In an effort to put together a broad spectrum of views on the current commodity price situation The Executive Times met up with Professor Golam M. Chowdhury, Chairman, Internship & Placement, IBA & President of University & Industry Alliance, University of Dhaka, Dr. Sirajul Islam, Dean of Faculty of Business Studies, Chairman of the Dept. of Management Studies and Provost of Surja-sen Hall, University of Dhaka, Professor Dr. A.K.M Saiful Majid, Chairman (BBA program), IBA, University of Dhaka, Dr. Belayet Hossain, Professor of the Dept. of Marketing, University of Dhaka and Mahmudul Haq, Assistant Professor, Brac University.

Emergency & Fear Factor

Golam M. Chowdhury says businessmen are shying away from making new investments. Government needs to create a business-friendly environment for businesspeople so that they can feel free to invest and get enough credit for operating their businesses. Confidence level in the business community has to be broadened. It is true, a perfectly ideal situation can never be achieved, but the process should be started. In the free market economy the government has no business to do business; they should be only involved in the regulatory mechanism.

Sirajul Islam thinks the current situation is not conducive as far as businesspeople are concerned. They are not willing to open big amounts of L/C now. So confidence building is important. Importers need to be motivated.

A.K.M Saiful Majid believes most of the businessmen stopped opening L/C because of the current situation. Government can develop special incentive packages in terms of bank loan, customs, taxes etc so that more businessmen/ importers come forward to do business. That happening, competition will increase and prices will fall as a natural consequence.

According to Belayet Hossain, unwillingness to do business in the current situation is one of the major causes of price hike. Businessmen are not interested to do business with low profit margin as they got high profit margin before.

Demand & Supply Gap

All the professors take the view that the current demand-supply gap is pushing the price up. While supply of essential commodities in the market fell the demand has not decreased. Supply fell because of low investment.

A.K.M Saiful Majid says alternative delivery or supply system has to develop. TCB (Trading Corporation of Bangladesh) can be reactivated but the problem is government employees lack efficiency in running an organization. So TCB needs to be changed into a public limited company (PLC). Saiful also thinks Chambers and Trade associations can play an important role in solving the current problem. Government should enter into a dialogue with businessmen.

Flood

Golam M. Chowdhury points out that the recent flood has caused a breakdown of transportation facilities. At the same time farmers have been highly affected as many farmlands have been damaged by floodwater.

Sirajul Islam says the impact of flood on transportation is huge; the disruption is affecting proper supply of goods in the market, which in turn is further increasing the price of essential goods.

Intermediaries & Syndication

Golam M. Chowdhury does not think the existence of intermediaries is highly responsible for the current situation, as intermediaries existed before when prices of essential commodities were affordable. He further argues today the Government is strictly monitoring the case of middlemen and so syndication is less likely in existence. So, in his view, it is not necessary prices of commodities will fall if the number of intermediaries gets reduced.

A.K.M Saiful Majid disagrees. He observes product price gets doubled, and sometimes tripled, when the product finally comes to the retail market by changing 3-4 hands. He believes for each middleman there is huge profit margin, considering the fact that the product that sells for taka 7-10 outside Dhaka city costs taka 25/30 within the city. This means there is mismanagement of the supply chain.

Sirajul Islam blames most of these problems on businesspeople. According to him, the supply chain has been disturbed by some dishonest businessmen. Unlike before, now businessmen cannot evade tax at the customs house and therefore they are adding the tax to the price. He further observes at the wholesale market customers can be sure about the weight only; they cannot be sure about the actual quality. Often retailers get damaged products, which customers would not buy, and so the price of fresh products tends to be more than the usual price.

Syndication is a legacy from the past governments and it was nurtured by the political parties, says Shirajul Islam. Though at present politicians are not in power, their influence on the supply chain has not died down. Businesspeople are willing to double their profit by creating artificial crisis of commodities. Ultimately the consumers are the sufferers. So effective dialogues with businessman can bring about a solution to this situation.

Belayet Hossain believes not only do big importers form syndication. Retailers are also involved in syndication otherwise prices would not be the same in all the retail markets. So proper monitoring of the retail market is also important.

Sirajul Islam emphasizes the point that farmers, who face risks from flood, heavy rainfall and lack of ground water, deserve the core profit for their own product.

Rise in Fuel Price

Golam M Chowdhry points out the dilemma of addressing the issue of fuel price. If fuel prices are very low in the local market, then black market will come into place. On the other hand if the fuel price is fixed in keeping with the global price, it will not be convenient for us at all.

According to Mahmudul Haq, the weak security situation at the border is also affecting the local oil market by facilitating smuggling.

A.K.M Saiful Majid says the danger of increasing oil price is businessmen will increase the price of commodities almost three times immediately.

Golam M. Chowdhury suggests that we closely monitor the macro economic situation very cautiously. This may mean we have to adopt the local formula rather than the global formula for the betterment of citizens.

Sirajul Islam is not against subsidy as such but suggests that subsidy should not be given in large quantities as this can increase the trading of oil on the black market. He thinks IMF's advice to increase oil price is harmful for the economy, as the benefit will go to the pockets of intermediaries and not farmers.

Dishonesty of Businessmen

Belayet Hossain says when in most other countries during their religious festivals businessmen reduce product prices so that people can enjoy the celebration, in Bangladesh the scenario is completely reversed. Businessmen here need to prove their patriotism. He further observes businessmen are not resuming their normal business activities although the government is trying hard to raise their confidence. This shows that they are dishonest and are not willing to do business in a corruption-free atmosphere.

According to Mahmudul Haq, some businessmen stockpile goods in large quantities speculating that price will increase in future and the profit margin will be much higher.

Golam M. Chowdhury emphasizes the importance of starting the process of self-purification and establishing norms and values. At the same time, he says, it is important that the Government start a dialogue with businesspeople.

Monetary policy

A.K.M Saiful Majid says that the monetary policy of Bangladesh Bank (BB) is also liable to some extent for the current situation.

Belayet Hossain says our economy is the economy of the poor. IMF can advise on many issues but we have to analyze the consequences before taking any decision. If fuel price increases, the price of agro products and industrial products will go up abruptly. He further points out if we try to set prices on a par with the international market our budget will fail.

Trading Corporation of Bangladesh (TCB)

Belayet Hossain observes TCB was formed after the independence of Bangladesh, in 1972 that is, but it failed because of less skill, weaknesses of administrative management and corruption that are usually seen in the state-owned enterprises (SOE).

Mahmudul Haq points out that TCB should be more active. The Government should maintain buffer stock by providing fund for TCB and ensure the effectiveness of the corporation. For the coming Ramadan, imports should be increased to keep prices affordable.

General Comments

Golam M. Chowdhury says banks, NBR, trade unions, media-everyone concerned-has a role to play to make the markets function normally.

A.K.M Saiful Majid points out that although it is said that the government has no control in the open market system, completely open market system is a textbook term. No economy is completely open; some countries are practising it but still there is some control over the economy; it is true even of the US economy. He further points out that coordination must be increased between the ministry of commerce and the ministry of finance. The ministry of finance takes many crucial decisions concerning inflation, product price, VAT, taxes etc, which have a direct impact on the market. So cooperation, coordination and information dissemination are needed to increase among different relevant ministries. Also, price control board can be established, which can control the market through setting the price ceiling of different products.

Sirajul Islam says the problem of price hike cannot be solved overnight. This problem existed before. Although government changed the core policies remained the same.

Belayet Hossain points out that Bangladesh entered the market economy system in the early 80s. Since then the number of private sector enterprises and investors has been increasing and they have been playing an influential role in the business. The present price hike cannot have been the work done in a day. There is definitely the influence of syndication and unethical manipulations of prices in the market. He thinks the government step to stem the price hike with the help of BDR may be a short time solution but in the long run it will not prove an effective tool. He anticipates that prices will not rise further in the coming Ramadan because winter is approaching and also because the Government is quite concerned about this matter. However, he underscores the need for setting up a strong price control board that will include specialists.

Belayet Hossain maintains that businessmen should not be interested only in making profit; they should be socially responsible, too.