The Centre for Policy Dialogue yesterday advised the government to investigate whether capital flight has taken place by way of sugar, edible oil and cotton imports.
“There is no resemblance between export and import growth of garment and cotton,” said Mustafizur Rahman, distinguished fellow of the CPD, while unveiling the private think-tank's latest study at an event held at the capital's Cirdap auditorium.
In the first four months of the fiscal year, the apparel export growth was recorded at 7 percent while the import growth of cotton was recorded at 75 percent, he said.
“Despite global price stability of raw cotton and an upturn in the growth of garment exports, the high growth of over 75 percent in import payments for this item appears to be suspicious,” the CPD said in its State of the Bangladesh Economy in FY2017-18.
There has not been any fall in yarn and fabrics import, neither has there been a sudden spurt in investment in spinning.
Given the fall in prices of raw cotton, the high imports would allude to very high volumes, which reinforces the need for investigation into the matter, the CPD said.
In a similar vein, the import bill for edible oil and sugar soared 29.3 percent and 50.8 percent respectively during the period.
Given the declining global price of sugar, this high growth suggests large increases in volume, the CPD said in the report. It is the same case for edible oil. These trends call for appropriate checking of the market by the commerce ministry for overstocking of edible oil and sugar. Some $8 billion to $9 billion of capital flight takes place from Bangladesh every year and 80 percent of it happens through misinvoicing.
But Mehdi Ali, president of the Bangladesh Cotton Association, dismissed CPD's observations. “I am surprised with the CPD's findings as there is no chance for capital flight through cotton imports.”
The reason for the higher cotton imports is that the capacity of the spinning mills has increased over the years.
In fiscal 2016-17, Bangladesh imported 6.5 million bales of cotton, up from 5.5 million bales a year earlier. At the end of the current fiscal year, Bangladesh may import 7.1 million bales of cotton, he said.
The demand for the natural fibre is on the rise in Bangladesh as it is the only country that is still mainly dependent on raw cotton for making yarns and fabrics.
Growth in import payments of other intermediate goods such as textile and yarn and dyeing and tanning materials was high, which suggests there would be potential positive impact on exports over the subsequent two quarters of fiscal 2017-18.
The import of chemicals (18 percent), plastic and rubber (21.3 percent), iron and steel (16.2 percent) and clinker (12.6 percent) showed particularly high growth.
In general, the import figures for certain items do not tally well with the global price movement, letter of credit settlement figures, domestic production and credit uptake and investment trends.
Subsequently, the CPD called for closer scrutiny by the National Board of Revenue and the Bangladesh Bank to identify cases of over-invoicing and capital flight.
The policymakers should also keep in mind that the country may face additional burden of import payments in the second half of the fiscal year as the price of some key imported commodities such as crude oil evinced signs of rise.
In general, import payments recorded significant growth to the tune of 28.7 percent during the first four months of fiscal 2017-18, according to the CPD report.