AL govt patronised corrupt nexus to syphon off project funds, White Paper body finds

Infographics: TBS

During the tenure of the ousted Awami League government, projects were frequently awarded at prices significantly above standard rates through open tender. In other cases, projects would be granted via unsolicited processes. In both cases, the quoted rates were always high and there would be ample opportunities for corruption.

This approach gave the previous government scopes for irregularities and corruption regardless of whether projects were awarded through open tenders or unsolicited processes, the committee preparing a White Paper on the state of Bangladesh's economy has found.

At an event organised by the Economic Reporters Forum (ERF) on Thursday (31 October), committee members detailed how the Hasina government repeatedly made revisions to projects by including additional expenses through newly-added elements, which significantly increased project costs.

This system allowed for the procurement of goods at inflated rates. For instance, items that could be sourced for Tk10 were often acquired for Tk1,000 under the pretext of project needs, according to the committee's findings.

Mega Corruption in Mega Projects

Committee member M Tamim, professor at Buet, said the Hasina government purposefully undertook large projects to exploit more funding opportunities.

"In these large projects, individuals involved in corruption were rewarded with privileges such as university positions, banking licences, and even prestigious awards like the Ekushey Padak," he added.

Prof Tamim, who assessed projects within the energy sector, said corruption was often approved by the Prime Minister's Office, especially within the power and energy sectors.

He added that key decisions were centralised with select companies receiving contracts based on directives rather than merit.

Mostafizur Rahman, committee member and distinguished fellow at the Centre for Policy Dialogue (CPD), said project proposals were often approved without sufficient oversight leading to wasteful expenditure.

Mostafizur, responsible for analysing mega projects and money laundering during Hasina's tenure, said, "The financing for these projects relied heavily on high-interest loans due to a shortfall in government revenue, which could have been used for debt servicing."

From the fiscal 2009-10 until June last year, the revised budget allocated Tk18.83 lakh crore for development projects. Among these, major initiatives such as the Payra Port, Matarbari Thermal Power Plant, Rooppur Nuclear Power Plant, Dhaka Metro, Padma Bridge, Padma Rail Link Project, and Karnaphuli Tunnel accounted for approximately Tk2.30 lakh crore in expenditures. 

He explained that after projects were approved, they were frequently revised, significantly inflating costs and increasing opportunities for corruption. 

New elements were added to projects, allowing some individuals to anticipate government land acquisitions, which led to a tenfold increase in land prices. The government would then acquire the land at three times the original cost, giving an illusion of saving money, the committee said.

Debapriya Bhattacharya, head of the committee, said, "Projects which bore no relation to public needs were undertaken for corrupt purposes. To offer undue patronisation to suppliers, items worth Tk10 were procured at Tk1,000." 

He added that significant theft has occurred in the banking, energy, and ICT sectors, with inflated projects undertaken in physical infrastructure and transportation.

Debapriya said these projects lacked public consultation and participation, resulting in "white elephants" such as the hi-tech parks.

The Nexus

Debapriya remarked that a collusion among military-civilian bureaucrats, politicians, and businessmen created a corrupt economic system that demanded authoritarian rule to sustain it. 

He said the Implementation Monitoring and Evaluation Division (IMED) under the planning ministry is "in a state of neglect", and there is consensus on the need for its reorganisation.

Selim Raihan, another committee member and economics professor at Dhaka University, noted that after questions arose regarding the government's political legitimacy following the 2014 elections, they fabricated a narrative of development.

This led to the emergence of a form of "crony capitalism", he noted, explaining that as the government's political legitimacy declined, project-based corruption escalated.

"We have identified various forms of corruption in projects. Politicians, bureaucrats, and businessmen formed an alliance to institutionalise the notion of development. They pursued mega projects and engaged in corruption. Although the government occasionally attempted institutional reforms, the nexus opposing these reforms has thwarted such efforts," he stated.

Another committee member, Prof AK Enamul Haque, former dean of the Faculty of Business and Economics at East West University, said a nexus had formed between officials and politicians.

He mentioned that this nexus expanded after 2018, leading to delays in project implementation and repeated extensions of timelines and budgets, enabling significant embezzlement. 

The committee has pinpointed government expenditures but has not yet identified specific perpetrators of corruption, he added.

A source affiliated with the White Paper Committee told TBS that although it has not been possible to verify every project, some have shown corruption levels of 60% to 70%. Even if corruption in mega projects averages around 20%, the monetary amount is substantial.

Laundering and repatriation

The White Paper Committee is expected to provide an estimated account of the money that has been laundered from Bangladesh during Hasina's tenure. 

Mostafizur Rahman mentioned that they are calculating this estimate based on findings from Washington-based Global Financial Integrity (GFI) regarding money laundering from Bangladesh between 2009 and 2013 and in 2015. 

This calculation considers the increased size of the economy, and the amount of laundered money will be determined using the balance of payments methodology.

After the meeting, Mostafizur told TBS that the central bank governor has mentioned that $17 billion has been laundered from the banking sector alone. 

"However, the White Paper Committee will present a more comprehensive estimate of total capital flight from the country, which is expected to be significantly higher," he added.

According to GFI data, in 2014 alone, approximately Tk73,000 crore was laundered from Bangladesh, compared to about Tk77,000 crore the previous year.

Since the government ceased providing data to GFI in 2015, the US organisation has been unable to report on the money laundering situation in Bangladesh.

To recover laundered funds, the government has formed a task force, and Mostafizur Rahman confirmed that the IMF and World Bank would assist the government in this regard. 

Debapriya Bhattacharya said the burden of the irregularities in the previous government's spending now falls on the public. That government has failed to collect sufficient revenue for public expenditure, and whatever has been collected has been laundered abroad. 

"Authoritarian politics was required to fill the gap in corrupt financing and to sustain the narrative of development. This created a cyclical relationship. The current changes provide an opportunity to break this cycle," he added.

Debapriya further said the future of politics and reform initiatives in Bangladesh will depend on economic stability. "Although politics currently determines everything, if the economy does not stabilise, politics may not have the opportunity to play its regulating role."

The Committee

The White Paper Committee will not propose any reform programmes to rectify economic misconduct. It will recommend mid-term planning. There will also be suggestions for initiatives needed to restore economic stability in the last six months of FY25 and the next fiscal budget.

The committee will advise on controlling inflation, stabilising exchange rates, maintaining liquidity in banks, managing the government's foreign debt situation, and ensuring the supply of agricultural products.

Debapriya said the committee will assess whether Bangladesh will graduate from LDC status by 2026. "There are gaps in the implementation of SDGs, and recommendations will be made to expedite this process."