Anomalies in trade data point to capital flight: Wahiduddin
Sayeed
Anomalies in trade statistics result in unexplained errors in balance of payments (BoP), indicating capital flight out of the country, Prof Wahiduddin Mahmud said yesterday.
Such inconsistencies may hide under- and over-invoicing of exports and imports and underlie money laundering, the economist said at a workshop at Bangladesh Bureau of Statistics office.
The government's statistical agency organised the programme to make public the draft National Strategy for the Development Statistics among stakeholders, including economists.
Mahmud, also a former adviser to a caretaker government, said exports and imports data are compiled by different government agencies.
Capital flight may be a cause of such discrepancies in the trade data and errors and omission in BoP, he said.
There have been allegations that a huge amount of fund flows out of the country illegally.
Various means such as under- and over-invoicing of exported and imported goods, and hundi, an informal way of transferring fund, help in capital flight.
Another way is misusing a system -- transfer pricing -- through which divisions of foreign or multinational companies transact with each other for goods or services available in separate countries.
Some $34.12 billion flew out of Bangladesh between the years 1990 and 2008 through the transfer pricing mechanism by foreign firms, according to an estimate by Global Financial Integrity, a Washington-based firm.
It means the country lost $1.8 billion in capital a year during this period.
Mahmud said hundi remains beyond the official estimate.
"There are loopholes even within the official system of reporting for which capital flight can not be captured," he said, "If we do not know the volume of these transactions, how can we take measures to prevent those?"
He asked for greater surveillance of exports, imports and other foreign exchange transactions to plug the loopholes.
"It will not only help generate better BoP data but also detect money laundering and capital flight activities," he said.