Effects of Tcb on the Economy of Bangladesh
I would like to thank our honorable teacher for arranging such a good session and allowing me to take this topic for term paper. His special guidance has made it successful to prepare this document.
I would like to convey my special gratitude to the authority of the Department of Business Studies for designing this course outline. Index Introduction1 Objectives1 What is TCB1 Economic Condition of Consumers2 Present Price Situation of Consumer Goods Market3 Reasons of Price Hike3 International Price Change3 Price Rise of Oil (Fuel)4 Stockiet’s Activity4 Delay in Supply Channel5Special Events5 Cumulative Action5 Types of Price Change5 One Shot Price Change6 Continuous Price Change6 Special Events6 Activities of TCB6 OMS (Open Market Sale)6 Distribution through Selected Dealers7 Monitoring Market Price7 Procurement of Essential Goods7 From International Market7 From Local Market8 Effects of TCB on Our Economy8 Positive Effects8 Negative Effects9 Findings and Recommendations9 Conclusion9 Introduction Trading Corporation of Bangladesh, which is abbreviated as TCB, came into existence in the after-war situation of Bangladesh after liberation in the year of 1972.At that time market of Bangladesh was suffering from lack of supply of essential goods and industrial raw materials because of unstable situation. People of Bangladesh were not ready to invest for importing such goods and the Government policies had not yet been formulated in regards of export-import business. So the then government of Bangladesh had to intervene the consumer goods market as well as the industrial raw materials market.
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It was an aid to nurture the newborn economy of Bangladesh so that internal production industries could boost up and price of consumable goods would not go beyond reach of general people.As the supply chain was not yet built TCH played important role to make essential goods easily available to the consumers at reasonable price.
Still TCB is playing such role in Bangladesh to establish a channel through which goods can be easily made available to the consumers in awkward situations. Objectives ? To understand the role of TCB in consumer goods market. ? To investigate possible reasons of price hike in the consumer goods market. ? To investigate impacts of TCB both positive and negative on consumer goods market. What is TCBTCB, the national trading house under the Ministry of Commerce of the Government of the Peoples Republic of Bangladesh, is an autonomous body headed by a chairman and the administration of this trading house lies on the Board of Directors, which comprises two Directors. All of these members are deputed from the BCS cadre officers’ pool. Though TCB was established in the backdrop of all round scarcities of essential consumer items and industrial raw materials after the liberation of Bangladesh now it works with some extension of role.
TCB is run commercially and sometimes intervening the market during sky rocketing of price of essential commodities or crisis period or during some special events (like the holy Ramadan or disaster) with a view to keeping it within the reach of general mass. Principal roles played by TCB are as given below. ? To carry on business of imports and exports in accordance with the policy of the Government. ? To arrange for the sale and distribution of the imported/locally procured goods and to appoint dealers etc. , for this purpose as per Government directives. Monitoring of prices of essential commodities in the local market vis-a-prices in the international market. ? Market intervention during price hike in the local market.
? To do all other acts and things connected with or ancillary thereto. Economic Condition of Consumers Bangladesh is a developing country. It’s economy is mainly based on the agricultural industry though there is some good advancements in the RMG sector. Most of the people of urban areas are depended on jobs (government or private) with limited income. Majority of the urban population fall in the middle class group having an average monthly earnings of Tk. 8000 to Tk. 0000.
This is merely enough to buy their daily needs. Rural people depend on agricultural works. Those who work in other’s land are very poor in this context. Very few percentage of the total population of Bangladesh are solvent. Therefore a small change in the price in the consumer goods market creates big impact on the whole economy. Even it was stated that the nation was suffering from malnutrition in recent past. Present Price Situation of Consumer Goods Market Bangladesh is the part of the global economy; as such they have to face the danger of the global financial crisis, which is a macro and micro impact all over the world.
In the latter part of the 2008, the global financial crisis has been spreading out all over the globe which leads to danger not only for USA and European countries, but to other parts of the world. Excessive liberalization, non-compliance of corporate governance, and through financial engineering, the market was manipulated that was the causative factors behind the crisis. Presently Consumer Goods Market of Bangladesh is suffering from price hike causing unbearable sufferings to poor and ultra-poor people including the middle class households.Most of the things costs double the price compared to the price of 4/5 years back. People had to curtail their expenditures even in the case of education, medication and daily foods. Reasons of Price Hike There are various reasons behind price hike. Some of the reasons may be: International Price Change Any price change in the international market creates impacts on the local market.
An increase in the price of edible oil in the international market causes an increase in our local market too. Mostly price of those goods, which are imported from foreign markets, are vulnerable to international price.Price of some goods, which are not imported directly, but their variations are imported, also rise due to price rise in the international market. For example think about onion. There are two types of onions in the market, one is our local product and the other one is imported ones. If the price of the imported onions rise price of local onions would also rise. The economy of Bangladesh faces another problem.
When price rises in the international market, it is observed that in the domestic market price rises sharply. But when price falls in the international market its responds very slowly in the domestic market.We know that at the time of opening of the Letter of Credit (L//C), the price which is available in the international market, it will continue and as such all on a sudden it may not be possible to reduce. But the rate of decrease of the price occurs at a far lower speed than what is actually desired. Price Rise of Oil (Fuel) Price of fuel is one major factor on which price of consumable goods depends. Fuel price has multiple effect on price of consumable goods. For example fuel is required for production, for transportation, for retailing, etc.
Even electricity is somewhat dependent of fuel price.During load shedding some retailers, dealers who work in urban areas, use diesel generators to produce electricity for their temporary use. If oil price rise more expense will incur. As a result the retailer, the dealers will think of increasing price of goods what they sell to keep their earnings fixed. Stockiet’s Activity In cases there are possibilities of price going high some stockiest buy more goods to make a handsome stock thinking that they would sell it at higher price. This causes shortage or scarcity of that good that time. As a result price of that good goes high.
Sometimes dishonest business men create syndicate and stocks whole of a particular market. As a result an artificial scarcity of that good arise which eventually creates price rise. Delay in Supply Channel Sometimes it happens that price of imported goods has fallen in the international market but price in local market is not falling. Normally it is because the system delay in the channel between the importers and the retailers. Sometimes it is done intentionally to earn more money. Special Events Price rocketing of dal, onion, brinzal, rice, sugar, and all other food items is a common scenario in every Ramadan in our country.During Ramadan demand of these items increase so sharply that supply cannot meet that.
As a result price increases sharply according to the general principle of the economy. Besides these mentality of our people is also set like that. We always get ready to buy things at higher price during Ramadan. Whatever the price of brinzel is, it is sold out. Even the poorest of our population keep some extra budget for that. This is a regular phenomenon in our country. The government of Bangladesh tries to keep the price of things within some specific range but hardly they can do.
Cumulative ActionPrice increase has cumulative effects on each other. If price of food increases food sellers earn more money. But what about the others who only buy foods. They try to increase their income. Landlords increase their rent, transport owners try to earn more by increasing fare, professionals increase their fees, service sellers increase their price of service, etc. This way price in every micro level increases which eventually increases the price level. Types of Price Change Our economy is vulnerable to two types of price changes.
Those are one shot increase and the other one is continuous increase.One Shot Price Change Price may increase for once and stops at that position for a measurable period of time. This is one shot increment. One shot price increase does not create the inflation. It only increases the price level for once. This thing normally happens in our country when a new pay scale is declared by the government. Price of everything rises even before declaration, when the government has decided to declare.
Continuous Price Change Price may increase continuously for a measurable period of time. This type of price increase causes inflation. In recent past our economy was experiencing such phenomenon.Not only our economy the world economy experienced the continuous price change. Currently price is some what stable though 2 or 3 times higher that that in the year of 2000. Special Events Sometimes price goes high for some special events. For example during the Ramadan price of essential goods and food items go extremely high because sudden increase of demand of those items in the market.
Incase of disasters price of essential goods may also increase. But generally price increases unexpectedly though predictable in every Ramadan. This has become normal phenomenon in our country.Activities of TCB TCB, being the national trading house of Bangladesh played and plays vital role during price hike situation of Bangladesh. OMS (Open Market Sale) Open Market Sale is an activity taken by the government of Bangladesh during price rocketing situation. In this program TCB sells rice, onion, sugar and other essential goods in the open market for reasonable price. This programs helps people to get things within their purchasing capacity.
Distribution through Selected Dealers TCB collects goods from various sources like purchases from open market or from international market.Then distributes those goods in remote areas other than urban areas through dealers. Generally rice, flour, sugar, etc are sold through the dealers among the mass people at rational prices. Monitoring Market Price TCB always monitors the market situation and reports the government of the Bangladesh regarding the price and other conditions of the market like supply of specific goods. TCB also sets price of the essential goods at which those should be retailed in different markets and also monitors whether those are sold at the specified prices. This activity helps mass people to get essential goods at normal prices.Procurement of Essential Goods From International Market TCB played a vital & significant role in the Import Trade during the initial years after liberation.
By importing a good number of essential consumer goods and industrial raw materials, it stabilized the prices in the market, as well as provided a great relief to the general consumers and small industrial units by supplying goods at reasonable prices. During the period of 1972-77 TCB used to import as many as 70 commodities such as Cement, Milk Food, C. I. Sheet, Drugs & Medicine, Textile, Yarn, Soda Ash, Auto Rickshaw, Salt, Sugar, Onion, M. S Billets, Al. Ingot, Pig-Iron,Zinc Ingot, Arms & Cartridges, Timber etc. But due to introduction of free market economy, TCB’s role in the field of import has become very limited.
As a result, functions and activities of TCB have largely been squeezed. Since fair trade has yet to be started, TCB’s role is significant to control the market. In fact, TCB’s interventionist role can never be denied. Whenever there has been any shortfall in the supply of any essential consumer goods in the market, TCB has, on the advice of the Government, made arrangement for emergency import of the said items in order to ensure adequate supply and to stabilize the market price.During 2005-06, in view of unusual price situation of some essential commodities in the local market, TCB imported Red Lentils & procured onion & gram(Chhola) from local market & sugar from BSFIC for direct sale at a fair price From Local Market TCB also collects food grains, sola, dal, sugar, lentils, etc from local market during the harvesting seasons and warehouses them accordingly. In case of scarcity of such goods TCB sells them to end consumers through OMS or selected dealers. Effects of TCB on Our Economy Positive Effects ? In case of price rocketing situation it relieves general consumers from sufferings.
They get things through OMS or selected dealers of TCB very easily at their hands. It helps to break syndicates present in the market. ? When importers cannot take initiatives of importing bulk amount of essential goods fearing loss in future the government can take initiatives for importing those goods. ? TCB distributes essential goods through dealers, who are supposed to report to the government through proper channel. Therefore it creates a good channel of distribution of consumer goods among the end users. ? TCB always monitors the market and informs the government.This helps the government to take decision whether the market should be regulated or not.
Negative Effects ? Free market economy concept does not allow intervention of external affairs into the market. ? Sometimes perfect competition is hampered due to the presence of the activity of TCB. ? Some dishonest dealers warehouse goods, which are distributed through them and it creates worst effect in the market. Findings and Recommendations Though in the present free market economy concept it is not expected that the government of a country would intervene the consumer goods market, sometimes it is needed for the betterness of mass people.But TCB should operate in a regulated way. It should not intervene into every nook and corner of the market. At the same time it should be noted that TCB is not the only way to combat the price hike.
Some other things like circulation of black money in the market should be regulated. Stockiest should be prevented from warehousing most essential goods for so long time for ill motives. Conclusion When some one is unable to walk by himself he can be aided by some external tools. Our economy is not so robust.It is vulnerable to so many affairs: international market, local syndicate, corruption in everywhere, lack of stable capital, political instability, majority of our people lie under poverty level, etc. In this situation when market cannot regulate itself the government can take initiatives. This task is some how done by the TCB.
It purchases goods from local markets as well as from foreign markets and distributes those essential goods in the awkward situation. It helps people to get things in their reach. However its scope should be specified and its limit should be drawn. Proper guidance of its operation may result in benefits.