Bangladesh's 'missing billionaires': wealth boom and glaring inequality | Business and economy

Dhaka, Bangladesh: Adjoining the chic Gulshan Club and overlooking the peaceful Gulshan Lake in Dhaka, the capital of Bangladesh, a 14-storey building is nearing completion.

Construction workers clad in orange hard hats and neon harness belts detail the finishing touches while the building's ornate facade glistens against its monochrome concrete and glass frame.

This building, known simply as Three, is being built by elite Bangladeshi real estate developer BTI and is arguably the most expensive residential building ever constructed in the South Asian country.

As well as having the most sought-after postcode, the 12 apartments – each spanning an entire floor of over 7,000 square feet (650 square metres) – come with a range of modern amenities and gadgets , including biometric security systems for locks. and AI-driven elevators and lighting for greater efficiency.

All the apartments were sold before construction even began, even with a whopping base price of 200 million taka, or $2.5 million until 2021 (the taka has since devalued, bringing the price down apartments at $1.8 million).

Since BTI chairman Faizur Rahman Khan also purchased an apartment in the building, the company carefully screened the other potential owners from over 50 applications received, mainly from businessmen in the city.

The increase in disposable income in Bangladesh is not unknown. Crowded shopping malls, like Jamuna Future Park, one of South Asia's largest, and new billboards advertising everything from packaged foods to cars and smartphones are further proof.

But this BTI building, perhaps more than anything else, speaks to the growing wealth of Bangladesh's wealthy, a handful of the country's 180 million people.

A study by the Boston Consulting Group (BCG) indicated that while the country's middle-income and affluent consumer (MAC) class is growing rapidly – ​​and is expected to reach 17% of the population by 2025, the disparity wealth of the country is increasing simultaneously.

It's a symptom of the nation's transition from an “economic hard case” — as former U.S. Secretary of State Henry Kissinger once called it — to an economy growing fast but grappling with a widening divide between rich and poor.

In Bangladesh, the richest 10 percent of the population now controls a disproportionate 41 percent of the country's total income, while the poorest 10 percent receives just 1.31 percent, according to government data.

The rise of millionaires

New York-based research firm Wealth-X has identified Bangladesh as the global leader in wealth growth between 2010 and 2019.

The study (PDF) indicates a remarkable 14.3 percent annual increase in the number of individuals with a net worth above $5 million, surpassing Vietnam, which ranks second with a growth rate of 13, 2 percent.

The Wealth-X report further projects that Bangladesh will be among the five fastest growing countries for high net worth individuals, with an increase of 11.4% over the next five years.

Further illustrating the growth of Bangladesh's richest, according to Bangladesh Bank data, by the end of 2023, more than 113,586 private bank accounts held at least 10 million taka (nearly $1 million), an increase significant compared to the 16 such accounts after the country's independence. in 1971 and 3,442 accounts in 2000, at the start of the country's manufacturing and export boom, which helped fuel many of these accounts.

This group, colloquially known as kotipotis, accounts for less than 1 percent of total bank accounts, yet controls a substantial 43.35 percent of total deposits, highlighting the concentration of wealth in the country. within a small segment of the population.

Economist MM Akash put it bluntly: “Bangladesh's rich are getting richer and richer while the poor are struggling to survive. »

It's hard not to notice the disparity. Less than 3 km from Building Three, along the same Gulshan Lake, is Korail, Dhaka's largest slum. Spanning an area equivalent to 40 football fields, Korail contrasts sharply with its wealthy neighbor, with four to five people crammed into tiny 9-square-meter rooms.

In recent years, COVID pandemic-induced lockdowns, the war between Ukraine and Russia, and the ensuing economic downturn have pushed more Bangladeshis into poverty.

Surveys by various organizations have consistently reported a substantial increase in the number of poor and extremely poor people. A post-Covid survey by the Bangladesh Institute of Development Studies (BIDA) found that around 51% of poor residents in Dhaka have been pushed into extreme poverty due to the coronavirus pandemic.

Akash attributed this widening gap between rich and poor not only to an unequal distribution of economic gains, but also to a development strategy that disproportionately benefited the ultra-rich.

The country's eighth five-year plan recognized policy failures contributing to persistent inequality and lack of equitable distribution of wealth.

A prime example, Akash said, is Bangladesh's tax-to-gross domestic product (GDP) ratio of 9 percent, well below the developing country average of 15 percent.

“We apply regressive direct taxation to the poor and the middle class while we allow widespread tax avoidance for the rich,” he says, adding that a significant portion of the rich's assets remain untaxed.

Khondaker Golam Moazzem, research director at the Dhaka-based think tank Center for Policy Dialogue (CPD), also criticized successive governments for prioritizing corporate interests by cutting taxes instead of taxing the rich.

“The irony is that here, workers face repression when demanding fair wages, while at the same time the ultra-rich get better benefits, even after tax evasion. »

A study by the Ministry of Finance suggests that 45 to 65 percent of Bangladesh's income remains untaxed. This is largely due to the ability of the super-rich to evade taxes by saving their assets – when they do so – at a value well below the market price.

As a result, a significant share of government revenue comes from indirect taxes, such as VAT, which fall disproportionately on the poor.

Moazzem said the poor bear a heavier tax burden than the rich. He also rejected the “supply side” theory that tax breaks for the wealthy ultimately benefit everyone.

Echoing Moazzem, economist Akash also questioned the idea that a growing number of wealthy people is a sign of a thriving economy – as the government sometimes tries to portray it.

“This is because most of Bangladesh's rich do not reinvest their wealth, but rather hide it in overseas accounts to evade taxes,” he said.

The enigma of the billionaire in Bangladesh

According to Oxfam's 2023 annual inequality report, the world's richest 1% have accumulated almost twice as much wealth as the rest of the world combined over the past two years.

Billionaire wealth has skyrocketed since 2020, with the richest amassing an astonishing $26 trillion (63%) of all new wealth created during the pandemic and cost-of-living crisis, while the The remaining 99% only shared $16 trillion (37%). ).

That means a billionaire earned about $1.7 million for every dollar earned by someone in the bottom 90 percent. Their fortunes increased by an average of $2.7 billion per day, further widening the wealth gap.

Paradoxically, despite being the 35th largest economy in the world, no Bangladeshi billionaire appeared on Forbes' annual list of global billionaires until this year.

Muhammad Aziz Khan, chairman of Bangladesh's Summit Group, who made his fortune through power and energy trading, was the first Bangladeshi to make the Forbes list.

To put things in context, Eswatini, an African nation with a GDP 100 times lower than that of Bangladesh, has a billionaire.

Additionally, of the 76 countries with at least one billionaire, 40 have an economy smaller than Bangladesh.

Chile, for example, has an economy about 78% of Bangladesh's, but has seven billionaires. Similarly, Cyprus has four billionaires while its economy is only one-fifteenth that of Bangladesh.

Journalist Sheikh Rafi Ahmed, who reports on these “missing billionaires”, claimed that many billionaires do indeed exist in Bangladesh, but hide their wealth in offshore accounts and real estate, pointing the finger at the 11 Bangladeshis listed in the Pandora Papers for such practices. Rafi believes that large capital outflows and tax evasion have hampered accurate estimation of individual wealth in Bangladesh.

“This probably explains the prolonged absence of Bangladeshi billionaires from global lists,” he said.

Naznin Ahmed of the Bangladesh Institute of Development Studies (BIDS) highlighted the alarming rate of capital flight due to over- and under-invoicing of imports and exports.

The scale of Bangladesh's wealth flight, as the ultra-rich take their money abroad, was so great that a 2017 Global Financial Integrity report ranked the country first among the world's least expensive countries. advanced for “illicit financial flows”.

“I think Bangladesh has secret billionaires, but they just don't keep their money here,” she said.