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Capital flight through trade mis-invoicing staggeringly high

Data reporting to UN Comtrade for Bangladesh has dropped
Star Business Report
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Bangladesh lost a staggering $7.53 billion on an average between 2008 and 2017 to trade mis-invoicing during its foreign commerce with its 135 trading partners, said the Global Financial Integrity Report (GFI).
The loss accounted for 17.95 per cent of Bangladesh’s international trade with all trading partners during the period, according to the GFI’s its annual update, “Trade-Related Illicit Financial Flows in 135 Developing Countries: 2008-2017”, which was released on Tuesday.
The country lost $11.51 billion in 2015, the latest year for which data was available for Bangladesh. The report stated no such data for Bangladesh for 2014, 2016 and 2017.
When pointed out the absence of the data, Maureen Heyd, communications coordinator of the GFI, in an email to The Daily Star, said: “Yes, there was a lack of reported trade data for Bangladesh in recent years. This is unfortunate, as it limits our ability to investigate illicit activity in Bangladeshi trade.”
“We don’t know why reporting to the UN Comtrade for Bangladesh has dropped off in recent years.”
Heyd, however, said the report represents new findings for Bangladesh, in that this report has been made with the most up to date available data, and therefore, it is the most current of the GFI’s work examining Bangladesh.
This report also examines Bangladesh’s trade mis-invoicing with all its global trading partners -- whereas the previous GFI reports examined only Bangladesh’s trade with the 36 advanced economies.
Bangladesh’s loss to trade mis-invoicing with the 36 advanced economies averaged $3.29 billion during the decade, which is 14.62 per cent of the country’s global trade.
When asked about the report yesterday, Finance Minister Mustafa Kamal told reporters yesterday: “I know nothing about the report. They [GFI] didn’t inform us anything.”
The GFI published the update examining trade-related illicit financial flows across 135 developing countries and 36 advanced economies by trading partners, commodities, regions and per cent of total trade among other indicators.
By analysing individual country government trade statistics supplied to the United Nations Comtrade database, the GFI identifies “value gaps,” or mismatches, in the reported data.
The report finds gap of $8.7 trillion in reported trade between developing and advanced economies over 10 years.
It states trade mis-invoicing is a significant obstacle to sustainable development.
In 2017, the most recent year for which data are available, the total value gap in trade between advanced economies and developing countries was $817.6 billion.
The act of trade mis-invoicing is a major type of illicit financial flow and can be used to evade customs duties, VAT taxes, and currency controls among other illicit activities. It also deprives developing country governments of desperately needed tax revenues.
Developing countries are losing a significant percentage of the value of their trade transactions, said Tom Cardamone, president and chief executive officer of the GFI, in a statement.
“Indeed, in 2017, the value gap associated with trade mis-invoicing amounted to 18 per cent of developing country trade. If the integrity of trade transactions cannot be assured, it is unlikely countries will be able to achieve the UN Sustainable Development Goals by the 2030 deadline.”
Cardamone also noted that poorer nations are often the hardest hit by mis-invoicing: of the 10 countries with the largest average value gap from 2008-2017, six are in Africa and are among the poorest countries in the world, including Sao Tome and Principe, the Gambia and Burundi.
The developing countries with the largest annual average value gaps in their bilateral trade with 36 advanced economies over the ten-year period were China ($323.8 billion), Mexico ($62.9 billion), Russia ($56.8 billion), Poland ($40.9) billion and Malaysia ($36.7 billion).
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