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Knowing The Ropes 0f The Billion Dollar Loan By India

Badrul Islam

Tuesday 02 November 2010

In my article, “Bangladesh-India relationship: Transit and other national issues”, on November 2009, I had indicated, that “determining public opinion and reaching a national consensus are a must before our government signs any agreement with India”. However the government has crossed the Rubicon on August 07, 2010 and it signed the 0ne Billion Dollar loan. This loan will finance 14 projects, within Bangladesh; all relating to development of railways and other communication infrastructure, particularly to facilitate transshipment of Indian goods to north-eastern region. Additionally, to ward off any speculations following the six months delay to give the loan, the Indian Prime Minister, Manmohan Singh through their Finance Minister ,Pranab Mukherjee announced that India will export 3 lac tons of Rice and 2 lac tons of wheat . If our Authorities heeded my advise, as stated above, then it would discover that the loan from India would not be required as our Country’s foreign exchange reserve now is hovering between dollars 10 to 11 billion dollars. We could have set aside one billion from this reserve and reaped three big advantages: (1) we could complete the 14 projects through competitive sources i.e. other countries besides India, and acquire better quality equipments, and utilize our own experts and manpower , (2) we could have bargained harder with India to complete first, all our outstanding bilateral issues without further delay or within a specified time limit, and (3) we could have ensured the continuity of Bangladesh’s share of marketable good to the northeastern states(now doubtful if transit established). We lost this advantage by accepting this loan from India. Our Foreign Minister, Dipu Moni said that when donors provide loans or grants, they protect their own interest. But I am cognizant that donors do discuss the pros and cons of how their loans would benefit the recipient country; so why did she not bargain on points that would be advantageous to Bangladesh? The Chairman of Fair Trade Advocacy, Mr.Manzur Ahmed, in his article “Passage of Indian cargo through Ashuganj” writes, “Bangladesh should have absolutely no obligation to allow “transit and transshipment” of goods from one place in India through Bangladesh to another place in India under the governing principles of “Transit and Transshipment in International Trade” as mentioned under Article V of GATT 1994(binding on both Bangladesh and India as members of WTO). The bait of carriage charge for Indian cargoes at the cost of marginalization of our natural advantage and perpetual loss of our export to seven sisters can never be an option. Bangladesh should adopt as its strategy and uphold the doctrine of third country transit as stated by Dr.Manmohan Singh in the inaugural session of 13th SAARC summit, that “All South Asian Countries would provide to each other, reciprocally, transit facilities to third countries”.(Ref: FE dt May 17,2010). Why our Authorities didn’t think of the above two points, why there wasn’t any coordination between the different concerned Ministries and why they showed so much enthusiasm to receive this loan from India beats my imagination completely. However, I deem it proper to remind our Authorities about the philosophy of Late Sheik Mujibur Rahman, the architect of our Independent Bangladesh. He expressed his gratitude to India for supporting the Liberation struggle but he also desired that Bangladesh - India relationship be imbued with the spirit of equality. Late Mujib was clear in his mind that he did not wish to be over- dependent on India. He did not wish that Bangladesh be dubbed as a client state of India as was being anticipated by political analysts and observers from different parts of the world. (Ref: Liberation and Beyond by J.N.Dixit). Is it not wise for our honorable Prime Minister Sheikh Hasina to follow the vision of her late Father? Since embarking on economic reforms in 1991,”emergent” India’s growth rate has risen dramatically and has been about 9 percent a year for the last five years. Yet India’s service to its people ranks below countries with neither democracy nor high growth, writes Sarmila Bose, senior research Fellow, in her article “Indians will vote but will they really have democracy?” In the same article she states that India has failed to deliver even the basics of a decent life to most of its citizen. Indians vote but they go hungry. The International Food Policy Research Institute ranks India 66 out of 88 countries in its 2008 Global Hunger Index: hunger is at “serious” level in 4 of its 17 biggest states, ”alarming” in 12 and “extremely alarming” in 1. This poor performance is unrelated to state-level economic growth or who hold power: this is a systemic failure. (Ref: The Times, April 10, 2009). I am confident, that the above description is the reason why India seeks trans-shipment/transit facilities through Bangladesh. But while doing this, will Indian Authorities, bear in mind that Bangladesh’s ongoing marketing of some of its products to both India and the northeastern states must not be jeopardized? 0ur daily newspapers carries worrisome reports of the obstacles the Indian Governments is creating to hinder the smooth business, I quote herein three examples: (1) Jute Bags- faced set back last month as India wants exporters to print country of origin, a rule, previously ignored for last eight years, to the benefit of Indians who re-exported them to other countries. India previously imported 5 lakh bales now it is down to 1.75 lac bales, (2)Food exporters found it hard to access the north-eastern states of India as regions custom authorities have set a new rule asking importers to store in boded warehouse from June this year. Delays in this test from India labs and showing bank solvency certificates by importers is discouraging them and (3) the issue of non-tariff barriers is being discussed for last eight years, says a top 0fficial of Bangladesh Tariff Commission. But talks remain inconclusive. The demand for transit/transshipment by India has been there from former East Pakistan times and following Independence of Bangladesh , Lt.Gen Jacob writes in his Book “Surrender at Dacca”, that he suggested to D.P.Dhar, then an Adviser to Late Indira Gandhi that it is important to get from Bangladesh Government an agreement of three essentials: guarantee for Hindu minority, rationalization of enclaves, and transit rights by rail and inland waterways through Bangladesh with use of facilities at Chittagong port. What Jacob didn’t know then, that Chittagong, Khulna and Mongla ports was strewn with mines and non- operational. Here I wish Citizens to note the contrasting attitude of India. While Jacob asked Dhar to seek guarantee from Bangladesh for use of ports, our Late Sheikh Mujibur Rahman, learning about mines in our ports, requested India to permit use of Calcutta (Kolkatta) port for six months for Bangladesh. The request was turned down on grounds of security. The habit of demanding things, right or wrong, from Bangladesh started right after independence (as seen from Jacob’s statement) and friendship indeed started with suspicion from the side of the Indian Authorities, as can be felt from their denial of above. Also India withdrew the Indian army from Bangladesh only after signing the controversial Twenty-five years agreement and on insistence of Late Mujibur Rahman. Praful Bidwai, an eminent Indian Columnists in his article “India seeks an exalted global profile” mentions, that the characteristic of India’s ruling elite is its insatiable appetite for symbols of grandeur and obsession with exclusivity. New Delhi’s policy makers want to raise India’s high profile. Consider India’s hubris-driven attempt to transform itself from an official development assistance (ODA) recipient to an aid donor. In 2003 it kicked all aid donors except six (US, UK, Russia, Germany and EU) and declared that it wouldn’t accept tied aid and launched a tiny ODA for poor countries to balance the growing Chinese influence in Africa. But China is an altogether different league. Its ODA is 25 billion. India’s is under 1 billion. However much of India’s aid are tied to Indian goods and services which is in contrast with India’s own refusal to accept aid. (Ref: DS dt August10,2010). It is under this concept, the 0ne billion dollar loan was given to Bangladesh. Does this kind of contrasting Foreign Policy of India, benefit its neighbor, particularly Bangladesh? Now let us analyze the loan itself. The interest rate is 1.75 percent per year with an additional commitment charge of 0.5 percent for unutilized credit at the end of a year and is repayable after 20 years with grace period of 5 years. The clock for interest has started ticking soon after signature on August 7, 2010. This means at end of 20 years the principal amount of 0ne billion dollars plus the interest of amount 262.5 million dollars (1.75 x15) will have to be returned to Exim Bank of India. What is not clear is how the commitment charges 0.5 percent is being applied. Will this be charged on the balance amount if any after the entire project is completed i.e after 20 years, or will this be charged every year? Already an estimated amount of $601.84 million has been earmarked for expenditure of 14 Projects. The balance amount of $398.16 million is yet to be allotted against approved projects. So if this amount remains unutilized till August 7 of next year i.e 2011 will 0.5 percent commitment charge be applied on this amount? If so an additional amount of $199.080 million will be added to above interest. This needs to be efficiently monitored otherwise the interest amount will be accumulating. It is no wonder that Indian Finance Minister has mentioned that terms of this loan, the largest India is giving (comparing to African country mentioned above) are extremely favorable; what he meant is it is very favorable to India on three counts: (1) India will get this loan back with profit from interests, (2) probably earning additional accruing profits from interest of unutilized portion of the loan, and (3) most importantly, the 0.5 % commitment charges has political gains as this loan, with this particular clause, becomes binding for Bangladesh government ; the present administration or other government which might replace the present one via elections. In case of political dispute it will debated that this is a clause of the Bank and not influenced by the Indian Government. Now it is imperative that transparency and efficiency by both, Bangladesh and Indian Authorities be maintained to overrule suspicions and corruptions in its implementation. The smooth operation will be a litmus test of India’s friendship to Bangladesh since the operation of all 14 projects will be with Indian equipments that is due to arrive soon in Bangladesh. The onus is now on the Indian Government to ensure, that all the project equipments, to be exported from India to Bangladesh are of the highest quality. We shall keep our fingers crossed on this and wish it success. But let me explain why I am stressing on transparency and efficiency; on website ( dt August 21, 2010) ANI reports that the first power project of 0il and Natural Gas Corporation of India, which received permission from Bangladesh Government for a one-time transit, has set up its unit of 726-Mega Watt Power plant and will be run by Gas provided by Bangladesh. The Plant 60 miles from Agartala, is bordering Bangladesh where there is gas reserve of 8.4 trillion cubic feet. This will be commissioned in December 2010 and the second plant by March 2011. R.S.Sharma, Chairman of 0NGS is very happy on the cooperation received from Bangladesh Government. Now note, that the report specifically indicated, the Plant will run by Gas provided by Bangladesh and I have not yet seen any agreement to this effect. However in the comments column a person using code name “Mod” has opined that this statement is false and there is no such official confirmation. Somebody from Bangladesh Authority must immediately take this up with the Indian Government and clarify this matter for this is of great concern and can cause misunderstanding to all this efforts of a friendly venture. Within Bangladesh, the incumbent governments enthusiastic announcements that this loan will bring benefits to Bangladesh in terms of “receiving electricity” through the Indian power grids from the Plants being set up mostly in border areas and, “financial benefits” from creation of regional hub, is being viewed with great skepticism due to the following reasons: (1) The Authorities of both countries are still not able to decide on Power sharing modalities from the border areas on various technical grounds. The situation is similar to situation of the Joint Rivers Commission that till date have not been able to solve the water sharing problems with Bangladesh, (2) though the Bangladesh Government has issued SRO for transshipment/transit fees to be levied on Vehicles/containers and cargo; no formal agreement has been signed with India, Nepal and Bhutan ; infact, India wants a waiver ,(3) also no formal agreements has yet been signed with Bhutan and Nepal; the Foreign Minister says an exchange of letters between the three Countries is sufficient, (4) no formal agreements have been signed for procedures to be followed in case of irregularities/corruption/denial to have banned/controlled items to be scanned or for random customs check at borders, and (5) no formal agreement has been signed that “No Military Equipments, transports or such similar cargoes will ever be shipped through Bangladesh. My humble suggestion to the Prime Minister of Bangladesh is that she refrains from accepting the offer for 3 lac tons of Rice and 2 lac tons of Wheat on following grounds: (1) the above report from Ms.Sarmila Bose on the prevailing hunger report indicates that India would benefit more from this stock than Bangladesh, (2) this offer is a Political stunt to reap benefits for the upcoming general elections, particularly from minority Muslims Community in India, and finally (3) on account of a bad experience Bangladesh had from the last offer of Rice for SIDR areas; Bangladesh was forced to pay more(approximately $150 per ton) than the original price fixed by the India. I don’t think Bangladesh Citizens would be like to experience this again. Kuldip Nayar, eminent Indian Columnists in his article,” India’s Tiananmen Square” writes, ”The right to choose is what Prime Minister Indira Gandhi confiscated when she imposed the Emergency. The Allahabad High Court disqualified her for having used the government machinery for election purposes. After getting a stay order from Supreme Court, she suspended the Constitution itself and played havoc with the nation. Her son Sanjay Gandhi, who had by then emerged as extra-constitutional authority helped her. Later, he took over and ordered the arrest of practically every known critic of his mother, smothered protest and used the government machinery to implement his scheme of things: one person rule. Three of those who helped Mrs.Gandhi and Sanjay Gandhi are today ministers in Manmohan Singh cabinet. They are Finance Minister, Pranab Mukherjee, Information and Broadcasting Minister, Ambika Soni and Minister for Highways and Roads, Kamal Nath. Placating political masters has become a duty for them; in return, they got out of turn promotion or cushy postings. Sanjay Gandhi put so much fear in the minds of the bureaucrats that it still works. I am not surprised over the findings of a study that India has the most corrupt bureaucracy.”(Ref: DS June 27, 2009). It is imperative to understand this above psyche, of the Indian Government, that I have described above quoting these three Indian experts, namely Kuldip Nayar, Sarmila Bose and Praful Bidawi. Then only one can also understand why, in 60 years, as quoted by Sarmila Bose ,in the same above mentioned article, India has been unable to solve armed conflict in Kashmir, its north east or with the growing communist “Naxalite” movements in its heartland. India’s human right record is poor – not just in Kashmir or north east. The latest figures from National Human Rights Commission show that the largest number of complaints comes from states outside conflict zones. Corruption is endemic. Contrary to assumptions in the West, anyone who has lived in India knows that the country doesn’t have the rule of law. Democracy is supposed to produce greater accountability but India’s democracy doesn’t respond to the needs of the people. (Ref: The Times, April 10, 2010). If it is true that local government policy reflects on the foreign policy of a country then it is not too difficult to understand, why in spite of its efforts to have a high Global profile, India has a poor rapport with most of its neighboring countries, including Bangladesh and therefore, they wish to free themselves from the influence of India. Let me cite two examples for readers to understand. Sri Lanka has recently agreed to the 1.5 billion dollars port project funded by China and this has fuelled Indian concern. Like wise, India is loosing its influence over Nepal. Mr. G. Parthasarathy, in his article, “Remove neighbors doubt about India”, says, “There are legitimate concerns in Nepal that Indian diplomats are acting like pre-consuls. Even friends of India express dismay of what they consider crude Indian “meddling” in their internal affairs. (Ref: Holiday dt September 10.2010). Nepal is yet to have an elected Prime Minister; but failing to do so because of alleged Indian conspiracy to have their henchmen elected. Maoist now has the greater influence and they are pro-Chinese. As for relationship with Bangladesh, India really needs to make a dramatic change in her attitude. Next, it is imperative that India reciprocates the good gesture of our Prime Minister Sheikh Hasina. What can India do? Ms. Smruti Patel, Research Fellow, Institute for Defense Studies and Analysis, offers her valuable opinion, “India needs to walk the extra mile and, if necessary, provide unilateral trade concessions already hinted by the Finance Minister. But any concession or policy announcements must not be allowed to get tangled in bureaucratic red tapes leading to broken promises.” Bangladeshis will be keenly observing the developments and progress of the above identified 14 projects and some more to be added in the future, on a priority basis. Let us all hope that wisdom will prevail on both governments and that none will try to out fox the other; most importantly India will not use their old trick on us, as they previously did, for operating the Farraka Barrage. Badrul Islam is an Independent Researcher. He previously worked for Foreign Chartered Coaster's Administration,BIWTA and for United Nations agencies in Bangladesh and East Africa region. - Show quoted text -

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