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Is it a rise in machinery import or in money laundering?

Published : Saturday, 3 December, 2016 at 12:00 AM  Count : 375
Haradhan Ganguly
Investments are not showing desired growth though prevailing bank interest rates are declining as per Bangladesh Bank's (BB) statistics. Bank's default scenario is getting wider day by day, thanks to BB's monitoring exercise. On the other side, machinery imports have been more than double. How funny it is! Production capacity build-up is going upward by importing more capital goods wherein investment lags far behind. How? Is it a raining without cloud? Is it a shining without the sun? The very recently given variables are confusing the financial sector analyses. This has led to saying by 'naughty boys' that higher imports appear to be an easy route for money laundering; otherwise it is not possible for a section of  businesses to buy new homes abroad, particularly in Canada and Singapore. Since businessmen have to pay only 1 per cent duty on the import of capital machinery, an 'honest section' of them are showing inflated prices. This is not an allegation or a hypothesis. It is a proving truth.
Erstwhile, it was an acceptance that higher bank interest rates were attributing to growing defaulting. But today's reality says opposite. Bank interest rates are showing down trend. Besides, some special facilities including facilities of restructuring of loans have brought in exceptional chances for big loan takers. But terrain goes opposite. Instead of declining, defaulting is enhancing in a big stride. During nine months up to September of the current year, loan default has reached TK 14 thousand 360 crore. The extent of total defaulting in the entire banking sector up to September 2016 stands at TK 65 thousand 731 crore. It is 10.24 per cent of the total bank loan disbursed. Political atmosphere is prevalent to be semblance of peace. Interest rates are declining. But dynamism is not found to be discernible.
Entrepreneurs are not coming forward to invest in the manner it is desired. But their cheering up of having big loans and getting it in an easy way from banks are not diminishing. A culture of a big chunk of money being swallowed without giving back to banks has been swayed upon the entire institutional credit regime. Big guns being empowered and blessed with many variables including political ones have been contributing to expanding defaulting without enhancing productivity. But small entrepreneurs including SME and players of rural informal sectors are very much disciplined with having time-bound responsiveness to repay bank loans. "...not that we are always successful, as bad hats always make their way to the board", the Finance Minister told reporters at the secretariat when he was asked about the loan scandal at state-owned Rupali Bank. Rupali has lent TK151 crore to a gold trader in Feni with much scrutiny. Of the amount, TK 60 crore was approved by the board and the remaining TK 73 crore was lent without any approval. The Daily Prothom Alo has recently reported this. A number of branch managers admitted that the loans were given to gold trader Anwar Hossain being instructed by 'the top', indicating the management and the board. It bears the testimony to our comment made above. State banks continue to be afflicted by large-scale financial felonies despite the government efforts in recent years to stop picking up board members on political considerations.
Nevertheless, irregular activities take place in the banking sector. Large loans are given without collateral. In many cases, acquaintances get loans and particularly those who are acquaintances with the people in the board and management resulting in piling up of loan defaulting. Even lower lending rates could not create any salutary effects on investment. BB's statement said, up to last December, default loan was TK 51 thousand 371 crore wherein in nine months gap, defaulting enhanced to the tune of TK 14 thousand 360 crore. In nine months we see a 28 per cent increase. Loan defaulting up to September of the last year was TK 54 thousand 708 crore. In one year gap we see a 20 per cent enhancement in the amount of default loans. Up to last quarter that ended in June in 2016, TK 63 thousand 365 crore was default loan. In three months gap, it increased to TK 2 thousand 366 crore. State-owned banks like Sonali, Janata, Agrani, Rupali, Basic and Bangladesh Development bank (BDBL) owe to loan faulting up to 29 thousand 956 crore within the discussing time. It was TK 23 thousand 745 crore up to December of the last year. Within nine months, this six state-owned banks owe to TK 6 thousand 211 crore defaulting. Even two state-owned specialized banks --- Agriculture and Rajshahi agriculture Development Bank --- are not far off being victim of defaulting. They have TK 5 thousand 817 crore defaulting which was TK 4 thousand 967 crore nine month earlier. Even 39 private banks have been suffering from the same disease of default culture with an amount of TK 27 thousand 689 crore defaulting loan in the first nine months of 2016. Up to December 2015, it was TK 20 thousand 760 crore. More or less, the entire gamut of our institutional lending regime has seriously been infected by growing defaulting. Such defaults are making the banks' capital adequacy ratio (CAR) weak. The government is providing funds from budgetary provision for revamping state-owned banks' operation.
But our focus is destined to be otherwise. With the ever growing defaulting, where does the banks' money go? They are not coming to productive investment. Since private investment is not getting invigorated. So! There is an allegation that businesses launder money in the name of importing capital machineries as there are duty benefits. Businessmen have to pay only 1 per cent duty on import of capital machineries. So a section of the importers show higher prices. In addition, the very mismatching of over and under invoicing is bringing in ample opportunity for money laundering and that is happening in our international trades. This hypothesis comes true when we see capital machinery imports have become more than double in the first quarter of the current fiscal 2016-17 in comparison to a year earlier. Between July and September, letters of credit for import of capital machineries worth over $1.8 billion against the sum of $820 million a year earlier, according to BB data. This increase is triggered on the back of the remediation works being carried out by garment factories. It is said the government infrastructure projects and expansion of steel mills and food processing sectors also contributed to the spike in capital machinery imports. If this claim is true, then why do we say the lacking of desired investment? Therefore, from this column we are demanding stern enquiry into the total matter. From a long past, we are hearing money laundering is taking place through the passage of mismatch in over and under invoicing. Bank authorities cannot stop it as there are many grades and qualities of products. But devices must be there to stop it since it should not let to be run for an unforeseeable period of time. r
Haradhan Ganguly is a freelance contributor and Secretary, United Nations Association of Bangladesh (UNAB). Email: gharadhan@gmail.com





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