BB should consider cash incentives for Forex remitters
There is no better way than to engage market forces to increase foreign exchange reserve
Many incentive programmes of Bangladesh Bank and government are there to give incentives to the businessmen to increase inbound foreign exchange remittance. These business takes advantage of one of the cheapest labor cost, subsidized electricity, subsidized fuel and gas and many more. After all these advantages, many of the businessmen engage into malpractices such as not giving enough salary, in some cases, no salary at all. Yet, government programmes aim to help them in the name of macro-economic benefit for the overall economy.
This article is not demanding to reduce all those perks to the companies and businessmen. That analysis is probably for another day.
Today, however, we would like to ask for your attention to an alternate way to increase the foreign exchange and benefit the national economy. It is already well-known that hard-earned money that NRBs sends back to home is a major source of our recent surge of forex reserve. Government and BB should consider how to give more incentive so that NRBs can contribute more to the economy.
Why not give a 5% cash incentive for every dollar that is sent by the NRBs? When someone chooses to send money using regular banking channel, there are two main disadvantages. First of all, the exchange rate is lower compared to the street rate. Also, there is a transaction cost that is often high compared to the other informal channels.
So, it makes sense that government should introduce a cash incentive program to counter these two inherent forces so our NRBs do not use the informal channels to send their hard-earned money.
On the macro level, there are many advantages of doing these:
1. It will accelerate the rise of Forex reserve which can be used for many infrastructure projects.
2. This is a much fair way to spread the government incentive since the money will be distributed among millions of families as opposed to few businessmen or companies.
3. Since there will be less informal Forex transfer, black money holders will have less opportunity to transfer their money out of the country. This is a very important factor since illicit businesses will become less attractive.
A valid question that might be asked is this: If there are so many advantages for giving cash incentives to our hard-working labourers to use regular channels for sending their money, then, why not Bangladesh Bank haven't introduced this so far? Why government only gives cash incentives to businessmen who already have all the money?
An easy answer is that big businesses have lobbying power and they can influence the decision making of the government. On the opposite side, there is no lobbying power that works on behalf of the millions of NRBs who works their days and nights to earn the Forex in a foreign land and send it to home so their family can have a good life.
It is time to fix this discrepancy and help the country and its countrymen have a fair treatment from government policies.
If you thought some of the ideas are worth of your reading time, please forward it to others. If you have an ear to the columnists in regular traditional media, please forward it to them. If you have an ear to the journalists and news editors of the electronic media, discuss it with them. Hope they would look at the suggestions and give due diligence.
Thanks for your time,
Innovation Line
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Note: This is a freelance column, published mainly in different internet based forums. This column is open for contribution by the members of new generation, sometimes referred to as Gen 71. If you identify yourself as someone from that age-group and want to contribute to this column, please feel free to contact. Thanks to the group moderator for publishing the article as Creative Commons contents.
After election of December 2008, we have been silent - we are observing what Hasina government does with the trial of war criminals. We would stay silent until we really make up our mind about the intention of war criminal trial by AL government. But this article is one of the few exceptions which needed immediate attention.
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