Banks to be recovered from hands of crooks

Ahsan H Mansoor served in the Middle East and Central Asia Department of the International Monetary Fund from 1996 to 2007

Mahfuz Emran: Dr. Ahsan H Mansoor is the newly appointed Governor of Bangladesh Bank. Prior to this, he served as the Executive Director of the Policy Research Institute, International Monetary Fund (IMF) served in various important positions. Ahsan H Mansoor took over charge as the 13th Governor of Bangladesh. The former chairman of BRAC Bank studied economics at Dhaka University and started his professional career there as a teacher.
After some times, he left for Canada for higher education in economics. He holds a Masters in Economics from McMaster University and a PhD from the University of Western Ontario. He joined the International Monetary Fund under the Economist Program in 1981 while pursuing his Ph.D. During his long career at the IMF, he worked in countries in the Middle East, Asia, Africa and Central America.
Also worked in the Fiscal Affairs and Policy Review and Development Divisions of the IMF. In the second phase, Ahsan Mansoor served in the Middle East and Central Asia Department of the International Monetary Fund from 1996 to 2007.
In 1989, he became Finance Advisor to former Finance Minister Wahidul Haque and served till 1991. He was also instrumental in the introduction of Value Added Tax in Bangladesh in 1991.
Talked to media about various aspects and reforms of Bangladesh’s economy and banking sector
Question: New interim government takes over. What aspects do you think they need to look at the moment?
Ahsan H. Mansoor: A big change happened in Bangladesh very quickly. No one imagined that everything would happen so quickly. As a result, nothing is planned. The problems that are going on in our economy have been going on for a long time. The previous government was ignoring these problems, many of them were deliberately created. Many problems including looters, debtors are deliberate and planned. As a result, the new government will have to deal with many aspects.
First of all, the government has to improve the law and order situation and with it control the apparent chaos in the financial sector. Here I am not talking about internal chaos but external chaos like street shootings, attacks by one side on another side, market control etc. Recently there was a shooting incident in a bank. It is unexpected, but it happens naturally in such situations. I think they can be solved very quickly.
Question: Ever since the new government took over, there has been talk of reforming the state. How do you think the economic sector can be reformed in this case?
Ahsan H. Mansoor: I would like to discuss the problems in the economic sector mainly by dividing them into several parts. First, the political problem of the economic sector. It needs to be purified through political engineering. So that the next government does not turn into another dictatorship, the constitution should be resolved through a referendum with the people together with the experts. It is time consuming. Elections at the moment will not solve this underlying problem. Today there is one family, if this family goes tomorrow another family will come and Bangladesh will not be able to get out of this family system. To get out of here some fundamental changes have to be made.
Secondly, corruption in Bangladesh should be stopped. Every service sector has been engineered and taken over. That is, the service that is supposed to be received at the land office for Tk 1000 will be asked for Tk 1 lakh. Tk 5-10 lakhs depending on the case. And they are doing it because they have the power. It is gross abuse of power. I have applied for a passport or national identity card, it appears that there is an error. Whether they want it or not, I don’t know. But to correct this mistake I have to suffer extreme financial and emotional harassment. Thus, every government service has to be bribed. Public services which should be free in the country have to be bought at high cost by the people. And the people of the country have become extremely dissatisfied.
I have lived in western countries for 32 years for professional reasons. I never had to pay a bribe to get any government service there. In 32 years, no one has ever had to say, this will not work here. I once visited a land office there. While parking the car, I saw it written there, you can park the car for 15 minutes. I thought, I will not do my job today. I will just leave the office. Because I have 15 minutes. I entered the office, gave my address and mentioned a land deed work. I asked them how long it will take? They took five minutes from me. I have deposited the fee at the specified place. In the meantime, I’m done. I saw that I still had 7-8 minutes left.
But what would happen if I went to a land office in Bangladesh? People want freedom from corruption and corruption in every government service in Bangladesh. People will be most happy if the access to government services is smooth. If you go to the police station, you have to pay bribe, if you don’t pay bribe, there will be no FIR, this is challenging my fundamental rights. If the government can bring changes in these areas, then I think the people of this country will remember this government for the rest of their lives. I think it is possible if you want.
Question: Is it possible to make government offices corruption-free?
Ahsan H. Mansoor: Definitely possible. Government officials should be held accountable. If a person makes a complaint against an officer, it should be investigated. If more than one person complains against the same official and the complaint is found to be true then he should be expelled. If the government can take such a strict stand, then this country will change radically.
Those who are corrupt are the ones who smuggle money abroad. If corruption can be stopped, money laundering will also be stopped. The country’s reserve crisis will be reduced to a large extent. Social balance will return. Now it can be seen that a minor tax officer has five houses in Dhaka city. A peon of Rajuk also owns ten houses, Tk 100 crore. How are they making this money? Our society needs to get out of this place. Corruption, irregularities must be stopped. This society must be saved.
Question: What kind of reforms do you think is necessary in the overall economic system of the country?
Ahsan H. Mansoor: There are two types of challenges in the overall economic system of the country. One is macroeconomic reform, which includes problems such as inflation, foreign exchange crisis, exchange rate instability, import crisis and money laundering. Right now, a lot of people in the country have bags of money. They are hiding with a huge amount of illegal money. They will try to smuggle this money abroad at any opportunity. Efforts should be made to prevent this trafficking as much as possible and to solve the crisis of foreign reserves by discussing with international donor groups. With the international recognition that Muhammad Yunus has, it will not be difficult at this point to get large-scale international loan assistance.
Another is the structural challenge. The kind of looting that has taken place in the country’s banking sector will indeed be difficult to overcome. First, we have to investigate, what is the condition of any bank at the moment. Who is involved in the looting and how terrible is the scope of the looting? The government may set up a separate commission to nab the big groups involved in this looting.
The government should take all legal measures to catch looters inside and outside the country. Before that steps should be taken to save the banks. Banks have to provide the required capital. Whether it is necessary to keep all the banks or not and whether it is possible to merge some banks should be looked into. Some banks will have to change ownership. Banks need to be protected from rogue groups. These reforms should be done on the basis of a roadmap taken by the bank.
Question: What is the need to reform Bangladesh Bank? How to do that?
Ahsan H. Mansoor: Mao Tse Tung had a saying-the rotting of a fish begins at its head. That is, if the heads are right then it is much easier to prevent the downward fall. And if it rots in the head, it becomes difficult to fix it. Bangladesh’s biggest problem was that the head of the country was extremely corrupt. As a result, the center of the institutions has also become corrupt. These institutions have unethically supported the head of the country. Bank robberies are condoned and covered up. So, if the heads can be fixed then it will be easy to establish good governance.
Another area that needs major reforms is the country’s revenue sector. The three sectors under the revenue sector should have separate committees for reforms. They will prepare the reform roadmap for each sector separately. The next task will be to implement that roadmap. The entire revenue sector should be brought under online automation system. Tax officers and taxpayers should not meet face to face in any way. If this system can be done, bribery will stop here. This system is strictly followed in America.
Question: Many people say that one of the biggest problems of Bangladeshi banks is its board of directors. What is your opinion on this? Is there no solution?
Ahsan H. Mansoor: Bangladesh Bank is definitely responsible here. However, the prime minister’s office bears the greatest responsibility. Instructions have been given from the Prime Minister’s office that they cannot be caught. The principle of banking is the fit and proper test. There is no question of owning banks who do not pass the fit and proper test. Bank ownership has been given to looter groups in our country. The government did this intentionally.
Question: A major problem in the banking sector of Bangladesh is non-performing loans. What can be done to reduce it?
Ahsan H Mansoor: It is not only the size of defaulted loans but also the type that needs to be looked at. Who has defaulted, where it is happening, who is involved in it – every bank should make a list and find out this information. It is not difficult to understand whether the default is intentional or unintentional by looking at the time of default. If the central bank is run by honest people and if there is no political pressure, it will not be difficult to bring the defaulters to justice.
Question: What should the government do to control the existing high inflation in Bangladesh?
Ahsan H Mansoor: We have always said that the government has put us in a trap with nine-six interest rates and our monetary policy has become ineffective. That means we are running on nine-six monetary policy. We have always talked about market-based exchange rates. But the exchange rate has always been manipulated by calls from the upper echelons of the government. We have always said that money cannot be printed for the government’s budget and liquidity cannot be given to banks in the name of bank protection. But the government did not listen. In particular, Islamic banks under the control of the S Alam Group have been given massive liquidity. This money has flowed into the market and has little impact on inflation. If the government adopts a policy that under no circumstances can money be printed, then inflation is bound to come down.
Question: Every month a large amount is withdrawn from the reserve to repay the foreign debt. How to fix our critical reserves?
Ahsan H. Mansoor: A full assessment of Bangladesh’s remaining reserves and foreign liabilities is needed at this time. The government may not be able to pay off all its external debt at the moment. How to extend the repayment period should be discussed with the concerned countries and institutions. This government will reform everything. And for that reform, foreign currency will be needed as economic support. I hope that the head of the government will be able to contact the international community and bring loan assistance of $8-10 billion very easily.
Question: To what extent do you think remittances and exports can play a role in reducing economic pressure?
Ahsan H Mansoor: There will be some immediate response through remittance but I don’t think it will be much. Because a lot of money will be smuggled through hundi and other means from here. Those who have saved billions of taka in the country, they will launder the money. It is not correct to say that the export income will increase suddenly. We have to live with what we have. At the same time try to increase as much as possible. Extortion of transport, time at the port should be reduced. Manage the current situation with time to correct other issues.
Question: Is it possible to improve the economy by strengthening the local government?
Ahsan H. Mansoor: Local government should be strengthened. Upazila and Zilla Parishads should be given more powers. They have to pay some taxation authorities and some state services are to be provided through them. For example, primary and secondary education may be left to the district level. I don’t see any need to keep it Dhaka-centric. University education should be central.
Local health or public health and immunization activities may also be left to the district level. It does not need to be done from Dhaka. Local hospitals can be left to the district administration. However, medical colleges may be Dhaka-centric. If the local government is empowered, it will play a major role in political change. Political leadership will develop from the local level. This system of trading nominations and giving nominations based on who knows whom must be stopped. If the politicians come up from the marginal stage, there will be a big change in the overall politics of the country.
Question: Our high growth was called jobless growth. As a result, income inequality has increased and the gap between the rich and the poor has widened. What can the government do to increase employment?
Ahsan H Mansoor: Employment generation is one of the biggest challenges. Abolition of quota system completely will not solve this problem. Every year we need employment of 20-30 lakh people. To create this massive employment first our students, need to be truly educated. They really need to develop their skills. They should be developed as entrepreneurs. They have to cooperate to become entrepreneurs. A large part of it has to find jobs abroad. We know that the population is decreasing in many countries of the world, millions of foreigners are employed in these countries every year.
Along with western countries, countries like China, Japan, Korea are also taking millions of workers from abroad every year. Our youth can also enter the job market of these countries if they have skills. There is a great opportunity in front of our youth but before we can take that opportunity our youth must be qualified. Manpower should be converted into public resources.
A major problem in our country is that informal employment is more than the formal sector. That is, I am a farmer’s child, the work that one person can do in my family farm, 10 people do together. A shopkeeper is working with five workers in his shop where one worker is required. All these workers are his relatives. This does not increase productivity. Maybe shared and eaten. The earnings of two are divided among ten people. In this way, the country cannot be taken further. We need to improve the formal sector. The salary is also good, there are many structured benefits. The country will move towards development only if the formal sector can be developed.
Question: Which issues will you prioritize to reform the banking sector?
Ahsan H. Mansoor: The government needs to pay special attention to solve the problems of the banking sector. A combination of four to five persons can form a team who are experienced in various aspects of the banking sector. If such a task force is formed, it is possible to restore order in the banking sector.
This reform can start with the weakest banks. The entire banking sector should be audited to find out where there are loopholes, how much theft-robbery-robbery has taken place. Then take legal action. At the same time, we have to work on how to restore the banks. Above all, people should be patient.
I would recommend, if possible, that the government should make public an outline of their strategy within 100 days. Which will include political reform, service delivery reform and economic reform. Other sectors may be associated with it. That is, this government wants to reform in any sector, a complete outline should be presented to the people. When this outline comes forward, a legitimacy of this government and a rationale for running the country will be created. As we have seen in Bangladesh, it does not take long to become an opposition group here. So, whatever the government has to do, it has to be done very quickly.