Muhith questions pvt investment abroad

The foreign destination of private investment is becoming questionable as the investment is made largely with black money, Finance Minister AMA Muhith said yesterday.

Many made investments abroad and the matter is now public knowledge. The media also reported on investment in the housing sectors in Malaysia and Singapore, he said.

“The source of this investment is black money. Because of this black money, capital flight takes place,” Muhith said at a pre-budget discussion with a group of economists at the state guesthouse Padma.

Capital flight occurs when assets or money rapidly flow out of a country.

The latest data of illegal capital flight from Bangladesh is not available. But it surged 33.78 percent year-on-year to $9.66 billion in 2013 through trade misinvoicing and other channels, according to a report of Global Financial Integrity.

Private investment as a percentage of gross domestic product (GDP) declined to a three-year low of 21.78 percent in fiscal 2016, according to a World Bank report published in October last year.

It is not clear whether this dipping investment is linked to the capital flight.

Speaking at the pre-budget discussion, several economists said the booming economy manifested that private investments were being made in the country. However, money is also being siphoned off the country. 

In reply, Muhith said the government was planning to set up a banking commission to help the sector get rid of its problems.

“The banking sector is growing well. But the difficulties it is facing have become acute.”

He, however, said the decision about the commission had not been made yet, and that he would consider the matter ahead of the next budget to be unveiled in June.

The country's top economists have long been demanding a banking commission to keep the irregularity-struck banking sector on the right track.

The banking sector of Bangladesh has been plagued with a number of disappointing trends for some time. This has impacted the soundness of the banking system and resulted in huge losses for the sector, Fahmida Khatun, an economist, said recently.

Irregularities have hit a number of private and state banks in recent years. Even serious governance issue has been reported in some new private banks.

The finance minister promised to set up the commission in the past.

“There is an urgent need for setting up a banking commission to scrutinise the overall situation of the banking sector and solicit concrete recommendations for a dynamic sector,” said Fahmida Khatun, also executive director of the Centre for Policy Dialogue.