Speaking at the recent annual conference of the Bangladesh Administrative Service Association, Chief Adviser Dr Muhammad Yunus has emphasised the need to create opportunities for young people, asserting that Bangladesh’s large population is not a burden but a valuable resource.

A day later, Deputy Commissioners (DCs) proposed the introduction of universal military training for youths, aiming to involve them in the country’s defence efforts.

Of course, this is a political decision, and it requires serious examinations of the proposed programme’s budgetary implications.

We have done some preliminary budget estimates. The good news is that we can introduce the programme progressively over 5-8 years, say beginning with 10% of those turning 18 years as a pilot and then gradually cover the entire cohort of 18-20 years old who are able to serve.

The context – seismic demographic shift

In 50 years since independence, Bangladesh’s population more than doubled from around 70 million (7 crore) to around 174 million (17 crore), turning Bangladesh as one of the most densely populated countries in the world. Despite a rapid fall in fertility, Bangladesh’s population will continue to grow largely due to the momentum effect. UN Population Division projects that Bangladesh’s total population will reach its peak in 2071 with a population of 226 million.

Bangladesh is well into the third phase of demographic transition, having shifted from a high mortality-high fertility regime to a low mortality-low fertility one. As shown in the population pyramid (Figure 1), there is a youth bulge comprising about 28% of the population in the age bracket 15-29.

Figure 1: Bangladesh’s population by age (2024)

The UN projects that by 2030, the proportion of youth in the age bracket 15-29 years will decline to around 25% and by 2050 to around 20%. So, this is our demographic moment that comes only once (see Figure 2).

As Professor Yunus stressed, young population is a blessing – a source of strength, energy and vigour. A country with a large number of young people not only has a large pool of work force, but also a large pool of potential future leaders – often referred to as “demographic dividend”.

However, demographic dividend is not prearranged. It is an opportunity provided by the age structural transition. This window of opportunity opens for a population only once. If missed, it may become a “demographic curse”.

A country can “become old before becoming developed” – as we see in the case of Sri Lanka- characterised by a large proportion of elderly population (non-working age) while the nation still struggles with poverty and infrastructure issues. Thus, the country not only has fewer working-age people (i.e., a smaller work force), but also has to support a large number of people in their older age. Such a demographic situation potentially hinders a country’s economic progress and creates challenges for its social welfare systems.

Thus, an increase in the proportion of young people in a country’s population structure can bring a huge dividend provided this raw power is converted into highly skilled human resources, absorbed in productive employment and turned into entrepreneurs.

This can be shown by decomposing the neo-classical production function as follows:
Y/P = Y/SE x SE/E x E/LF x LF/WP x WP/P, where Y = GDP, P = population, E = employment, SE = skilled employment, LF = labour force, WP = working-age population.

Thus, GDP per capita (Y/P) is the product of:

a) productivity gains due to skilled employment (Y/SE),
b) proportion of skilled employment (SE/E),
c) employment rate (E/LF),
d) labour force participation rate (LF/WP) and
e) demography, i.e., proportion of working age population (WP/P).

Bangladesh’s demographic dividend may become a mirage. The recent student/youth unrest which began with a demand for quota reform and ultimately toppled the Hasina regime is a clear indication of the economy’s inability to absorb these youthful people in productive employment or turn them into entrepreneurs. The official unemployment figure of about 3-4% based on outdated labour force survey methodology does not reflect the reality.

National service – a feasible urgent solution

Our most critical challenge is preventing demographic curse and reaping demographic dividend. Mandatory national service, comprising some basic defence training, IT and general literacy-numeracy and vocational skills, will not only bring enormous economic benefits, but also prepare the country for disaster management, especially due to climate crisis. It will also act as an effective deterrent against possible threat to our national sovereignty.

Currently, we have around 1.6 crore (15.9 million) youths in the age bracket 20-24 – roughly 87 lakh females and 73 lakh males. Of the youth turning 18 years, about 29 lakh are able to serve, excluding child-bearing females (around 25%) and those with various disabilities.

If 10% of the youth turning 18 years are included in the programme in the first year, and Tk 12,000 per month (equivalent to the current minimum wage) is used for each participant, then 5.8% of the total 2024-25 budget proposed by the fallen regime would been required for defence. This is marginally higher than 5.3% allocated in the proposed 2024-25 budget. This figure rises to 5.9% and 6.2% if training each participant requires Tk15,000 and Tk20,000, respectively.

The above rough and ready estimates assume no change in the exiting allocation for other defence expenses. Nor does the exercise consider efficiency gains.

Obviously, budgeting cannot be done in isolation. The first place to find money is reallocation as required by reprioritisation. It should be mentioned here that the fallen regime in its last budget proposed for 2024-25 in June 2024, increased defence budget by 11% over the revised defence budget for 2023–24. Therefore, this has to be examined seriously; the priorities of the ‘new Bangladesh’ cannot be the same as the fallen regime’s.

Money can also come from the savings that might result in other sectors, e.g., education as there will be reduced pressure to expand post- secondary education. If necessary, the costs of such programmes have to be shared through higher taxes for the sake of securing a prosperous future of this country.

Empowering the youth

Training and skill development through mandatory national service is just one element in the supply side of the equation. The pool of available talent needs to be empowered and deployed to yield demographic dividend. Otherwise, it will be wasted and may even turn into a disruptive force.

Our most critical challenge is preventing demographic curse. Not only we have to reap demographic dividend, but also ensure what is referred to in the literature as ‘second demographic dividend’. While the ‘first demographic dividend’ due to the rise in the proportion of working-age population is transitory, the ‘second demographic dividend’ can be perpetual.

For this to happen countries need to invest in skill upgrading, support entrepreneurial initiatives and innovative/flexible work environment to allow working even in older age and asset accumulation by workers.

Especially, given the advancement in technology, and particularly Artificial Intelligence (AI), we urgently need to rethink skill development for our youth. Many university degrees may soon become obsolete because the skills they offer are prone to automation.

Ironically, many blue-collar, hands-on jobs are likely to survive because they require mental and motor skills humans have developed over millennia and are really difficult to automate. We consider them low-skill because we take those skills for granted. On the other hand, jobs which require high-level critical thinking will also survive. We need urgent actions to prevent our youth from falling into the “middle”.

Act now

Professor Yunus has rightly understood the key message of youth revolt that the youth should be placed at the heart of strategies as they are committed to creating a new world which is inclusive, fair and just. Therefore, it is logical that his government initiates the measures when the aspirations of the revolution are still fresh in the minds.

Anis Chowdhury, Emeritus Professor, Western Sydney University (Australia); held senior UN positions at Bangkok & New York in economic & social affairs

This opinion editorial was first published in New Age (24 Feb. 2025), Dhaka, Bangladesh

IPS UN Bureau

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Illicit financial flows. Credit: IPS

By Khalid Saifullah
NEW YORK, Oct 4 2024 (IPS)

The commonly used Bangla phrase for siphoning off money out of the country – “taka pachar” – is rather misleading. Because taka, the Bangladeshi currency, is never taken out of Bangladesh. It’s not useful anywhere else. What goes out is its equivalence in foreign currencies, especially, US dollars. The technical term for such criminal act is Illicit Financial Flows (IFFs). Mistakenly, sometimes IFFs are referred to as money laundering – a processing of criminal proceeds to disguise their illegal origin.

Money laundering and illicit transfers of funds

Although there are some links between money laundering and IFFs, they are not the same activity. The United Nations Office on Drugs and Crime defines money laundering as “the conversion or transfer of property, knowing that such property is derived from any offense(s), for the purpose of concealing or disguising the illicit origin of the property or of assisting any person who is involved in such offense(s) to evade the legal consequences of his actions”.

On the other hand, Illicit financial flows (IFFs) refer to illegal movements or transfers of money or capital from one country to another. However, sources of such funds may not be illegal (e.g., corruption, smuggling).

In practice, IFFs can also involve ill-gotten money – the worst case as in Bangladesh. The billions of dollars that were taken out of the country were mostly obtained through corruption and stealing of public funds.

How do illegal fund transfers happen?

Nearly US$3.15 billion flows out illicitly from Bangladesh annually. If a common person wants to travel abroad with a few hundred of thousand dollars, they can simply slip it in their pocket and catch a flight which is perfectly legal if that amount is within the legal limit of a country. For example, one can legally take out a maximum of AUD10,000 out of Australia (or bring in) without having to make declaration. For Bangladesh, it is only USD5,000.

But cronies of the Hasina’s kleptocratic regime robbed and transferred millions and billions of dollars. According to a recent report, close to US$150 billion was siphoned off the country during 15 years of kleptocratic Hasina regime’s mis-rule. So, they must have carried out these very illegal activities through legal channels. How did it work though?

Well, it’s very difficult to know for sure, but it is believed that most IFFs happen through trade mis-invoicing or trade-based money laundering. Let’s try to understand the design with an example.

Let’s say, you want to launder one million dollars. Either you or your accomplice have an export-import business. Let’s say you need to import 10,000 units of a product each costing $50. But instead of $50, you declare that their unit value was $150. By “securing” assistance from some key people within the authorities, you get Bangladesh Bank to transmit one and half million dollars as the payment for your grossly over-declared imports to a foreign company you set up for this purpose. You pay the exporter half a million dollars for your legitimate imports, and in the process, you have succeeded in laundering the one million dollars you wanted to get out of Bangladesh. The same can be done for exports but in reverse. This is of course a simplistic example and there can be many creative variations of this menace.

There are reasons to believe that this happened a lot in the case of Bangladesh. Why? Well, to begin with, Bangladesh does have a vibrant export-import sector which can make trade-based money laundering accessible and difficult to trace. Secondly, many of Hasina’s cronies themselves were involved in international trading. Thirdly – and I don’t think many people know this – Bangladesh stopped sharing detailed international trade data with the UN after 2015. There can of course be other explanations for this, but the timing nevertheless raises questions. UN Comtrade, world’s largest source of international trade data, has data on most countries in the world but not Bangladesh, world’s eighth largest population and thirty-fifth largest economy.

We need detailed trade data

International trade data has the special characteristic that it’s a two-sided account. Bangladesh’s export of cotton T-shirts to US is also US’ import of cotton T-shirts from Bangladesh. In practice, there are some other factors at play but overall, this is how it is. Users can easily compare international trade data and any glaring disparities become immediately apparent.

One could argue that this still could be done since Bangladesh Bureau of Statistics (BBS), Exports Promotion Bureau (EPB) and Bangladesh Bank (BB) all publish external trade data. It would seem so but that’s not really the case. Without going into much details, the data published by these agencies lack the necessary details to be comparable. Their data is at an aggregated level and not disseminated in a comparable manner. EPB doesn’t even publish imports data (it’s probably not in their mandate).

Then, there’s the issue of accuracy. Weeks before Sheikh Hasina’s ouster, BB revised exports data stating that EPB’s figure was 10 billion USD higher than actual exports. The Chief Adviser Muhammad Yunus in his most recent address to the public promised to publish accurate trade data. It is a very necessary and welcome step. However, it is not sufficient. We need the necessary details in the data to allow for comparison with our trading partner countries’ data. In particular, we need:

• Data by calendar year (Jan-Dec) and not only fiscal year.
• Data by monthly frequency.
• Breakdown by commodity codes up to at least HS (Harmonized System) 6-digits level. There are around 6,000 HS 6-digits codes available from the World Customs Organization (WCO). These codes can specify a commodity with sufficient details.
• Commodity descriptions.
• Breakdown by trading partner (ISO codes for country of origin for imports, country of last known destination for exports).
• Breakdown by country of consignment (ISO codes for any third country the commodities may have passed through).
• Mode of transport (sea, air, road, rail, etc.).
• Breakdown by customs procedure codes (for what purpose the commodity was imported or exported).
• Breakdown by trade flow (exports, imports, re-exports, etc.)
• Value (free-on-board basis for exports; cost, insurance, and freight basis for imports), net weight and quantity.

Towards modernization and automation of financial intelligence

Accurate, timely and detailed trade data is important for analyses of possible trade mis-invoicing but it’s not sufficient in preventing money laundering altogether. What we need is an overhaul and automation of financial intelligence itself.

The backbone of such an automated system should be a Business Register (BR). A BR is exactly what it sounds like – it’s a register of all businesses in a country. A key component of the BR is the unique identifier. Each business or enterprise is assigned a unique ID. Once set up, businesses must be required to use this ID in all types of activities, from setting up bank accounts to trading.

The BR can contain many other information on the businesses including size, sector, economic activities and so on. Thanks to the unique identifier, BR can be used to link data from different domains, e.g., linking trade data with businesses and their banking activities.

Given the treasure trove of linked data available from customs declarations, banks and other sources – much of which cannot be published for public use due to confidentiality- the information can nevertheless be used to build very intelligent and sophisticated systems thanks to statistical modelling, machine learning and artificial intelligence which can flag any suspicious activities in real time. I mean, something has to be “off” in a transaction involving money laundering and the technology is out there to detect it.

The existence of such a system itself could lessen the problem of money laundering to a great extent because it will serve as a strong deterrent. Building this level of data capacity will of course take investment. But looking at the estimated 150 billion dollars laundered by Sheikh Hasina’s kleptocratic regime, it seems the return on investment is very enticing.

Khalid Saifullah is a trained statistician with 14 years of experience working in international organizations.

IPS UN Bureau

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