Price Hike in Bangladesh
Introduction
People are suffering most in this problem now specially the poor people. There are many reasons behind this problem. But we think formation of syndicate and corruption is the main reason behind this. But international market price, fuel cost, power crisis, natural disaster, transportation problem, illegal toll collection, action against corruption by the caretaker Government, street vendors and illegal construction drive by the joint forces, lack of communication and co-ordination in between different Government officers etc are also responsible for recent price hike in Bangladesh. And the rate of this price hike is very fast.
Even the military back Government was failed to solve this problem. They were not able to find the root behind this problem due to lack of appropriate monitoring system. But just the Government can solve this problem by using his intelligence agency, by introducing effective monitoring system, by improving law & order and by identifying the evil syndicate groups. But it is not a very easy job. The support of general public is also needed to solve this problem. The main reasons behind this problem: The prices of commodities are almost uniform across the capital, which only implies that a group of people are fixing the prices and that they have enough clout in the market to be able to decide what the prices should be. Corruption of so called political leaders, corruption of different Government officials and law enforcing agency is the main reason behind this problem. We can solve this problem by taking the following measures. Identify the syndicate groups. With the price increase of essentials capturing headlines of our national newspapers and TVs almost everyday. Because this price hiking problem has become the main social problem in Bangladesh.
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People are suffering most in this problem specially the poor peoples. There are many reasons behind this problem. According to The finance Minister Abul Mal Abdul Al-Muhit, “international price hike of essential necessities as being responsible for high domestic prices. ” Of course, international market price is also responsible for domestic inflation, but only partially. The ministers’s statement simply ignored other domestic factors, many of which created by the action by the Government, and also some of which created by the previous government.
According to our study we identify some supply-side factors as being responsible, such as hoarding, and loss of business confidence, administered energy price hike, international price hike of essential commodities, bribe and illegal toll collection, structural and institutional constraints etc. corruption of so called political leaders and different government officials etc are also responsible for this problem. And if the food price is not controlled, the inflation rate may reach double-digit level very soon which is currently 7. 5%. In our research paper we tried to figure out these reasons.
And we tried to find some solution about this problem. we also tried to figure out the bad effects of this problem. we hope by reading this paper the readers will able to figure out the main reasons behind this problem and also able to reduce or solve this problem. RESEARCH AREA In our proposal paper our had mentioned some question at which point we did like to investigate to prove our hypothesis. Our question were > What is the main reason behind this recent price hike in Bangladesh? > Is corruption and local syndicate only responsible about this price hike? gt; What should be the role of government to reduce this price hike? > How can we solve it? Obviously formation of syndicate and hoarding by them, corruption, power failure, traffic fames and load-shading, international price hike of essential commodities, bribe and illegal toll collection, structural and institutional constraints etc. according to Ahmed. T. (2009), the oil crisis of 1973, when oil prices increased in exponential proportions, was not so much due to shortage of oil supply as it was due to the decision of the major oil exporters, Arab states, to increase the prices.
It was not that oil reserves had suddenly sunk through the floor or that its demand had shot through the ceiling. In strictly economic terms, a handful of oil exporters were in collusion, which led to dramatic increases in global oil prices. The entire western world was affected and the sudden price hike resulted in a long-term recession ending decades of economic boom. It was also the first time that the United States faced an oil shortage since the Second World War. The Arab states had succeeded in their intent to use oil as a weapon against those not friendly to their cause. It is perhaps a classic example of collusive oligopoly.
The situation in the current-day Dhaka markets is similar except that the collusion does not concern one item but several ~ mostly such essential food items as rice, wheat, potatoes, lentils, edible oil, onions and milk powder. According to a report in Amar Desh (May 11, 2009), prices of essential food items have increased 25 per cent on an average in the past four months. According to a report in New Age (May 11, 2009), prices rose between five and 50 per cent during the same period ~ most of it under the military-backed interim government of Fakhruddin Ahmed that assumed office after the proclamation of a state of emergency on January 11.
According to the government’s own statistics, inflation increased from just fewer than six per cent in January this year to almost 7. 5 per cent by March. While the government appears to be in denial suggesting that inflation is not really out of control and quite below the danger level, experts fear that it might, in fact, have crossed the double-digit mark driven by the soaring food prices. According to SLATE magazine (2009), about our very own mafia groups that group has come to be known, and often referred to in the media, as the syndicate.
Despite the fact that academics, researchers and even politicians have acknowledged such collusion, its existence is denied upfront, both by government officials and businesspeople, in a manner that can be likened to that regarding the mafia. For the longest time, the existence of the mafia, or rather Cosa Nostra, was denied by insiders as well as government officials till misconceptions and myths were laid to rest by, what came to be known as, the Maxi Trial in a court in Sicily over a hundred years after its existence was officially reported.
As for the syndicate, it has proved to be invincible and even immune to a state of emergency, which has not been able to curb It’s potential for collusion and thereby manipulation of the prices. The tenure of the BNP-Jamaat alliance government saw two changes of commerce ministers, each given the sack for the same reason, while the last one had utterly failed in his pledge to rein in the prices of essentials. The invincibility of the syndicate was perhaps never felt with such force as it was on July 25, 2006 at a monthly luncheon meeting of the American Chamber of Commerce in Bangladesh.
The third commerce minister of the last government, Hafiz Uddin Ahmed, squarely put the responsibility of controlling the prices of essentials on other ministries and went so far as to suggest that the government should set up another ministry for the Task. „The Consumer Protection Act is being scrutinized now and I have urged the food ministry to make anti-hoarding laws for checking unscrupulous trader’s syndicates and hoarders,”he said.
He also suggested that the finance and food Ministries were better equipped to tackle the matter. It was just three months after Hafiz had taken up his new portfolio on April 26 with the pledge to reduce prices of essentials within a month. Barely a week earlier, at a meeting with businesspeople at his office, he assumed a dramatically different tone and harped on a different note, although, even then, it was obvious that his success in bringing down the prices of essentials was at the mercy of the businesspeople.
On July 19, Hafiz announced to the press ~ following the meeting ~ that the intelligence agencies had identified the members of the syndicate „who were involved in manipulating prices through hoarding and other means. But he only “hoped that the relevant ministry would take Necessary action. His comments about the meeting betrayed his helplessness and utter Inability to hold sway over the businessmen. „They have given us assurance that they will not make any windfall profit by making the people hostage, said Hafiz about the traders present at the meeting.
With hindsight it appears that the minister did his best to divert attention from the syndicates citing a marked difference of prices between wholesalers and retailers, and the producers and wholesalers that he suggested added to the woes of the people. M Saifur Rahman, then the minister for finance and planning, and perhaps the most influential cabinet member of the BNP-led government, when approached with the possibility of reducing import tariffs on essential food items, told the press, it never paid off. He said the prices would decrease for a short while but resume their rising trend soon after.
Instead, he suggested, the syndicates that manipulated the prices were the main reason behind the price hike and had to be dealt with decisively. But government officials deny their existence quite categorically despite overwhelming circumstantial facts that testify exactly the opposite. The commerce secretary was quoted in January as saying they are „yet to receive any conclusive evidence on the existence of syndicates?. He went further to substantiate his claim asking, „When the prices went up everyone was blaming syndicates.
But now that they are going down how come everybody is quiet? If there was a syndicate why are the prices coming down? He did partially admit to their existence since former ministers had claimed that syndicates exist. But the rebuff of a prominent businessman, quoted in New Age’s weekend supplement Xtra on January 12, smacks of the classic mafia disclaimer. “I read about this regularly in newspapers but I have never seen one or been a part of it,” says Mostafa Kamal, chairman of the Meghna Group, one of the leading importers of edible oil, powdered
Milk and sugar. “How, where and when are questions people who accuse us of syndication should answer,” he said. It is alleged that the Meghna Group is among the leading syndicate members in the country. Hossain. E. (2009), programmed officer of the Consumers Association of Bangladesh, echoed the general apprehension. “I have attended meetings at the commerce ministry where powerful and well-known businessmen have directly threatened government officials with cutting out supply if they did not accept their chosen prices,” he told Xtra.
According to the Daily Star (May 18 2009), a report of the Centre for Policy Dialogue, a research organization, based on records of the National Board of Revenue, found that a strong cartel accounted for a substantial share of the imports. The report says the top five importers have accounted for importing 96 per cent raw sugar, 46 per cent refined sugar, 67 per cent crude soybean oil, 60 per cent crude palm oil, 49 per cent wheat, 37 per cent rice, 31 per cent lentil, and 31 per cent onion of national imports till March of this fiscal year.
While the report did not mention any names, a number of reports in other newspapers have done so. For instance, according to a report of Amar Desh (May 11, 2009) the TK Group, the Meghna Group and the City Group account for 65 per cent of edible oil imports. The next three ~ the SA Group, the MEB Group and the Marine Group ~ account for another 25 per cent of the imports. Quoting sources, the report says traders of Dhaka and Chittagong are the major importers of lentils, ginger, garlic and other essentials that come from India.
It goes on to mention the names of Shathi Enterprise, Seven Star and Banijjya Bhandar from Dhaka, Rumpa Enterprise of Bogura, Pahari Enterprise, AB Trading and Akhter Impex of Chittagong as significant market players. When the country is badly shaken by the unprecedented floods there is another alarming factor—the price hike of essentials that is slowly but very steadily engulfing the rural life of the common people. It is appalling that one kg of green chili costs you TK 200! There are no vegetables that cost you less than TK 30 per kg! It also creates shortage of foods. That also increases the price of essentials.
Similarly other factors such as power failure, international market price, fuel cost, power crisis, natural disaster, transportation problem, illegal toll collection, action against corruption by the caretaker Government, street vendors and illegal construction drive by the joint forces, lack of communication and co-ordination in between different Government officers etc factors are also responsible for recent price hike in Bangladesh. By taking serious action and frame effective laws for the elimination of the middle men groups existing various trading circles and to control bribery in between law enforcing agencies and traders.
By minimize the traffic jams and load shadings. By forming a strong co-ordination efforts and monitoring system, established for the cooperation, co-ordination and exchange of information in between different Government officials entrusted to check price level. By identifying syndicate groups and taking appropriate action against them. The Government can control the price. By creating awareness against corruption and establish a price list for all kinds of goods to control price hike. And by electing an honest and stable Government, the general people can solve this problem.
Hypothesis
There are many reasons behind this recent price hike in Bangladesh. But we think formation of syndicate and corruption is the main reason behind this. But international market price, fuel cost, power crisis, natural disaster, transportation problem, illegal toll collection, action against corruption by the caretaker Government, street vendors and illegal construction drive by the joint forces, lack of communication and co-ordination in between different Government officers etc are also responsible for recent price hike in Bangladesh.
And the rate of this price hike is very fast. Even the military back Government was failed to solve this problem. They were not able to find the root behind this problem due to lack of appropriate monitoring system. But just the Government can solve this problem by using his intelligence agency, by introducing effective monitoring system, by improving law & order and by identifying the evil syndicate groups. But it is not a very easy job. The support of general public is also needed to solve this problem. METHODOLOGY There are two types of data in my research paper. . Primary Data. & 2. Secondary Data Primary Data:- We have collected my primary data to figure out the mail reasons and public’s reaction about recent price hike in Bangladesh by conducting a survey on 30 general people. To do that survey first we had prepared some questions and some suitable answer against each question. After that we went out for general people to conduct our survey. The shopkeepers, doctors, teachers, tailors, chemists, retired peoples, servants, housewives and students were the people who were participate in our survey.
In reply of my second question 83. 33% people said syndicate groups are involved in price hike because the government can? t control the price. In my survey most of the people think the syndicate groups are mainly responsible for this problem. These syndicate groups controlling the price by hoarding. Hoarding by businesses has been widely blamed by many as being main culprit behind the current crisis. Indeed, if we let aside moral issues, hoarding markets perfect economic sense to businesses and that is why they build up stocks to make larger profits.
For example suppose the current market price of a NOKIA 1202 mobile phone is TK 1800. Now let us assume that for some unknown reasons, the price of the same brand mobile is expected or any mobile phone dealer in the market sell NOKIA 1202 at the lower price now or wait to sell at the higher price a month later? What would happen to the current market price of NOKIA 1202, if most dealers hold off selling? This is exactly how inflationary expectation, expectation about future price hike, leads to hoarding, creates shortage, raises current market price and, finally, brings larger profits for businesses. From the above analysis we conclude that the syndicate groups are nothing but a well-known business farms, run by well-known business man. But the syndicates, for all their collusion, manipulation and public denial, are not entirely responsible for the price hike. There are other related factors some of which are compelling, even more than syndication. To begin with, production costs have risen and So have the prices. But it gives an impression that the farmers are linked to the market and thereby benefit from the price rises at the consumer end. That is hardly the case.
They are paid the bare minimum below which the farmers cannot afford to cultivate crops the next year. And prices at their end have increased only marginally over the years. The real value addition (pun intended) to agricultural produce begins with the middlemen who buy from farmers. Along the supply chain there are warehouses, wholesalers, retailers and micro-retailers often with several more layers of middlemen sandwiched among them. Reports in the media indicate that prices, especially those of vegetables, appreciate by up to 500 per cent between the farmer and the end-consumer.
That is how the middleman also controlling the market price. And the Government is not able to identify them, catch them, and even control them. Even the Government has blamed international market price hike of essential commodities as being responsible for high domestic prices to cover their failure. The Government has failed to solve this problem due to the corrupted Government officers and corrupted law enforcing agencies. They are not willing to monitor the market price. They are just willing to take bribe.
Again lack of communication and co-ordination in between different Government officers and lack of communication system in between different Upozela and districts head quarters with the capital is also responsible for this recent price hike.
And only A B 20% of people said blockade and strike is responsible for this. Political leaders are not actually political leaders. Actually they are political business man. They invest there money to own the party nomination and also own the election. Actually they bought there place in Parliament. After wining the election they start to gain black money as much as they can. And they gain it by corruption. And that’s why the price of essential commodities is increasing day by day. This political don’t care about the general people, they just care about themselves. Even they don’t know how uch black money they have gained by corruption. The current anti-corruption drive by the Caretaker Government clearly shows the statistic how much black money they have gained through corruption. That’s why the corruption of so called political leaders also responsible for recent price hikes.
According to my survey, in reply of my forth question 46. 67% people said bribe and illegal toll collection is the main structural & institutional constraints that are mainly responsible for this recent price hike. And 33. 33% people said power failure is also responsible for this problem. But I think this both factors are equally responsible for this problem The illegal practices of bribes toll collections and associations greatly influence in raising the price of essential commodities. The traders has to paid toll and bribe at each entering point of a town.
And this increases the transportation cost of goods. As a result the price is increases. And the Government has failed to stop this because of the involvement of corrupted law enforcing officers. While the Scarcity increases the opportunity cost of any service and provides opportunities for corruption. The acute shortage of generation capacity and its consequent effects - frequent load-shedding, low voltage and low frequency - on different economic sectors, as well as on essential services such as water supply, hospitals, and telecommunications, have opened up doors for many types of corruption.
That is also responsible for this recent price hike. Why that is happening? Because of the corruption of the employee of DESA and PDB. According to the Transparency International Bangladesh (2006), ? A Ledger Keeper in DESA, a very low level employee, became the envy of many when he purchased a house in a middle-income residential area of Dhaka for Tk 3. 8 million and an allotment in a shopping arcade. ? Many Assistant Engineers of BPDB own private cars, which they cannot afford to buy and maintain on their official salary. A particular Assistant Engineer, with close links with the Collective Bargaining Agent, comes to office in a luxury four-wheeler, while another mints money by making various interventions in the name of a minister. ? A meter reader who was placed under suspension joined the ruling political party, got his job bank, became a CBA leader, and is now the happy owner of two houses and a shop. ? A corrupt and overweight meter reader, who employed agents to do his job and concentrated on eating instead, was transferred from Dhaka to an outstation by an over-zealous DESA officer.
When the country is badly shaken by the unprecedented floods there is another alarming factor the price hike of essentials that is slowly but very steadily engulfing the rural life of the common people. It is appalling that one kg of green chili costs you TK 200! There are no vegetables that cost you less than TK 30 per kg! It also creates shortage of foods. That also increases the price of essentials. And that’s why we think natural disaster is directly responsible for price hike, but the others are partly responsible.
It is now very easy for the Government to established scientific monitoring systems and cells to keep constant observation data collection and exchange of information? s about the causes up and down, price level of important food items and essential commodities. According to our survey most of the people said the rate of price hike is quite fast. And the general public’s can help the Government to remove this problem. Most of the people in Bangladesh can afford to meet their family essential commodities, but they said it was very tough.
Surprisingly the upper class people are also by price hike. Most of the people agree to that if laws and regulation enforced properly, it is practically possible to reduce this price hike. And the general peoples can also play a big role to solve this problem. LIMITATION We had very little time to do that survey. If we had enough time we may go out of Dhaka to find the poorest people. We want to take the interview of the poorest people. We had also faced lots of obstacles, but after all of these obstacles finally We finished our research paper and we are quite satisfied about it.
Conclution
Given the scenario in Bangladesh, any measure to control prices, barring one that addresses the syndicates, is bound to be band-aid-like ~ a bit of eyewash. That is perhaps the first area where the government should focus in its bid to reduce the prices of essential items. But it is not possible for the Government to reduce this problem alone. The general people, the mass media everybody should came forward to help the Government to reduce this problem. Other wise the price of essential commodities will increase day by day. And nobody will able to control this problem.
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