Stepping back from reconstructing institutions in disarray 

Prime Minister Tarique Rahman recently reminded us about the context of the July Uprising that ousted the previous government. While we must forge ahead without muddling past legacies, understanding the institutional failures that brewed the grievances and fueled the mass uprising is vital. It is heartening to see a common recognition that individuals are largely  products of a system that deserves closer scrutiny. 

Geopolitical compulsions are real, but reactive nationalism triggered by foreign aggression risks fueling autocracy. Preventing nationalism from turning fascist requires proactive nation building where the state upholds citizens' interests, establishes rule-based governance, and enforces transparent laws. 

Using an economic lens, this analysis prioritises positive, structural  examination to highlight where policy reforms are urgently needed for genuine nation-building. 

Institutional weaknesses are evident across several critical sectors. 

Capital market manipulation

Small retail investors have been repeatedly burnt in the share market due to foul play by powerful, unchecked actors. 

Real estate collusion

Urban households and remittance earners seeking housing are often exposed to developers engaged in fraudulent or deceptive practices, including collusion with individuals laundering untaxed funds through property markets and the use of powers of attorney over sold apartments as collateral for bank borrowing, sometimes with the assistance of complicit bank officials. 

Unregulated financial schemes

Small savers have been routinely cheated by unregulated multi level marketing (MLM) agencies, multi-purpose cooperatives, and Ponzi schemes, and all such actors freely use commercial banks to channel illicit funds. 

Banks as vehicles for government-mediated resource transfers 

Successive regimes have perennially refilled bank vaults emptied by politically connected loan defaulters, forcing ordinary citizens to bear the brunt via taxes, external debt liability, and inflationary pressures. 

Systemic governance failures in the banking sector

Historically, regulators in the sector have been susceptible to pressures and allurements from the very actors they are expected to regulate. Such relations are presumably rooted in the idea of shareholder owners entangled in BSEC-BB ordinances, and in inadequate protection of depositors' money that give free hands to  senior management and chairman of private banks. 

Difference in efficiency across the two  segments is alleged not to be a cause of reverse power relation, but an outcome shaped by an extremely unequal pay-structure. Furthermore, ambiguities in rules defining relative power within the central bank allow external interests to influence (or block) decisions through the corridor of power. 

Amidst such a chaos, "projectisation" of activities provide opportunities to sponsors and external lenders to align banking activities to their interests disguised in global best practices. The subject deserves far more critical assessment, much beyond firefighting. 

Geopolitical compulsions are real, but reactive nationalism triggered by foreign aggression risks fueling autocracy. Preventing nationalism from turning fascist requires proactive nation building where the state upholds citizens' interests, establishes rule-based governance, and enforces transparent laws.

Ambiguous citizenship status

A major institutional blind spot is the blurred distinction  regarding state obligations to native citizens, residents, and trans-boundary individuals. Foreign Citizens of Bangladeshi Origin (FCBOs) and dual-status individuals often exploit global  governance gaps to remain non-transparent about their tax obligations while extracting local wealth. This group has frequently transmitted misgovernance and financial opacity into  Bangladesh society, economy and politics. 

Beside the banking sector governance, these issues highlight three key vulnerabilities: property  markets shelter "black money" and tax evasion is common in property transfers, a financial sector  that shelters illicit wealth, and the lack of a comprehensive national registry to track domicile,  residency, and citizenship. 

During recent budget consultations, three progressive policy proposals were tabled to address  these vulnerabilities — only to be subsequently overturned or sidelined by the ruling authority. 

Reversing real estate tax reforms 

Property transfers are notorious for evading taxes and perpetuating a massive pool of untaxed  (black) money. When deed values under-report actual market prices, the government loses  revenue, sellers hide illicit proceeds, and buyers avoid disclosing their funding sources. 

The lawmakers are aware of these and chose to keep official registry assessments pegged to  artificially low mouza values, legitimising a network of corrupt intermediaries and tax officials. 

It was expected that the new government would mandate market-based property valuations to  reduce black money, increase revenue, and transition toward transparent digital governance.  Instead, the proposal was overturned on the grounds that moving toward market valuations would somehow endorse the "self-initiated investment" of illicit funds. 

Abandoning TIN integration with banking 

The second major U-turn was abandoning the proposal to link Tax Identification Numbers  (TINs) with bank accounts. While Bangladesh spends significant resources on foreign-mandated  anti-money laundering (AML) frameworks, it consistently fails to protect domestic depositors.

We aspire toward data-driven, algorithmic governance, yet authorities like the National Board of  Revenue (NBR) either have limited access or remain blind to basic financial data. 

Establishing a coordinated information network for full disclosure of income, investment and  wealth is a difficult task. Yet, a modest, sensible step would have been requiring mandatory TIN  submissions only for accounts exceeding a specific threshold — such as accounts balances over  Tk. 10 lakh or where individual transactions exceed Tk1 lakh. 

Unfortunately, the previously  proposed policy, without any mention of thresholds, was taken off the table on grounds of  protecting small businesses and less wealthy depositors. 

Ironically, this reversal safeguards wealthy elites who under-report their assets or shields their financial footprints, as well as tax  evaders who belong to the upper echelon of the society or have revealed allegiance to foreign  authorities.

A modified proposal with exclusionary principle applied to deposit and transaction ceiling, instead of certificate-dependent identity, can put us on track to get free from the captivity of "black money". 

Fumbling identity categorisation and fiscal accountability 

Finally, proper financial accountability requires strict classification of residency and citizenship.  Because commercial banking drives economic transactions, account eligibility must reflect an  individual's legal residency and work status. 

Differentiating native residents and Non-Resident  Bangladeshis (NRBs) from FCBOs is essential for regulating foreign currency entitlements, local  borrowing rights, and pension repatriations. 

The dangers of ignoring these boundaries are clear. 

Bangladesh continues to extend large domestic credit lines to foreign nationals. For example, the S Alam family recently filed an  international arbitration claim against the interim government with the World Bank's ICSID, exploiting their Singaporean citizenship and bilateral investment treaties despite their deep involvement in local banking crises. Without clear institutional classification, digitalisation risks  becoming a tool for further state regimentation rather than democratic transparency. 

Policy-shapers and decision-makers must urgently revisit the three plus areas of institutional and  policy reforms that are critical for nation-building. Retreating from these reforms and  enforcement mechanisms fundamentally dents our hope for equity and a transparent future. We cannot rebuild ruined institutions if the policy trajectory fails to take off.

Sajjad Zohir is the Executive Director of the Economic Research Group.