The cabinet has finally approved the Gold Policy-2018 as was placed by the Ministry of Commerce. For long, analysts have been advocating for an open and transparent gold policy so that the investors at home can do gold business in a competitive environment and the market can be freed from the smugglers. The main reason behind gold smuggling in and outside the country was that while there was a demand for gold bars and gold ornaments at home, the supply of gold was constrained by many prohibitions, including high import duty, with regard to gold import. The main source of gold ornaments has been the smuggled gold and the old worn-out gold ornaments often sold by the old customers.
Trading in gold was never recognised as an economic activity in this country. The policymakers never thought of gold as one of the important components in the rich people's asset basket. Holding gold bars in the asset basket or investment in gold as a holding element was not recognised as a legal act. The gold and also to an extent some foreign currencies act as a useful store of value for investors (holding of foreign exchanges as store of value is not legal for Bangladeshis).
Bangladesh has taken an inordinately long time in legalising gold import. Anyway, it's better late than never. The Gold Policy will hopefully pave the way for establishing a competitive gold market, wherefrom the government will also receive commensurate revenue. Country's gold market so far served the interest neither of the investors, nor of the government. Rather, it served the interests only of smugglers and a few gold shop owners who used to charge a highly differential price compared to international price for gold and gold ornaments. As the source of gold supply was not open and the transactions not recorded, the shop owners did not maintain proper book keeping of their sales and thereby deprived the government of its due revenue receipt.
One hopes that the newly-approved Gold Policy will not only remove the constraints in gold trade and business, but also will cover items like gems and diamonds. The gold policy today in many countries covers everything the investors think of, as precious metals like gold, gems, diamonds etc which can be stored for values.
The investors who want to hedge against risk in a turbulent asset market, go for gold holding. Bangladesh for long denied its rich citizens of this opportunity and that harmed the economy in the way of prompting a huge capital flight from the economy.
The Bangladesh Bank (BB) has been assigned, in the Gold Policy - 2018, with the responsibility of issuance of licenses to the gold traders for gold import through authorised dealers which are the designated commercial banks.
We believe the import duty will be either nil or very minimal, and this time things will work smoothly. Also, the BB is to see that a few licence holders for gold import do not form a cartel or squeeze others out of the market. The overseeing body for gold import and its greater business for a while shall have to be the BB, but a better option here will also be establishing a full-fledged overseeing body that should be brought into being through an Act of parliament.
With the Gold Policy in place, the national economy will eventually see a flourishing gold and ornament market. Bangladesh will also earn a good amount of foreign exchange from ornament export.The size of world gold jewellery market is said to be $2.4 trillion. If Bangladesh can take a small share of that market through export of those items, that will be an achievement. Bangladesh has skilled manpower, but they need further training. Today, gold ornaments are not only hand-made but also machine-made. The investors in gold business should make good use of their money.
Abu Ahmed is Professor of Economics, University of Dhaka.