Panos Radio podcasts report on Phulbari resistance

Photo: Shahidul Alam

Panos Radio South Asia (PRSA), an undertaking of Panos South Asia, on October 15, 2007, podcasted a report on community resistance against Phulbari Coal Project in Bangladesh.

In this latest edition Panoscope went to Phulbari, a small hamlet in north Bangladesh where, for the past several years, local residents have been resisting an open pit coal-mining project that threatens to displace thousands of people and destroy the environment. The controversy revolves around a clandestine deal between the erstwhile Bangladesh government and a British coal company called Asia Energy (now renamed Global Coal Management PLC). Asian Development Bank (ADB) is planning to provide US $ 100 million loan and US $ 200 million political risk insurance to Asia Energy. ADB is now conducting its due dilligence and scheduled to approve the funding the project in March 2008.

Download and listen to the report.

Download the complete transcript: phulbaripanoscope.doc

Visit Phulbari Resistance for more information on the community resistance against open pit coal mining in Phulbari.

Photo essay on Phulbari: Profits versus the poor

US bill for RMG market access needs govt engagement

NewAge, October 28, 2007. Dhaka, Bangladesh

The current military-driven interim government has yet to take up any visible initiative to back the new bill placed in the US Congress to provide more access to Bangladeshi garment products, which it must. The congressmen and senators in favour of the least developed countries would be able to make a better case if the authorities in Bangladesh as well as other concerned quarters, provide them with solid data and research, writes Tanim Ahmed*

Fully free market access of garment products to the developed world has been a consistent and long standing demand of Bangladesh as far as trade is concerned. Every mini ministerial meeting of the least developed countries, typically preceding a full blown ministerial summit of the World Trade Organisation, since 2000 has concluded with this demand in the very first paragraph.

The full ministerial summits have also acknowledged the demand as justified and have typically promised as much in their declarations. As of the last ministerial meet, held in Hong Kong in 2005, 97 per cent of products from least developed countries will enjoy preferential market access in the developed countries as soon as the current round of trade negotiations are concluded, subject to a number of other conditions. More often than not, these conditions dilute the concession to such a degree so as to render it almost useless.

Having already secured reasonable access to Europe and Canada, Bangladesh has been desperate for similar access to the lucrative American market for garment products. The ready made garment sector, accounting for over three-fourths of Bangladesh’s export earnings, is naturally of utmost concern for the government as well as the business groups. The garment exporters have also been lobbying the United States establishment to enact a bill that allows duty-free import of garment products from all least developed countries. Although many of the poorest countries are allowed preferential access to the US market, only a handful are left and not given this preference, which incidentally includes Cambodia and Bangladesh

A new bill styled ‘New Partnership for Development Act 2007’ that was introduced in the House of Representatives of the US Congress on October 18, by Congressman Jim McDermott among others, strives to provide all least developed countries with such access. Quite understandably the duty-free and quota-free access is limited to a certain extent to apparently provide African countries with some leverage and advantage over Cambodia and Bangladesh that happen to be the most competitive apparel manufacturers among the least developed countries. These two countries have been referred to as ‘significant apparel supplier’ in this bill and are subject to more restrictive provisions than the other LDCs.

It has been a matter of concern that countries in sub-Saharan Africa, especially those covered under the African Growth and Opportunity Act which was also authored by Congressman McDermott, and other countries that currently enjoy concessions under the generalised system of preferences would see their margins completely eroded faced with the stiff competition from Bangladesh and Cambodia.

Quarters have it that the US textile lobby, the National Council of Textile Organisations, and the trade union body, the American Federation of Labour and Congress of Industrial Organisations, are actually playing the Africa card to ensure protection of the local textile industry in the US. There have been attempts previously as well to prevent the US giving fully free market access to Bangladeshi apparel items with scores of senators and congressmen writing to the US president to block any agreement that provides duty and quota free access of Bangladeshi apparels to the US. Only last month, there was a hearing at the United States Trade Representatives office initiated by the American trade union body, regarding alleged labour rights violations in Bangladesh with a petition to cancel Bangladesh’s preferential access facilities.

The bill striving towards a duty-free access for all least developed countries puts a cap on the volume of exports made to the US from Bangladesh and Cambodia during the calendar year of 2007 for eight types of products— trousers, slacks, breeches, shorts, knit shirts and blouses, non-knit shirts and coats—that would be eligible for duty-free treatment from 2009 to 2019. It means that the duty-free facility for these products will be limited to the volume of their exports made to the US during the current year for 10 years beginning 2009. The quantitative restriction may increase a maximum of 15 per cent every year provided that the ‘significant apparel supplier’ meets certain labour standards and upon consultations and approval of certain officials and congressmen.

It has already been pointed out that these categories of clothing items that face quantitative restrictions account for about 65 per cent of Bangladesh’s exports to the United States, which are also presumably of importance to the United States itself for the sake of its own political interest to protect the local industries. Quantitative restrictions should not apply to any other garment product. On the other hand, with China entering the US market in 2009 when the currently imposed emergency safeguard expires and faces quantitative restrictions, Bangladesh will apparently have a rather hard time to even retain the market share it currently does, let alone grow at the phenomenal rate of over 20 per cent that has been the case for the last few years. Thus, the provision of 15 per cent increase every year with this year’s export volume set as the base year might turn out to be reasonable.

However, the main point of concern is the rules of origin stipulating 35 per cent value addition in case of Bangladesh and Cambodia, while it would be 25 per cent for other countries covered by the act. According to garment manufacturers, most of the exports to the US market are woven items in which case value addition is hardly between 20 and 25 per cent. Thus 35 per cent would indeed be too steep a requirement for it to be meaningful. It might be argued that value addition requirement be decreased by equal percentage points for both the significant apparel suppliers and other countries so as to make it less steep and more meaningful.

Alternatively, it could also be argued, based on rigorous research of course, that products not in competition with those from other countries, especially those from sub-Saharan Africa, may be allowed a lower value addition requirement or that equal to the other least developed countries. The argument would be further strengthened if it could be demonstrated convincingly the extent of poverty reduction that such benefit might result in or how much more it means in increased wages for the garment factory workers in Bangladesh.

According to a newsletter titled ‘Trade Fact of the Week’, dated February 21, 2007, published by the US based Progressive Policy Institute, Bangladeshi exports to the United States worth $3.3 billion in 2006 faced tariffs of $496 million and Cambodian products worth $2.2 billion faced tariffs of $367 million. The same year British exports worth $53.5 billion faced tariffs of $430 million and French products worth $36.8 billion faced tariffs of only $367 million, the same amount as that of Cambodia.

In 2006, France’s per capita income was $34,810, 74 times that of Bangladesh with $470 and 91 times that of Cambodia with $380. The United Kingdom’s per capita income was $37,600 in 2006—80 times that of Bangladesh and 99 times that of Cambodia.

Another point of serious concern is the requirement to accord foreign and local investment equal treatment. While the requirement to implement intellectual property rights takes into cognisance the benefits and concessions accorded under the World Trade Organisation rules, meaning an exemption till 2016 for essential drugs and 2013 for everything else, the demand for a similar provision, accommodating the WTO concessions accorded to least developed countries in case of investment should be made rather strongly or it would compromise national interests severely.

It is presumed that the preference scheme will expire at the end of 2019 but there are no directions regarding its renewal even if it is subjected to further review before approval in the Congress. One of the main problems with the current GSP programmes of the United States is that they expire every few years and have to go through a long tortuous process, while a case of renewal might lessen the amount of energy and time to have a new bill written and enacted afresh.

The bill notes rightly that advanced developing countries such as India or China and other Organisation for Economic Cooperation and Development members could greatly help reduce poverty in the least developed countries if they provided similar benefits. The bill also directs the US president to take up such an initiative with these countries.

This bill has the provision of spending $250 million every from 2009 through 2018 on such development projects as capacity increasing for small and medium enterprises, agriculture, financial institutions and investment promotion as assistance to leverage trade preferences. Under aid for trade the bill stipulates expenditure of another $250 million per year between 2009 and 2019 for financing economic diversification and infrastructure projects, improvement in the transport of goods and services, improves distribution of electricity, food and water and improves the provision of education and healthcare.

It is understandable that these funds will be used with the intention of eventually benefiting US interests, either commercial or political. But it is the contention of certain quarters that countries like Bangladesh could benefit from these projects if the proposals are well thought out and appropriate in the local context.

The law, if enacted, will apparently set up appropriate offices that will produce a report card every three years based on which it would be decided if certain countries are eligible for the benefit. The requirements are largely core labour standards, such as freedom of association and recognition of collective bargaining, that are well justified. There would also be a mechanism to consider public petitions and examine them regarding observance of labour standards and working environment in the industries.

Although the government asks the garment manufacturers every few months to implement the minimum wage along with the 10-point agreement signed last year, the manufacturers hardly pay heed and continue to violate those stipulations as reports in the media testify. The foreign pressure, especially from the United States, might in fact spur them to action and compel them to strive towards better standards in exchange for the benefits. According to insiders, such pressure from the foreign quarters is often more effective than relentless requests of the local authorities.

It is obvious that the new bill is rather progressive and barring a few provisions, would be beneficial to the poorest countries of the world as it stands at the moment. But it is still at the most primary stage. Currently, as of October 18, it has been referred to the House Financial Services Committee, and will subsequently be referred to the committees on Ways and Means and Foreign Affairs before coming up for debate and hopefully approval at lower house of the Congress. A similar process will be in place at the upper house, the Senate. If approved at both houses the bill will be referred to a Conference Committee in order to make sure that the bills that the House and the Senate enacts are identical, where it would be subjected to further scrutiny and editing. There is a great likelihood that the bill would be diluted further and further at every stage of editing and scrutiny.

The different stages of the passage of the bills are evidently where lobbyists will be in action to further their own interests. A delegation of the Bangladesh Garment Manufacturers and Exporters Association has already left for the United States where it will meet different quarters including the congressmen and senators who might be in favour of the bill.

The current military-driven interim government has yet to take up any visible initiative in this regard, which it must. The congressmen and senators in favour of the least developed countries would be able to make a better case if the authorities in Bangladesh as well as other concerned quarters provide them with solid data and research. It would also be of great benefit if the African and Asian countries lobby Washington together. While private quarters and non-government elements, the Centre for Policy Dialogue, Oxfam, and the chambers of commerce for instance, are upbeat and active about the fate of the new bill, it remains for the government join hands with their efforts. The government’s presences would quite understandably lend these efforts a higher degree of credence and acceptability.

*Tanim Ahmed works for NewAge, a leading English newspaper in Bangladesh. He can be reached at: tanimahmed@gmail.com

IMF suggestions to Bangladesh to hit the majority hard

Editorial, NewAge, October 27, 2007. Dhaka, Bangladesh

The International Monetary Fund has recently submitted a set of recommendations to the central bank. According to a report in New Age, the lending agency has recommended scrapping of zero tariff and tax exemption facilities besides expanding the coverage of value added tax. It has asked the government to implement these measures by next year and have them approved by the agency in order for it to continue to provide support. Reportedly, the prescriptions require the government to frame new tax legislations. The IMF recommendations have a myopic objective of merely increasing the exchequer’s revenue without any consideration to the welfare of the common people. Lending agencies, being removed from the ground realities, typically make such recommendations and have brought about economic crises in many countries across the world, and are thus losing their ground.

The zero-tariff facility that had been in place was mostly offered in the case of industrial raw materials and capital machinery in order to encourage industrialisation. Mirza Aziz, the finance adviser to the military-driven interim government, surprised even those quarters privy to the budget-making process, when he declared in June this year sweeping tariff measures scrapping this facility for hundreds of items that would surely impede industrialisation. Higher import tariffs of such machinery and raw material would only discourage further investment and thereby hamper employment generation, increase of wage and eventually lead to low economic growth. The tax exemption facility is in place once again, only to encourage investors to establish industrial units in the country. Scrapping this provision would only send out wrong signals. Such measures – low import tariff of raw materials and machinery, and tax exemption – have been followed by countries, including those that today instigate these agencies to recommend the contrary, on their path towards economic prosperity and development.

The value added tax, as we have previously mentioned, burdens the common man since it is paid by everyone and at the same rate regardless of their affluence. Increase in the coverage of this indirect tax would only mean that the common people, especially those from the poorest section of the populace, who are outside the income tax net, would have to pay taxes. This tax, in the case of education and health services, would in fact amount to penalising citizens for seeking enlightenment or for striving to be in good health. Such measures would also seem to deny that the government itself is obligated to provide such services to its citizens.

We find the recommendations made by the lending agency inappropriate and inconsiderate of the plight of the common man. These recommendations, increasingly nudging the state towards a free market economy that results in inequity and disparity, are more likely to bring about crises and economic devastation than genuinely trigger wholesome development, like they have done in many other countries. We expect that the government will not give in to the pressure of the lending agency for the sake of national interest.

News and update: IMF sets fiscal agenda for Bangladesh government

Nazmul Ahsan, NewAge, October 26, 2007. Dhaka, Bangladesh

The International Monetary Fund has set economic and financial agenda for the government of Bangladesh in advance for the next fiscal year, asking the latter to implement those to qualify for future assistance.

The lending agency wants the government to agree to implement the policies and fiscal reforms spelt out in a recent document by November, finance and central bank officials said. In its latest move, the IMF asked the government to initiate budgetary exercises by further reducing the zero-tariff facility, tightening tax exemptions scheme and expanding value added tax.

The government is asked to get these recommended budgetary measures for the next fiscal year endorsed by the Fund by May, 2008, one month before the next fiscal year begins. The wish list and conditions summarized in a document, styled ‘economic and financial policies for November 2007,’ have recently been submitted to the Bangladesh Bank and the finance ministry.

Implementation of the conditions is linked to the future assistance from the Fund under its PRGF (poverty reduction growth facility) arrangement, sources said. ‘The attached draft document on economic policies more fully outlines the type of reforms that would be needed to support a request for a PRGF arrangement,’ reads a letter of Thomas Rumbaugh, IMF’s adviser for Asia and Pacific, written to finance adviser AB Mirza Azizul Islam recently. ‘It is drafted to reflect policies to be agreed and implemented by November 2007, a possible date for finalising a PRGF request, as well as policy commitments through December 2008’, the letter further reads.

According to the list, the IMF has asked the government to reach an agreement with the lending agency by May 2008 on the tax measures to be taken in the 2008-09 fiscal year. The government will have to get the Fund’s approval for new income tax law, reduction in number of zero-rated commodities, expansion of VAT to retail level and phasing out of remaining tax exemptions.

The IMF’s latest script on the economic and financial policies will also require the government to rewrite the income tax legislation by February 2008 and assess the cost and efficiency of all income tax exemptions.

Furthermore, it asked the government to enact a new VAT law with a modern invoice-credit based system, and separate excises from VAT. Officials at the finance ministry and National Board of Revenue expressed their reservations over the IMF’s suggestion for further reducing zero-tariff facility in the next budget.

The government drastically reduced the same facility in the current budget amid widespread criticism from industrialists, chamber leaders and economists, they argued. ‘We should not go for further reduction in zero tariff facility and tightening tax exemption to appease the IMF,’ a member of the NBR told New Age. ‘The present government did the same thing in the current budget ignoring the reservation of revenue officials,’ he added.

The budget for the current fiscal year withdrew zero-tariff facility from above 400 items, mostly raw materials and capital machinery at the insistence of the IMF at the last moment, sources said.

Four per cent infrastructure development surcharge has been withdrawn from about 2600 items, of which more than 1600 are finished and luxury products, sources said. Industrialists and economists said the measures cost the local industry heavily and opened the floodgate for less important imports.

Revenue officials said the government cannot withdraw all tax exemptions overnight, which could stall the growth of local industry. An NBR survey in March 2006 revealed that tax exemptions cost the government heavily. Tax relief enjoyed by corporations and big businesses cost the exchequer Tk 350 crore in foregone revenue during the 2004-05 fiscal year alone. These exemptions accounted for nearly 74 per cent of the total revenue forgone by the government in order to encourage and facilitate industry during the period. Currently, tax exemptions are offered to the corporate sector under about 18 categories and another 20 categories at individual level, tax officials said.

Asked about the rationality of the IMF conditions and necessity for further PRGF arrangement, economist Anu Muhammed said no government with dignity can reach agreements with a multilateral lending agency on how to frame its budget and what fiscal measures would be taken. ‘It is humiliating and disgraceful, and the government should reject such diktats outright,’ he told New Age on Thursday.

The economist also opposed any further deal with IMF for PRGF as he believed that there was no link of poverty reduction with the PRGF, which is designed to destroy the country’s industrial base and which has been rejected by many countries.

Profits versus the poor

Republished from ShahidulNews, September 2007.
Photo: Munem Wasif/DrikNews Text: Shahidul Alam

“I have lost a son, maybe I’ll lose another, but I won’t let them setup a coalmine here.” To Tahmina Begum who had lost her son Toriqul to police bullets, her land was also her family.

It could have been a ‘B’ rated western except that it is set in the east.

People wanting to hang on to their ancestral land versus mining companies wanting huge profits. There have been only minor changes from previous scripts. When farmers wanted fertilizers and seeds, the police had opened fire killing them, when they wanted electricity to irrigate their soil,

the police had opened fire killing them. Now that they want to retain their land rather than have it converted into coal mines again the police have opened fire killing them.

Shaotals, being indigenous minority groups, find themselves even more vulnerable within this persecuted community. In the shootings on the 26th September 2006, in Phulbari, Dinajpur, in northwestern Bangladesh, at least six villagers are known to have been killed, over a hundred are said to be missing.

Reminiscent of his predecessors on this land, Gary Lye, the CEO of the British company Asia Energy Corporation (Bangladesh) Pty Ltd, which wants the mining rights, denied the Phulbari project would harm the environment saying it would benefit local people instead.

He did add “It is up to the authorities to determine exactly what happened, but it would appear that the unforgivable events and the needless loss of life and suffering that took place yesterday in Phulbari are entirely the fault of the organisers (of the protest).”

It had been the fault of the farmers when they wanted fertilizers and seeds, it had been their fault when they wanted electricity to irrigate their lands. It was now the fault of Tahmina Begum and her son Toriqul, for wanting to stay on land that was their own.

The poor deal that Bangladesh appears to be getting, the massive profits predicted for Asia Energy, The foot dragging on the investigation of Nasreen’s death, are suspicious on their own. The close friendship between Asia Energy and Bangladeshi government officials that has emerged looks ominously close to Shell’s friendship with General Abacha. Despite this friendship, faced by the massive protest of over 20,000 people,

the government has again had to back down, but with the increasing appetite for energy of war hungry nations, and with pliant governments ready to please in the hope of hanging on to power. Tahmina Begum might well lose the other family member that she has nurtured and tilled all her life. The west meanwhile continues to promote ‘freedom and democracy’ worldwide.

Further resources:

Visit Phulbari Resistance for regularly updated information about community resistance against Phulbari Coal Project.