David Ricardo was a late 18th century British political economist and immensely successful stock trader, who would be as comfortable in the beer inns of London as in the House of Commons, of which he became a member at the end of his life.
He voiced opinions on currencies, financing, and speculation, and on to the celebrated theory of comparative advantage, a fundamental point of free trade and specialisation of countries and individuals; along with several other leading economic theories.
I refer to David Ricardo in my very first article as a sign of deference to the masters who have contribute to modern thought regarding business, finance and economics, and also because I want to point out that economic cycles, fund flows, wages and profits are as fundamental issues today, as they were in Ricardo’s world more than 200 years ago.
Extrapolating to modern 21st century Bangladeshi business and financial realities, and its effect on the day-to-day lives of my fellow country people, the issues of wages, profits, investments and value are hard-core realities of our times.
I would like to use this column to highlight issues and events which are important to the Bangladeshi business and financial world and have an impact on the lives of sections of the nation’s people.
The first issue to highlight is an experience from a recent visit to Italy, where I had the chance to see first-hand the numerous Bangladeshi, or people of Bangladeshi origin, working in blue collar and quasi-white collar professions.
From data available currently, it is estimated that there are almost 500,000 persons from Bangladesh living in Italy, who have gained a reputation, as learnt from my Italian contacts, as hard working and non-troublesome characters in the domestic economy. Let’s view this migration as part of the greater picture of our diaspora.
In total, there are almost 10-12m people holding Bangladeshi passports or of Bangladeshi origin living across the globe. Of these, the majority are working as transient workers in the Middle East and South East Asia.
It is believed that at least 90% of these people are first generation, blue collar immigrants and workers, who will continue to send money back home, either because of future return, or due to first generation family relationships.
At the same time, according to latest Bangladesh Bank statistics, the remittance kitty touched $14.18bn seven days before the current fiscal ended – nearly 15% higher than the same period last year.
Remittance in this fiscal would cross $14.6bn once figures for the 2012-13 fiscal are added. Only five years ago, in the 2007-08 fiscal, remittance inflow stood at $7.9bn.
That is an increase of 17% per year, on a US dollar basis, over a period of five years. If the lower figure of 90% of 10m persons overseas are selected, that results in a per person remittance of $1,825 per head.
This remittance also has a cost, ie the cost of moving overseas, which may be $2,000-3,000 per head to be paid to the international agency, with overseas payment being $1.5-3bn if 500,000–1m people paying $3,000 going overseas are taken into account.
However, that still results in the net addition to the domestic aggregate demand standing at $11bn for FY 2012-2013.
This is the single largest addition of external funds into the domestic economy, and thereby add to aggregate demand, for soaps, shampoos, shoes, biscuits, cement, rods, ceramics, media, fed by fast growing local companies engaged in those activities.
The wage rate for these hard working people will have a far greater impact on the domestic economy, and any effort to increase their collective skills and reduce their cost of overseas work will have wonderful multiplier effects.
The immediate focus can be on the government providing them a lump sum payment, similar to a cash subsidy, of a small percentage, upon their return, on their total legal remittance through government channels; allowing international recruiting agencies to operate directly in Bangladesh, in conjunction with local partners; or even converting their remittance at a set rate of Tk80 per $1, to be set every six months by Bangladesh Bank, due to their higher value addition to the local economy.
There are many simple steps that can be taken to spur this onward. Think about it. David Ricardo would have already.
