A total of $14.059 billion had been siphoned off from Bangladesh in 10 years since 2001 through trade mis-invoicing, corruption, bribery and tax evasion, said a report of Washington-based Global Financial Integrity (GFI).
Of the money, $10.597 billion [almost 75 percent] were transferred through under- and over-invoicing of exported and imported goods, said the report styled Illicit Financial Flows from Developing Countries: 2001-2010, released on December 17.
Bangladesh has been ranked 44th out of 143 developing countries from where money is transferred illegally to developed economies. In South Asia, Bangladesh is placed second, India being the first, in terms of the illicit fund outflow.
Economists Dev Kar and Sarah Freitas prepared the fourth report of the GFI.
“The capital outflows stem from crime, corruption, tax evasion and other illegal activities,” the report said, adding that the developing countries had lost $5.86 trillion to illicit outflows from 2001-2010.
The study found that Asia accounted for 61 percent of total illicit outflows from the developing world with China losing the highest amount. Mexico, Malaysia, Saudi Arabia, Russia comes after China in the global ranking.
“Indeed five of the ten countries with the largest illicit outflows (China, Malaysia, the Philippines, India, and Indonesia) are from Asia,” said the GFI.
It said globally trade mis-invoicing accountd for 80 percent of cumulative illegal flows from the developing countries over this period. The rest of the unlawful transfers took place through corruption, bribery, theft and kickbacks.
The GFI study revealed that $1.406 billion had been siphoned off from Bangladesh on a yearly average. The highest amount of fund -- more than $2 billion -- was sent out in 2006-2007.
The extent of the illegal money transfer dropped a bit in the next two years but shot up in 2010, according to the report.
Ahsan H Mansur, executive director of Policy Research Institute (PRI), said estimation of the real amount of illegal fund outflow is difficult.
“But it is well-known that large amount of money is going out of Bangladesh, India and other developing countries. The first world countries are the main beneficiary of the outflow,” he said.
He blamed the political and economic insecurity for the loss. Lack of quality infrastructure for health and education sectors is another factor behind the illegal fund transfer, said Mansur, a former economist at International Monetary Fund.
Giving instances of many well-off Bangladeshi people buying houses abroad and sending their children there for education, he said, “There are hundreds of Bangladeshi families living in Canada, but they earn in Bangladesh.”
On fake invoicing of exports and imports, he said over-invoicing takes place in those products that have lower import duty.
“Capital machinery and raw material are the main source of illegal transfers,” said Mansur referring to Bangladesh, adding that the real estate business such as sale of apartment and transfer mis-pricing were the other factors.
“The solution is to improve economic and political security so that people feel comfortable in their homes. At the same time, infrastructure has to be improved for better living. The people will not send money out of the country if general economic outlook is promising. There is no short-term solution,” he said.
Towfiqul Islam Khan, senior research associate of the Centre for Policy Dialogue, said the latest findings of the GFI were based on a more conservative estimation.
An earlier estimate from the United Nations Development Programme (UNDP) by Dev Kar suggests that Bangladesh lost about $34.8 billion in 1990-2008; this would be equivalent to $1.8 billion per year, said Khan.
The GFI said the illicit outflows measured were approximately 10 times the $88 billion of net official development assistance (ODA) that went into these developing countries in 2010.
The report recommended increasing of transparency in the global financial system to reduce the outflow of illicit money from developing countries.