EDEN BUILDING TO STOCK EXCHANGE

https://dailyasianage.com/news/210491/of-the-eight-crore-stakeholders--of-hundi-market

Published: 01:32 AM, 22 December 2019

Of the eight crore stakeholders of Hundi market

M S Siddiqui Bangladesh had a total export of 31,734,162.42 thousand dollars and total imports of 48,058,710.04. Bangladesh services export is 3,859,114,757.66, current US$ and services import is 9,262,672,910.45 as per statistics of World Integrated Trade Solutions. Bangladesh is trying to increase the number of exporting products other than garments and has taken a landmark decision to identify 18 categories of service exporter through Export Policy Order 2015-18. Service should be a source of export earnings for Bangladesh. Service is one of unique and is determined depending on the territorial presence of the supplier and the consumer at the time of the transaction. According to Article I:2, the General Agreement on Trade in Service (GATS)of WTO covers services supplied, (1) serving from the territory of one country into the territory of any other country (Mode 1 - Cross border trade); (2) serving in the territory of one country to the consumer of any other country (Mode 2 - Consumption abroad), (3) Service by a supplier of one country, through commercial presence, in the territory of any other country (Mode 3 - Commercial presence); and (4) service by a supplier of one country, through the presence of natural persons of a country in the territory of any other country (Mode 4 - Presence of natural persons). There are many outsourcing companies providing service through its telecommunications to overseas clients working at the Bangladesh office to their clients in other countries (Mode 1). As tourists, students, or patients to consume the respective services are coming to Bangladesh to get service from transport, hotel and other services (Mode 2)' There are some service providers by a locally-established affiliate, subsidiary, or representative office of a foreign-owned and - controlled company (bank, hotel group, construction company, etc established office in other countries to provide services (Mode 3) and foreign national provides service going to other countries in person as an independent supplier (e.g., consultant, health worker) or employee of a service supplier (e.g. consultancy firm, hospital, construction company). Bangladesh migrant workers are under this category (Mode 4) as they are staying in the territory of other countries to give service. The service exports are so wide and invisible and there are unlimited opportunities for expansion of these sectors. Bangladesh government recognized the sectors but different regulating authorities are reluctant to accept these as export of service under these 4 modes. The migrant workers are the major source of service export and earner of foreign currency. The number of expatriates is over 1 crore and it is impossible to calculate their total income and their total remittance. Wage-earners are absolutely beyond their control as the foreign exchange law cannot force them to repatriate their earnings to Bangladesh. Their remittances in Bangladesh averaged 1212.94

USD Million from 2012 until 2019 through official channel and sending more than this amount through Hundi. Bangladesh import around US$50b per annum from other countries. The most of the import are channelized through the agent of overseas suppliers. These agents are named as Indentor in the Import and Export (Control) Act 1950 and Importers, Exporters and Indentors Registration Rule 1981. The National Board of Revenue (NBR) yet accepts Indentors as service exporter and imposed 15% VAT and 8% Advance Income Tax on all inbound commission against service exporter to other countries. There is an apprehension that agents are discouraged to bring their service export earnings to Bangladesh due to VAT and abnormally high AIT. If the agent earned an average 3% commission on Invoice value, the amount of commission should be around US$1.5b. Some other similar service exporters such as travel agents, Hotels, Forwarding agents and Buying agents are also not recognized by relevant regulators. These service exporters also earn a sizable amount of foreign exchange. There are also lawyers, solicitors and charter accountants who receive remunerations from overseas principals. Writers and authors get money from foreign journals and publishers. Consultants also collect consultancy fees from agencies and business houses abroad. In short, Bangladesh earns a handsome amount of money through many sources without moving to other countries. The problem is the strict rule of transactions of foreign currencies. Bangladeshi nationals are not allowed to open Bank account in other countries and any remittance to their account subject to scrutiny of central Bank. A fear always discourages them to bring legally earned money to Bangladesh. The policy of Bangladesh is to monitor and regulate the declared business earnings, which discourage the FE earners to bring their income through official accounts. In many cases due to diversified methods of transaction, Bangladesh Bank cannot monitor these remittances which fall under illegal hundi transaction or money laundering. Bangladesh restricted the sale of foreign currency and permit to sell only to banks upon remitted to the country at a fixed rate while the price of currency in the hundi market is higher. Government has stopped facilities of FE earners to Bank, government or importers at market price for benefit of Banks at the cost of poor FE earners. This policy is also one of the reasons for development of hundi market. Unfortunately, there are instances of diverting the fund to other locations of the world. It was estimated that $7.2 billion in 2012, $9.6 billion in 2013, $6.3 billion in 2014, and $5.9 billion in 2015 has been laundered to other countries. Bangladeshi taka is being sent to Malaysia, Singapore, Australia and Canada and the USA. The number of citizens from different professions invests in those countries as security as they don't feel safe of life and illegally earned money. The price of the dollar increased against taka because of a rise in money laundering through hundi. The supplies come mostly from FE earners Bangladesh nationals many of whom succumb to the lure of higher price of their hard-earned money. Sometimes market insiders understand the demand of FE to transfer abroad and the price of foreign currency go up. These launders money is transferred from source of income (particularly middle east) to other destination like USA, Canada, Malaysia etc. Interestingly, everybody is vocal against hundi and illicit transfer of money abroad but all of them need foreign currency for medical service, education of their children and other purpose. The

allocation of foreign currency is not sufficient for trouble abroad for many purposes. It is essential for which access to official channel is either prohibited or limited. These demands arise chiefly from (a) the need to finance smuggling, (b) under-invoicing of imports to reduce the incidence of duties and taxes, (c) to transfer wealth, (d) to meet expenses for treatment and education abroad (official allocation is either inadequate or access is difficult), and (e) for investment in business or real estate. The Anti-Money Laundering Act of Bangladesh alone is a very standard law up to global standard. The expatriates living with family, students studying in other countries, patients taking treatment abroad and tourist and other visitors and their close relatives are involved in money laundering due to strict monetary policy and Foreign Exchange Regulation Act, 1947. Interestingly, it is estimated that about half of population i.e. 8 crore citizens are involved in act of money laundering and beneficiary of laundering of FE. All of them can be indicated under the Anti-money laundering act. Hundi is inevitable devil of exchange market to feed illegal transactions but in the international market, it is the result of strict and old fashioned foreign exchange policy. According to IMF annual survey most of the countries, especially those who have opted for convertibility of their currencies, have abandoned the requirement of compulsory repatriation of invisible earnings. A similar step may be taken in Bangladesh also to save business community from the hassles and expenses--visible as well as invisible -- that go with registration and submission of returns for all inbound FE income. The beneficiary of the hundi market is all the profession of this country, particularly who earned money from bribe and kick-back of government development works. They are the major buyer of foreign currency from the hundi market. The action of law enforcers is not the solution, rather these types of actions may drive the money to the underground and undermine the liquidity in the banking system. The law enforcers cannot stop all the source of illegal income unless eliminate the root cause of corruption and convertible currency to give due price of hard-earned foreign currency of workers abroad. The source of FE in the hundi market should be discouraged and bring them to formal FE market offering them the real price of their FE. There is no need for a protected profit of Banks from buying and selling of FE without any effort. The expatriates should be allowed to sell their hard earn currency at market price to the bank, government, travellers to other countries and importers at their convenient. Hundi market is essential for corrupt people of all professions particularly influential section of the society. Foreign earners or poor expatriates are the supply of FE since they are deprived of the due price of currency due to force purchase of currency by banks at a fixed price. It can be reduced with the reduction of corruption and offering due price of FE to the expatriates who earn money for their hard work. The writer is a Legal Economist. Email: mssiddiqui2035@gmail.com.