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Shop talk

Black money, white money, economic activity

ERSHAD KHANDKER
DHAKA is now a town of shopping arcades or shopping complexes. Apparently, this is good news for shoppers, wholesalers, retailers and employees and also customers. Some other groups also benefit by generating business from these establishments. But this proliferation seems to trouble the more informed or socially aware. They are well within their right to be asking questions like, where do people get the money to build such large places with so many costly shops, so much produce and products, so many shoppers? What is the origin of this trend of bringing
together sellers and buyers in such large numbers?
The "cause and effect" factor of this retailing boom is interesting. The cause is the natural instinct of people to do business, supply where there is a demand. Economics theory and practice i.e. book based solutions and practical examples, clearly show that entrepreneurship is an essential tool of national development. So, on the face of it, the retailing festival now on in the city, is not a bad thing. Just imagine the number of people, the variety of services involved in building one shopping mall. The bank, real estate company, the shop owners and employees, the various product merchants who sell their wares to the
shops etc. And the most important component is the consumer. The money spent by the consumer will eventually pay the salary of the peon, ferrying tea to the merchant preparing to go to the shopping mall to sell his ware. This cycle of money changing hands creates opportunity for the government to earn revenue by charging taxes at different points -- at source, direct and indirect levies and finally income tax. Jobs are created, money changes hands and source of livelihood is provided by all this commercial activity. More and more wealth is created, and new and different businesses are added due to the bearish retailing market.
The man asking question about
these shopping malls is presumably worried about the chances of black money involved. it is a fair call and the worry is about the amount of black money, not the existence of it. The amount of black money in circulation could be as high as 30 per cent of the total economy of Dhaka city. Data on this would be smudgy or inaccurate. The emergence of such a boom in shopping is not wholly unprecedented for an urban economy; the question is, is there a black hand at work? An idea can be formed about all this, by first looking at the different players like the population of the city i.e. consumer base and their comparative breakdown. Sort of a rational analysis.
The real estate companies build the shopping malls. it is seen that most constructions involve bona fide firms erecting the structures and then leasing out the shops. Most of these companies borrow money from banks or use their own capital. Since the locations of the shopping malls are good, the available space is quickly taken lease of. Based on educated and informed guesswork, it could be inferred that shops are bought by traditional businessmen, people coming into new money and some people starting new businesses with money from retirement benefit, money diverted from other businesses or many other sources.
The consumers have different income range. There are the rich businessmen, upwardly mobile and the middle class. The one way of making determination about income range is to gauge income tax figures. Needless to say, income tax is not an accurate reflection, many avoid paying taxes and many of those paying, only pay a fraction of the real amount, making a hash of the figure.
Then there is black money. Consumables being bought by black money mean that it is turned into white money as it moves in transaction. And most economies suggest that black money should be turned into white money, allowing that cash to circulate in the real economy, so that this money shows up as revenue for the government. That is why, governments often declare amnesty or indemnity, and refrain from asking specific questions about the origin of the money (as long as the source is not obviously from criminal activity).
Retail shops in large shopping arcades mean increased economic activity. Newjobs are created, money is transacted and circulated in a wide network. There is great benefit in this. However, sound fiscal and regulatory balance must be maintained. The source of the money should be properly registered, good audit mechanism established and revenue generated for the government coffers. Government agencies need to be vigilant against any kind of "bubble effect" like that bursting in Japan. Genuine entrepreneurship is always welcome.
Ershad Khandker is a freelance journalist.