening up the gold market. We urge the government to look into the issue seriously. It is wrong to think that if gold market is made open, a huge amount of foreign exchange will go out of the country. For making the gold market transparent and competitive, the import of gold has to be made easy with lower levy on such import. Once import of gold is made open like other commodities, there will be a competition at every stage of this trade. A jewellery industry will grow providing ornament buyers an opportunity to buy this item at competitive price. The present captive gold market is serving nobody's interest except that of gold traders and smugglers.
The writer is Professor of Economics at the University of Dhaka.