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Thursday, March 18, 2010

Import of natural gas and hydropower from Myanmar

Abdul Matin

One of the worst decisions of the BNP-led government in 2004 was the rejection of the Indian proposal to lay a gas pipeline from Myanmar to India through Bangladesh. This could enable us to share part of the gas and significantly reduce our dependence on the import of costly oil (and perhaps LNG) to meet our energy needs. China immediately grabbed the opportunity and built a 2,806 km pipeline from Myanmar to China with a maximum discharge of 424 bcf of natural gas per year. China also built a 771 km oil pipeline running parallel with the gas pipeline to deliver 240 thousand barrels of crude oil per day. India tried in vain to revive the Myanmar-Bangladesh-India gas pipeline project in 2013.
Recently, Bangladesh took an initiative to import natural gas from Myanmar and build a power plant at Chittagong with the option of sharing electricity with Myanmar. The proposal was put forward by a high-powered delegation that visited Myanmar recently. It is reported that Myanmar responded positively to the proposal and decided to send a technical team to assess the viability of exporting gas from its Chin State, which is adjacent to Bangladesh.
Myanmar started to export natural gas to Thailand in 1999. Thailand decided to invest $3.3 billion in oil and natural gas development in Myanmar by 2020. Gas exports yielded a total of $3.5 billion for Myanmar during the 2012-13. The country's current natural gas output comes primarily from the offshore Yadana and Yetagun fields, but is likely to rise because of the political and economic reforms in Myanmar and the subsequent easing of sanctions by the US and the European countries. Myanmar is also keen to attract foreign investment and is issuing production-sharing contracts through direct negotiations. There is now good prospect of discoveries of new gas and oil fields in Myanmar. The country has proven natural gas reserves of 7.8 tcf.
The Bangladesh delegation also proposed to purchase 500 megawatt of hydropower from Chin or Rakhine provinces through erecting cross-border power transmission line and offered joint investment in developing hydropower projects. Myanmar has an enormous hydropower potential of up to 100,000 megawatts.
The initiative taken by the government to import natural gas and hydroelectricity from Myanmar is a very wise decision. The proposal has two major advantages: (i) a common border between the two countries requiring no approval from a third country to build pipelines or electric transmission lines and (ii) the close proximity of the gas fields and hydropower sites from Bangladesh. These factors will make the cross-boundary transmission of natural gas and electricity easier and more economic. Moreover, Myanmar will benefit from our experience in construction and operation of gas based and hydropower plants.   
In view of the shortage of energy resources, one of our best options is to share the resources of the neighbouring countries. Bangladesh is now importing about 500 MW of electricity from India. This capacity may be increased further very soon. It has also taken initiative to import hydroelectricity from Bhutan through India.
Unfortunately, the relationship between Bangladesh and Myanmar had not been very good in the recent past. Following the settlement of the maritime boundary dispute between Bangladesh and Myanmar, the prospect of cooperation between the two countries is now brighter. In our interest, we should now build a good neighbourly relationship with Myanmar and seriously cooperate not only in energy sector but also in all other sectors of trade and commerce.
The writer is a senior nuclear engineer.

The Daily Star, 15 February 2015

How does Bangladesh figure in India's Look East Policy?

Wahiduddin Mahmud

INDIA is looking for new economic frontiers in the East. In the face of continuing stalemate of WTO negotiations, countries are looking for alternative or parallel arrangements. The past decade has seen the flourishing of many such initiatives. As an emerging global economic powerhouse, India would obviously not like to be left behind.
There is the American-led 12-country Trans-Pacific Partnership (TPP) in which neither India nor China plays any part; but both the countries as well as Japan are involved in the ASEAN-led 16-country parallel initiative called the Regional Comprehensive Economic Partnership (RECEP). The outcome of these initiatives will depend on factors that go much beyond the nuts and bolts of trade into the realm of geopolitics.  It thus makes sense that India is looking for alternative routes to link with the ASEAN, which is currently the focus of India's so-called Look East policy.
But while pursuing the big ideas of economic partnerships, it would be a folly for India to lose sight of what can be achieved nearer at home. To start with, one could argue that India's Look East policy needs to look first within its own borders, so that its east and north-eastern parts can both be a vehicle and a beneficiary of the policy. Connectivity and economic integration with Bangladesh becomes important in that context. Consider this fact: most of the 30 border districts of Bangladesh – out of a total of 64 districts -- are among the most economically disadvantaged areas of the country. The Indian districts bordering Bangladesh are similarly lagging behind. Clearly, the cross-border economic synergies due to geographical proximity are not being fully exploited.
The potential of turning geography to economic advantage is obvious. This sub-region provides the land corridors for connecting India to East Asia, such as through the proposed trans-Asian road and train links. But beyond that, the connectivity is also important for providing access to seaports. The hinterland of Kolkata and Chittagong ports can extend beyond Nepal, Bhutan and the seven sister states of northeast India to large parts of inland China. As China's manufactures move inward, it is exploring backdoor routes, such as reviving the old Silk Route and looking for new ones. That is why Bangladesh in particular would like to see the success of the initiative called BCIM-EC, the acronym for Bangladesh, China, India and Myanmar economic corridor.
There has been much talk about transit facilities for Indian goods through Bangladesh. The issue has been narrowly focused in terms of transit of goods only and not as part of sub-regional economic integration through which a number of things can happen. For example, supply chains can be developed to use the resources of the Indian north-eastern states by setting up labour-intensive processing industries in Bangladesh – say, by Indian investors – and exporting the products worldwide through Chittagong port or to the rest of India. These may not be as big ideas as India's current Look East policy in terms of priority of the Indian policymakers at the centre; but the potential economic dividends can be high for Bangladesh and the North-eastern states of Bangladesh. The sub-regional integration can also benefit Kolkata –a city that has not clearly lived up to its full economic potential, mainly because of its remoteness from the major Indian economic hubs.
For the same reasons, the South Asia Growth Quadrangle (SAGQ) comprising Bangladesh, eastern India, Bhutan, and Nepal deserves more attention and should be part of India's Look East policy. The region, compared to SAARC, enjoys geographical proximity, economic complementarities, and socio-cultural similarities favouring greater economic integration. Previous studies have concluded that power trading within the SAGQ sub-region would confer major benefits on all four countries.
Realising that potential of economic integration will need huge investments in infrastructure. Scarcity of land in Bangladesh and the governance problem of implementing large projects are additional hurdles.  The newly created Asian Infrastructure Investment Bank (AIIB) initiated by China has immense developmental promise for infrastructure development in Asia, particularly by bringing together the two Asian giants, China and India, and by providing China an institutional mechanism to deploy its large pool of accumulated reserves.
The main economic logic of India's Look East policy lies in the fact that South Asia generally has been left behind in the race to integrate into global supply chains, which is a particularly dynamic segment of world trade. India has seen an upsurge of its trade with some of the south-east Asian countries after it implemented the free-trade agreement with the ASEAN in 2010. The question remains whether there will be similar enthusiasm in India for fostering comprehensive regional economic integration with its immediate north-eastern neighbours.
The writer is Chairman, South Asia Network of Economic Research Institutes.
(Extracts from the speech delivered at the “Kolkata Dialogue” of the Look East Economic Summit organised by Indian Chamber of Commerce in Kolkata, January 9, 2015.)

The Daily Star, 25 February 2015

BOTTOM LINE Will sweet words cut any ice?

Barrister Harun ur Rashid

The West Bengal Chief Minister Mamata Banerjee arrived in Dhaka on February 19 for a three day visit. Her entourage includes ministers, businessmen, media and eminent cultural media personalities who are popular in Bangladesh. The visit has drawn widespread attention since it was due to her opposition that the Teesta water agreement could not be signed.
Mamata is quintessentially a politician and observers say “she came, she charmed the people of Bangladesh with her personality and she left, with reassurance of love for Bangladesh.”
On thorny issue of the Land Boundary Agreement which envisaged the swapping of enclaves between the two countries. Ms. Banerjee had earlier opposed that too but recently softened her stand.
The West Bengal Chief Minister Mamata Banerjee sought to reassure the people of Bangladesh ahead of her crucial meeting with Prime Minister Sheikh Hasina: “You may have questions in your mind about Teesta. Please keep faith in me about that. You have some problems, we have some problems. I will discuss that with Hasinaji on February 21 when I meet her. Leave it to us. Don't worry about it. Padma, Megna, Ganga, Jamuna -- we have never seen divisions there. No one will be able to divide us even if they want to,” Ms. Banerjee said in Dhaka.
Her story seems to be that the Central Water Commission is a premier technical organisation of India in the field of water resources and is presently functioning as an attached office of the Ministry of Water Resources, Government of India. Teesta River flows from Sikkim and Sikkim has many water projects which deplete flow of water to West Bengal. If Sikkim can be persuaded by the Modi government to release more water to West Bengal, the chief minister will then be able to share the water with Bangladesh.It may be recalled that in September 2011, Ms. Banerjee had pulled out of a delegation to Dhaka led by then Prime Minister Manmohan Singh, who was expected to make a major announcement on the sharing of the water of the Teesta. She claimed the pact would harm the interests of the people of north Bengal through which the Teesta flows. Her move had embarrassed Manmohan Singh and he was not able to sign the pact.
But the question mark over Teesta remains for two reasons; first the election in West Bengal will take place in 2016 and, second, the BJP and Trinamool Congress of Banerjee are likely to contest the election. It is reported that it is not desirable politically to sign the Teesta water sharing agreement with Bangladesh before the state election.
Furthermore, Ms. Banerjee seems to have become politically weak. The divisions among the leaders have led to the loss of the two by-election results in the state. BJP, which has been gaining ground in West Bengal riding the Saradha scam, has posed the biggest political threat to the TNC of Banerjee at the West Bengal election.
It may be recalled that the Saradha scam seems to have tainted the reputation of Ms. Banejee and her party leaders. The  Kolkata-based Saradha Group is said to have defrauded thousands of investors, including poor people, in West Bengal, leading to the arrest of its owner Sudipta Sen. Saradha Group  had over 10,000 registered chit funds across the country and with an aggregate turnover of Rs. 30,000 crore per annum.
The shadow thrown by the Saradha scandal is slowly creeping up the hierarchy of the Trinamool Congress. After two Rajya Sabha MPs, the CBI arrested Madan Mitra, one of most powerful ministers in Mamata Banerjee's cabinet, for his alleged involvement in the multi-crore chit fund scam.
The BJP president alleged that Chief Minister Mamata Banerjee was more interested in trying to save her scam-tainted party leaders than developing the state. Shah also reminded people that the Mamata government had opposed an NIA probe into the Burdwan blast in January, throwing a question to his audience: “Will you allow such a state government which gives priority to vote-bank politics over national security?”
The question is why did she come to Dhaka? There are several reasons, some of which deserve mention. First she wants to soften the minds of the BJP leaders, including Prime Minister Modi, towards her by visiting Bangladesh so as to enable her to become a “goodwill messenger” between the Bangladesh government and the Modi government in resolving long-pending issues between Bangladesh and India. Second, she wants to demonstrate to the people of West Bengal that she is popular with the government and people of Bangladesh with a view to winning the 2016 legislative election in West Bengal. Third, although her party has won 34 seats out of total 42  in the Lok Sabha in the May parliamentary election, BJP's overwhelming victory  with 282 seats (BJP and its allies NDA =336) has diminished her political leverage with the Modi government..
Let us now wait how the political game is played out between TNC and BJP in the coming months.
The writer is former Bangladesh Ambassador to the UN, Geneva.

The Daily Star, 22 February 2015

FDI drying up due to political crisis

Sadiq Zafrullah

Developing countries are mostly dependent on export, remittance inflow and foreign direct investment (FDI) for economic growth. Foreign investment plays a vital role in the growth of gross domestic product (GDP) as it is very important to increase consumption demand and standard of life of the people. Foreign investments increase the flow of money, thus accelerates economic growth and development. But regrettably FDI is on the decline in Bangladesh.
It is easy to understand observing the condition of the commercial banks in recent times. The heaps of idle money in the banks mean less money circulation in the market and less investment. In Bangladesh, each indicator of the financial development is going down or being negative nowadays. These negative trends are exerting a heavy toll on the economy.
Why this sudden downturn of the economy of Bangladesh? To answer this question, most of the economists attribute to the political instability. The fickleness in the international relations also has link with the ups and downs of foreign investment. It is easily predictable that the recent political unrest is liable for such critical and fragile state of the economy.
Now wooing back the foreign investment is the biggest challenge for the government. But the challenge is daunting given the fact that most of the developed countries are experiencing economic slowdown. In addition, Middle Eastern countries are also going through political crisis. Bangladesh needs immediate action to increase the FDI. And to encourage the investors, interest rate of bank loan should be brought down to single digit.
The economy was in a stable condition and progress was satisfactory throughout the global economic downturn of the last few years. Again Bangladesh has been recognised internationally as a rising economic power; but it lags behind in many sectors. But the potential economy is being repeatedly affected by political violence and anarchy. After a peaceful year 2014, the 2015 has started with the eruption of violent politics as the two main parties continue to remain on collision course.
After increasing for three consecutive years, FDI has dwindled last year. Temporary estimates of Bangladesh Bank (BB) show FDI amounted to $153 crore in 2014 whereas it was $160 crore in 2013. FDI decreased by 4.25 percent. According to the BB statistics, half of the total foreign investment came as a reinvestment to the multinational companies last year. Of them, 25 percent investment came through the inter-company loans. And the only 25 percent came as new investments.
Local and foreign entrepreneurs have lost their interest to invest in the country due to prolonged political uncertainty. According to the Board of Investment (BOI) data, only one foreign direct investor got registered for investment in January this year. It amounts to Tk 50 crore compared to an average monthly registration of Tk 2,500 crore last year. Even Local investors fear that the political situation could aggravate the situation further. Such fear might have already sent a bad signal to foreign investors who were interested to invest in Bangladesh.
BOI data shows foreign investments registered in 2014 were $3,000m. The real FDI was $1,640m (Tk13,000 crore) in 2014. This year the re-investment, however, was $700m (Tk5500 crore). BOI saw a moderate growth in FDI situation in 2014 although FDI in 2014 was not diversified. The setback is reflected in the fact that a total of 30 firms - foreign, local and joint venture - registered with BOI in January this year. But of them, foreign firm was only one.
In the month of December last year, a total of Tk3,000 crore investment was registered. In January this year the figure came down to Tk1,000 crore. In 2013, total volume of investment registered was $2,621m but the real investment was $1,599m.
Industries Minister Amir Hossain Amu MP said that inflows of FDI into Bangladesh rose to a record high of US $ 1.6 billion in 2014. This figure is expected to cross 2 billion US dollars in 2015. Amir Hossain Amu said Bangladesh is a vibrant economy that has, despite the recent global economic meltdown, maintained a consistent growth rate 6 percent plus. “We are keen on increasing FDI and we welcome more foreign direct investment in our booming industrial sectors like shipbuilding and ship recycling, infrastructure, communication, ICT, agriculture, textile, power, health and education and other prospective sectors.” He also said that the government has taken up an initiative to formulate National Industrial Policy-2015 recasting the previous one, focusing on growth competitiveness, reform and ease of doing business.
On the other hand, the cost of imports increased in the first five months (July to November) of the current fiscal year compared to the corresponding period of last year. Imports of readymade garments (RMG) sector capital goods increased to several thousand percent. However, the growth in exports of RMG goods was very low in the last five months. So, question arises if the businessmen are related with money laundering.
In this context, research organization Center for Policy Dialogue (CPD) stated, there was no investment at all rather huge amounts of money have been smuggled out of the country last year. And it amounts more than foreign aid in taka. CPD worries if the smuggled money is coming back to the country as foreign investment and aid.
Assembling the reasons behind the sterile foreign investment, we observe, though the cost of business is comparatively less in Bangladesh, getting necessary plot for building industry/factory is next to impossible. Though cheap workforce is available, getting new connections for gas, electricity and water are quite impossible. Again, other cities have available plot for industries but requires environmental clearance and many other certificates. It wastes a lot of time. Therefore, Bangladesh is not getting expected foreign investment.
Most of the FDI in South Asia flows toward India. In last three years, about 90 percent FDI of this region entered into India. And Bangladesh got about 3 to 3.5 percent only. On the other hand, 85 percent of the FDI stock (reserve) of South Asia is in the possession of India.
Furthermore, foreign investment is not increasing due to lack of investment friendly policy, bureaucratic perplexity, political instability and energy crisis. Again, the investors are being disappointed by the absence of any visible government initiative. There was no mentionable foreign investment in any sector without telecommunication last year. The reason is that the government has not taken any positive steps to remove the aforesaid barriers of investment. Actually, the government has failed to provide the needed benefit and policies to attract foreign investment, resulting in an investment crisis.
Frequent change in the policies is another obstruction to expected foreign investment. If the government wants to attract foreign investors it has to establish an investment friendly policy and ensure a stable political atmosphere, improvement of law and order and supply of utility services.
Although many internationally reputed companies have shown interest to invest, they are turning away for not getting necessary support. Samsung (a mobile phone company) had shown interest to build a factory here in Bangladesh nearly 4 years ago. They asked for a 2,000 acre of land in the export processing zone but didn’t get it. Huge foreign investments are lost for not taking the right decision at the right time.
Bangladesh is left with no other alternatives but to attract more FDI and boost and diversify exports. It is the government who should come forward to take all the initiatives to gain local and foreign investors’ confidence. National Board of Revenue (NBR) and Board of Investment (BOI) are two important agencies which should work together to deal with the ongoing crisis. But above all, politicians should let the situation calm down.
The writer is a student of Department of Economics, University of Dhaka.

The Daily Sun, 23 February 2015