News and Update: IMF wants fresh loan deal with Bangladesh

NewAge, October 23, 2007. Dhaka, Bangladesh

The International Monetary Fund has expressed its willingness to remain actively engaged with Bangladesh in any form that is deemed ‘suitable and appropriate’ by the government. This offer was made by the deputy managing director of the lending agency, Takatoshi Kato, during a meeting with the finance and planning adviser, AB Mirza Azizul Islam, in Washington on Sunday.

An IMF delegation that recently visited Bangladesh returned without making any concrete progress on a fresh loan agreement styled ‘Policy Support Instrument’ following criticism by the economists and rights organisations as well as a lawsuit against such a move. The government’s earlier loan agreement — the so-called ‘Poverty Reduction Growth Facility’ — expired recently.

A news release issued by the Bangladesh embassy in Washington said the finance adviser welcomed IMF’s support for the government’s efforts to address internal and external constraints in conformity with the goals of maintaining macro-economic stability, accelerating economic growth and expediting poverty reduction.

Mirza Aziz, in a separate meeting along with the World Bank’s vice-president for South Asia, Praful C Patel, stressed the need for scaling up the WB’s aid within the framework of the Country Assistance Strategy and giving more assistance in the form of budget support.

The WB’s executive expressed the Washington-based institution’s full support for the reform efforts by the present government and assured it that the WB would strengthen its engagement with the Bangladesh government in the implementation of the reforms agenda.

In the meeting with Mirza Aziz, the IMF executive expressed the hope that the Bangladesh government would ‘seriously keep in view the urgent need to contain the rising inflationary trend through appropriate policies which it finds appropriate’.

The adviser mentioned that the government would address, through appropriate policies, the emerging shocks resulting mainly from escalation of prices of essential products, especially petroleum products, in the international market.

The WB’s prescription of pursuing a contractionary monetary policy for arresting the rising inflation was a bone of contention as the country’s economists termed it suicidal for a growing economy.

Kato, however, appreciated the commitment of the interim government to maintain and sustain macro-economic stability by implementing the needed policies and initiating institutional reforms.

News and Update: Trade liberalisation induces food price hike, WB admits

Khawaza Main Uddin, NewAge, October 22, 2007. Dhaka, Bangladesh

Trade liberalisation that eventually has resulted in skyrocketing of food prices afflicts the rural population of Bangladesh, admits the World Bank in its World Development Report 2008: Agriculture for Development.

The report released by the bank on Friday also says that the trend of shrinking the sizes of farms in economies, such as Bangladesh, which still heavily rely on agriculture, is another major cause of rural poverty, and such a reality can generate further social tensions, leading to civil conflicts.

‘Trade liberalisation that raises the price of food hurts net buyers (the largest group of rural poor in countries like Bolivia and Bangladesh) and benefits net sellers (the largest group of rural poor in Cambodia and Vietnam),’ reads the report.

The report of the multilateral lending agency, which prescribed the process of trade liberalisation in the 1990s, also claims that a liberal trade policy, inducing massive imports of rice by hundreds of small traders during the 1998 floods, helped the government stabilise prices without building up any large stock.

Quoting a Bangladesh study, the WB report asserts that although the ‘average landless poor household loses from an increase in rice prices in the short run’ but it ‘gains in the long run as wages rise over time’.

The report, forecasting a further increase in food prices on the international market, expressed ‘particular concern’ for the food-importing developing countries, ‘Because many of the poorest countries spend a large part of their incomes on cereal imports’.

More than 50 per cent of the poor in Bangladesh, according to the report, comprise the rural landless households and they spend 27 per cent of their total budget for buying rice, the nation’s staple food. And so, it says, ‘Poor Bangladeshis are the most vulnerable to increases in rice prices.’

Only 8 per cent of the country’s poor are found to be net sellers of food. ‘So the aggregate welfare effect of a change in rice prices is dominated by its effect on net buyers.’

Also, the number of farms in Bangladesh has doubled over the past 20 years, increasing the number of farms smaller than 0.2 hectares in size proportionately. ‘Continuing demographic pressures imply rapidly declining farm sizes, becoming so minute that they can compromise survival if off-farm income opportunities are not available,’ the report cautions.

It also points out that ‘a large share of rural households… does not have any access to land’. The Washington-based lending agency, however, attributed what it termed the substantial reductions in rural poverty in Bangladesh to earnings form rising farm and non-farm activities and lower rice prices thanks to use of new technologies, besides manpower export which has also benefited the rural as well as the national economy.

The report has triggered the question whether a densely populated Asian country like Bangladesh, with its labour-intensive small-scale farming, would be able to produce cereals and other staple foods efficiently in its farms that generally tiny in size, especially if rural wages rise.

In South Asia, the report predicts, the decline in farm size will continue because the rural population has been growing by 1.5 per cent a year. As an indicator of poverty, the report mentions that Bangladesh, India, and Nepal occupy three of the top four positions in the global ranking of underweight children.

The World Development Report also expresses concern for the developing countries due to proliferation and stringency of food safety and health measures being adopted in export markets. ‘Many fear that the emerging standards will be discriminatory and protectionist,’ it observes.

The document underlines the need for increasing the productivity of agricultural labour through consolidation and mechanisation of farms to bypass the widening gap between rural and urban wages in many Asian countries.

Millions of workers employed in rural areas are said to be trapped in low-earning jobs in Bangladesh, where around one million people join the rural workforce every year. The WB report mentions that non-farm rural employment increased at the rate of 0.7 per cent and farm employment at 0.1 per cent a year during the 1990s.

Delineating a strong record of agriculture in development, the report posts an estimate that the contribution of agriculture to the growth in gross domestic product was at least twice as effective in reducing poverty as the GDP growth in non-agricultural sectors.

The report calls upon the policymakers of countries facing severe resource constrains to attach a balanced priority to various sectors and give due attention to agriculture, especially to increasing investment in the sector.

The report correlates agricultural development with achievement of the UN Millennium Development Goals of halving extreme poverty and hunger by 2015. It acknowledges that, despite convincing successes, agriculture has not been used to its full potential in many countries because of anti-agriculture policy biases and underinvestment, often compounded by mis-investment and donors’ neglect, at the cost of severe human sufferings.

‘A dynamic “agriculture for development” agenda can benefit the estimated 900 million rural people in the developing world most of whom are engaged in agriculture and who live on less than $1 a day,’ the World Bank Group president, Robert B Zoellick, told the launching ceremony of the report in Washington on Friday.

‘We need to give agriculture more prominence across the board. At the global level, countries must deliver on vital reforms, such as cutting distorting subsidies and opening up markets, while the civil society groups, especially the farmers’ organisations, need more say in setting the agricultural agenda,’ Zoelink maintained.

News and Update: Draft coal policy eyes ban on export

NewAge, October 21, 2007. Dhaka, Bangladesh

The advisory committee formed to finalise the draft coal policy inserted in the draft at a meeting on Saturday some major issues, including ban on coal export and bar on assigning any foreign company with operation of any coal field without participation of any state-run organisation.

The committee, headed by former BUET vice-chancellor Abdul Matin Patwari, also decided in principle to keep a provision in the policy for taking a pilot project on open-pit mining at Petrobangla’s Barapukuria coal field.

The committee, which started to review on Saturday every line of the draft submitted by the Energy Division, inserted a provision in the ‘perspective chapter’ that it would not be possible to export coal from Bangladesh keeping in view the country’s energy security for the next 50 years.

It also noted that the people and the nation were the owners of the country’s coal and other mineral resources. The committee also included in the draft a clause that the government sector would get preference in developing coal fields. ‘But, in case of emergency, the government will be able to take a decision on developing coal field through joint initiatives with private and public entities of local and foreign countries,’ its observed.

The meeting was told that no foreign company could be given any coal field alone and any foreign company could only develop coal field jointly with any state-run entities like Petrobangla or the proposed Coal Bangla. The modalities of such joint initiatives will be discussed by the committee in future.

The committee decided in principle to insert a provision in the policy for launching a pilot project on open-pit mining at Barapukuria coal mine covering eight square kilometre area to examine the viability of the mining method that drew much controversy in the country.

Two committee members, Professor Nurul Islam and Professor Badrul Imam, who submitted a paper on their recent experience on India’s coal sector, concluded that it would be unrealistic from environment considerations to go for open-pit mining in Phulbari coal field.

The professors from BUET and Dhaka University attended SAARC Technical Seminar on Strategies on Promotion of Coal Development and Clean Coal Technologies in SAARC Region on October 16 in Kolkata and visited an open-pit mine at Sonepur.

According to the paper of professors Nurul Islam and Badrul Imam, most of the open-pit mines in India are implemented at coal fields that have coal seams at a depth ranging between 100 and 200 metres, whereas in Phulbari, where Asia Energy has proposed to extract coal through open-pit mining, the coal seams are at a depth of 300 metres.

The meeting was told that the north part of Barapukuria coal field, where the country’s lone underground coal field is situated, has a coal reserve at a depth of 110 metres.

The meeting observed that by implementing a pilot open-pit mining at Barapukuria coal field, its impact on the environment could be assessed and experience on resettlement issue gathered.

It was suggested that a state-run entity would launch the pilot project for 10–12 years. But many of the committee members felt that funding would be the major obstacle to implementing such pilot projects.

University Grants Commission chairman Nazrul Islam, Bangladesh Army engineer-in-chief Major General Ismail Faruque Chowdhury, Professor Mustafizur Rahman of Dhaka University, Infrastructure Investment Facilitation Centre executive director Nazrul Islam, Petrobangla director Maqbul-E-Elahi, and former managing director of Barapukuria coal mining company Golam Mostafa attended the meeting, among others.