New Power Politics in Asia: Focus Releases Briefing Note on the Shanghai Cooperation Organzation

August 31, 2008

Focus on the Global South has released a briefing note on the Shanghai Cooperation Organisation (SCO). The Shanghai Cooperation Organisation (SCO) is a regional mechanism, which was created in 2001 and consists of the following:

People’s Republic of China, Kyrgyzstan, Russia, Tajikistan, Kazakhstan and Uzbekistan. It was inspired by the need to solve the border disputes lingering between the Soviet Union’s successor states and China in the wake of the end of the Cold War. Originally a Chinese initiative, taken after resolving their border problems with Central Asia and Russia, it was also profitable for the Central Asian States, which were lacking in consistency, stability and resources in the midnineties and struggling to establish multilateral and bilateral relations beyond the region. It was also designed as a platform to balance the role of the United States in the Central Asian region.

Main findings of this paper :

  • The SCO has been able to meet with its initial objective to establish geopolitical multipolarity in Central Asia and check the US advance into the region.
  • It is a reflection of the emerging multi-polar world.
  • Its increasingly acquiring strength is suggestive of becoming a major political force of the Eurasian region.
  • The SCO will play a vital role in ensuring international security.

Click to download the paper. 


SAARC: So Little Free Trade, But So What?

August 31, 2008

Benny Kuruvilla* (1), Focus on the Global South-India

South Asia’s talking shop – the South Asian Association for Regional Cooperation (SAARC) – held yet another annual summit from 2 -3 August 2008, with the usual entourage of ministers, bureaucrats, media, think tanks and NGOs descending into Colombo. Over 1200 delegates attended the 15th summit of the eight-member club, considered the world’s largest regional grouping. (2)  The spotlight was expected to be on the food and energy crisis, but bombings in the last week of July in the Indian cities of Bangalore and Ahmedabad ensured that the ‘fight against terrorism’ became the centre piece of the conclave. 

The Colombo declaration titled ‘Partnership for the growth of our people’ emphasised, more than anything else, the need for the strongest possible cooperation in fighting terror and trans-national organised crime.(3) There were sections on climate change and a separate statement on food security. This was a positive step as concrete initiatives to deal with the climate crisis, rising food prices, declining agrarian incomes and ensuring food security will be welcome. But there was also a lame section in the declaration on the nearly defunct free trade treaty for the region, the Agreement for a South Asian Free Trade Area (SAFTA). The absence of any serious commitment from the SAARC political leadership to move ahead on SAFTA met with criticism from business quarters. Expressing disappointment on the lack of concrete steps to invigorate free trade in the region, Tariq Sayeed the President of the SAARC Chamber of Commerce and Industry (SAARC CCI) said ‘hunger and terrorism are undoubtedly vital issues for a region like South Asia, but promoting trade and entrepreneurship could be the best answer to deal with such issues’. (4)

This sidelining of regional trade integration is not new. Despite previous attempts beginning from the SAARC Preferential Trading Arrangement (SAPTA) in 1995, economic integration has been a consistent no-show in South Asia. And frankly other than the usual suspects — the World Bank, the Asian Development Bank, a few neo-liberal think tanks and some bureaucrats — nobody is really is clamouring for free trade in the region. For sure, trade between SAARC countries is marginal; intra-regional trade accounts for only 5.5 per cent of total trade and there is merit in increasing that  substantially but, as this article argues, a deep integration Free Trade Agreement (FTA) is barking up the wrong tree.      

WHAT IS BEHIND SAPTA’S FAILURE?
Despite modest expectations, a flexible structure and three rounds of preference exchange negotiations, SAPTA came a cropper. There are several reasons for this. In the 1990s member countries preferred the route of unilateral domestic reforms for trade concessions rather than through the SAPTA. (5)  In the initial rounds, although India offered, on paper, the largest number of concessions in tariff lines, it tactically left Non-Tariff Barriers (NTBs) off the agenda. (6) Moreover the Indian tariff cuts were not deep enough and excluded items such as textiles in which countries like Bangladesh and Sri Lanka were competitive. This ensured that the largest market in the region remained effectively closed. In short, there were not enough of the preferential aspects in SAPTA for a preferential trading arrangement to flourish. While some argue that this led to a loss of trade opportunities, the flexible approach in SAPTA did indeed address some of the sensitivities of member countries. (7)  The positive list for instance addressed the fear of a surge of imports from India into other countries in the region that already experienced enormous bilateral trade imbalances with the latter. (8) The political situation in the region didn’t help the trade liberalisation cause either; the 1999 coup d’etat in Pakistan, the assassination of members of the Nepal royal family in 2001, the 2001 election boycott in Bangladesh and the continuing ethnic strife in Sri Lanka ensured the primacy of domestic political priorities. 

This slow progress of the SAPTA should have called for a rethink and directed policy makers towards more flexible options to manage trade, especially for the smaller countries in the region, but instead there was a foolish attempt to speed up the process by removing flexibilities and converting the region into a fully-fledged Free Trade Area. Predictably, this set it up for failure yet again. The SAFTA was signed in 2004 and, after arduous negotiations on revenue loss compensation, rules of origin and sensitive lists, it came into force in January 2006. Unsurprisingly, SAFTA still had long negative lists, a limited number of products for tariff concessions, restrictive rules of origin, exclusion of issues such as para-tariffs and NTBs and the exclusion of the services sector. Members gave themselves till 2016 to achieve total liberalisation and agreed that there would be a two tiered system of tariff cuts; a slower pace for Least Developed Countries (LDCs) and a faster pace for others. 

The large number of items on the sensitive list (those that will not be subject to tariff cuts) is evidence of the recognition of possible negative consequences of tariff reductions on tax revenues and livelihoods. The mid 2006 lists had India with 867, Pakistan 1183, Sri Lanka 1574, Nepal 1355, Bangladesh 1254, Maldives 671 and Bhutan with 259 items which would not face the chopping block. (9) Facing a SAPTA like situation, hectic parleys began to try and prune this long list, but progress continues to be elusive as before. Part of the reason is simple. For instance in the textiles sector the presence of several products (such as readymade garments, woven and knitted garments, special woven fabrics, handlooms, handicrafts, jute and jute goods) in the sensitive list illustrates that India, Bangladesh, Nepal and Pakistan are in competition with each other. India, the benign hegemon that promises to undertake ‘asymmetrical responsibilities’, has 302 textiles lines in its sensitive list. As each country would want to protect its domestic sector, duty free quota free trade is not likely to be on when there is competition from the region. 

INDIA-SRI LANKA FTA SETS A TREND
India and Sri Lanka were the pioneers in the region to experiment with a free trade agreement. Signed in 2000, the ISFTA did lead to increased trade between them but it also brought in its wake negative impacts in specific regions and sectors. The agricultural sector in one of India’s southern states, Kerala –  which directly competes with Sri Lanka in a number of products — was adversely impacted. The implementation of the FTA saw high volatility in pepper and coconut prices which resulted in farmers in Kerala facing uncertainties in their incomes. For instance, the export of pepper from Sri Lanka to India increased from 2154 tonnes in 2000 to 6167 tonnes in 2003. (10) The price of pepper per quintal declined from the all time record of Indian Rupees (INR) 21502 in 1999-2000 to INR 6980 in 2004-2005. (11) The sharp drop in prices accentuated the ongoing crisis for small producers and the initial years of the FTA saw hundreds of farmers in the pepper belt of Wayanad district in Kerala committing suicide. 

Despite this, India has pushed for scaling up the ISFTA into a Comprehensive Economic Partnership Agreement (CEPA) and pre-SAARC media reports did indicate that the CEPA would be signed on the sidelines of the 2008 Colombo summit. But Sri Lanka had to postpone the event indefinitely due to opposition from left parties such as the Janatha Vimukthi Peramuna (JVP) whose member of parliament Wimal Weerawansa argued that a CEPA would deal a crippling blow to the service sectors in Sri Lanka. (12). Weerawansa argued in the Parliament that the provisions of the deal would give Indian investors an upper hand, leaving local enterprises in the doldrums. 

SERVICES AND INVESTMENT STALLS NEGOTIATIONS
The 2008 Colombo declaration calls upon SAARC members to commence negotiations for a Framework Agreement on Trade in Services and an Agreement on Investment Promotion and Protection. While India, with a relatively developed services sector, has a vested interest in this move, it is a contentious issue for others. In a February 2007 meeting at the Ministry of Commerce, industry representatives in Bangladesh came out against the liberalisation of the country’s incipient services sector under SAFTA. (13) And as mentioned in the preceding section the India Sri Lanka CEPA is now stuck on the issue of services. 

There are of course proponents from civil society as well. South Asia Watch on Trade, Economics and Environment (SAWTEE), an NGO based in Kathmandu agrees that Pakistani and Indian services companies in information technology, telecommunication, banking and financial services and engineering will gain from a services agreement within SAFTA. They also argue that since the potential for intra regional services trade and investment is high it is also a better option for LDCs, given that weakness in manufacturing in almost all SAARC countries except India. Moreover, since services provision is, at times, inadequate in the LDCs, it is assumed that free trade in services can add to the overall availability and quality of services. (14) 

This is a dangerous and flawed argument. Given the experience of developing countries in liberalising services the reluctance of countries such as Bangladesh and Sri Lanka in opening up their services sector under a legally binding framework is justified. Liberalisation and concomitant de-regulation, especially in basic services, undermines the public sector, resulting in diminishing access of such services to poorer sections of the population. Liberalisation kicks in de facto privatisation in cases where big private sector operators crowd out the public sector (in sectors such as finance, insurance and telecommunications). It is thus prudent that countries be given the time to scale up regulatory frameworks and do comprehensive sector level assessments based on consultations with all affected constituencies such as industry, unions, consumers, local and regional government representatives and different line ministries before they open their services to the private sector, even if they are from neighbouring developing countries. 

At the February 2007 SAARC business leader’s conclave in Mumbai investment was identified as a key sector to be integrated into SAFTA for an effective increase in regional trade. At the event Indian Minister of State for Commerce Jairam Ramesh stated that countries such as Bangladesh, Nepal and Pakistan would not be able to have a positive trade balance with India, because of the nature of their economies. The key to resolving this issue was not trade but integration of investment rules in the region through protocols in SAFTA that provide market access and protection to FDI. This, according to Ramesh, would make it possible for other countries in the region to improve their trade balance with India. It is unlikely that policy makers and the business sector in other SAARC countries will fall for this logic that is reflective of Indian business’ mercantilist interests. Applying free trade principles of non-discrimination to FDI would seriously limit the ability of countries to reach national development objectives through proactive industrialisation policies. Policy makers in many developing countries have recognised the importance of the quality of the FDI received and have attempted to improve it through selective policies and by imposing performance requirements on foreign affiliates and by providing incentives for high quality investments. For example, East Asian countries such as South Korea have in the past pushed FDI into high technology and export-oriented sectors using various policy instruments. (15) These include provisions on localisation, contribution to development of modern industries, transfer of technology and export orientation.  

The national treatment clause (Article 5) in SAFTA would prohibit member countries from using several of these policy instruments. Regulations such as equity ceilings (regulation on a maximum of FDI allowed in a national company), obligations on technology transfer, universal services provision (legislation that obliges private providers in basic services such as health, education, water to supply services to marginalised sections) and employment of local labour will fall foul of SAFTA rules. Such an investment framework under SAFTA rules will maximise investor rights at the cost of development priorities.  

LESSONS FROM WTO NEGOTIATIONS 
In the ongoing WTO trade talks, South Asian countries have been reluctant to cut industrial tariffs under the WTO Agreement on Non Agricultural Market Access (NAMA). They have argued that under the formulas proposed in the WTO they would have to implement steep tariff cuts which would severely impact local industries, balance of payments, tariff revenues, policy space and employment, all of which are crucial components of national development and poverty reduction policies. As SAFTA follows a similar logic of progressive tariff cuts, the effects on small industries that are as yet not ready for competition will be similar.

TIME TO THINK BEYOND FREE TRADE 
Trade and development policies for a small vulnerable economy such as Nepal will be significantly different from those of countries such as India and Pakistan. For Nepal this would entail product diversification, deepening of local industrial activity and scaling up technology. An economically integrated South Asia will not allow the Nepalese Government to follow policies that allow this. National policy space is both needed and justified to create an enabling environment for local industry and employment. This is not to say that trade cannot happen among the SAARC countries. In fact reports indicate that there is vibrant ‘informal’ trade within the region which shows that complementarities do exist. It is up to policy makers to go beyond lofty empty rhetoric at summits and instead meaningfully engage with traders and agriculture groups to find ways of creating a bottom-up trade co-operation framework for the region. Or they can wait for the next SAARC summit in the Maldives to insert another paragraph on the importance of implementing SAFTA.

* Benny Kuruvilla is a research associate with Focus on the Global South based in Delhi, India. bennyk@focusweb.org 

NOTES
1. With inputs from my colleague Afsar Jafri and Susana Barria, a former intern at Focus. Comments can be sent to: bennyk@focusweb.org 
2. With a population of 1.5 billion, the SAARC is the largest regional grouping in the world. Member countries include Afghanistan, Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan and Sri Lanka. The second largest regional group is the Association of Southeast Asian Nations (ASEAN) with 526 million followed by the European Union (EU) with 500 million. 
3. SAARC (2008). ‘Declaration of the Fifteenth  SAARC summit’
4. Anonymous, ‘SAARC chamber concerned over sidelining of trade issues’ , The News, August 06, 2008
5. Research Information Systems (2003), ‘Regional Trade Liberalisation under SAPTA and India’s Trade Linkages with South Asia’. New Delhi 
6. Non-tariff barriers include government measures such as quantitative restrictions, import licensing and variable levies.
7. The SAPTA was based on a positive list approach and did not have any strict deadline for implementation. A positive list approach allows countries to choose products that will be liberalised as opposed to a negative list in which all products are deemed covered unless specific exceptions are made.  
8. Bhutan is the only country which has a positive trade balance with India largely due to energy imports by the latter.  
9. Government of India. (2006). ‘South Asian Free Trade Area, Annex-I- Sensitive Lists of Member States’. Ministry of External Affairs: New Delhi.  http://www.saarc-sec.org/main.php. Note that where member countries have 2 sensitive lists (for LDC and NLDC) the longer list has been used. 
10. Report on Export of Pepper from Sri Lanka to India under ISFTA –Implications, by Sri Lanka Export Development Board, Page 7, http://www.srilankabusiness.com/eresearch/pdf_files/ISFTA-Implications/pepper%20Internet.pdf
11. Dhar Biswajit and Verma Poornima (not dated), ‘India-Sri Lanka Free Trade Agreement: Regional Implications for India. Working paper. Unpublished. 
12. Anonymous, ‘Sri Lankan MPs clash over CEPA with India’, Economic Times, 6 August 2008. 
13. Anonymous, ‘Bangladesh sets SAFTA strategy tomorrow’, South Asian Media Net, February 11 2007.
14. Raj Bhatt Shiv, ‘Services under SAFTA: how to make it work for South Asia’, SAWTEE, September 9 2006.
15. Nagesh Kumar. (2002). ‘Globalisation and the quality of FDI”, Oxford University Press: New Delhi. 

REFERENCES
Gallagher, Kevin P. (2005). Putting Development First: The Importance of Policy Space in the WTO and IFIs. London: Zed Books.
Nath Mukherji Indra. (2004). ‘Towards a Free Trade Area in South Asia: Charting a Feasible course for Trade Liberalization with Reference to India’s Role’. RIS: New Delhi, December
Research Information Systems (2003), ‘Regional Trade Liberalisation under SAPTA and India’s Trade Linkages with South Asia’. New Delhi


Phulbari Day in Photos: Remembering the August 26 Martyrs

August 29, 2008

 

 

 

 

 

 

 

 

 

 


Asia Energy behind coal mine advocates

August 26, 2008

Tanim Ahmed, NewAge, August 26, 2008. Dhaka, Bangladesh

UK-based Asia Energy has been behind the organised campaign of a group of civil society fronts in favour of swift coal extraction in northern Bangladesh, reveals a New Age investigation.
 These fronts, platforms and associations, were initiated and supported by the subsidiary of Global Coal Management Resources to demonstrate public support for its proposal for an open pit coal mine stretching 65 square kilometres at Phulbari of Dinajpur, countering strong national and local opposition.
   

Two years ago on August 26, several thousand people took to the streets protesting against the proposed open pit mining, which was feared to displace over one lakh people and affect the life and livelihood of another two lakh people.
   Three people were killed and dozens others injured as law enforcers opened fire on the protesters on the day in 2006.
   

According to Asia Energy, Phulbari coal mine would produce some 520 million tonnes of coal over 35 years and displace 50,000 people.
   The associations or platforms, particularly active in the northern districts in advocating swift coal extraction include the Greater Rangpur-Dinajpur Business Development Forum, comprising different business bodies and businessmen, the Greater Dinajpur District NGO Alliance for Sustainable Use of Natural Resources, evidently an association of 30 local non-governmental organisations and North Bengal Mineral Resources Reporters’ Forum, an association of journalists.
   

Office bearers of these forums deny their links with Asia Energy and claim to be promoting mineral extraction for the benefit of the northern region that has remained neglected for long, and reduction of disparity compared to the rest of the country.
   

The business development forum was founded by Nazrul Islam, a former executive chairman of Bangladesh’s Board of Investment, and a retired additional secretary of the government. Nazrul continues to serve as the forum’s chairman. But he is also the executive director for Asia Energy Bangladesh.
   

Nazrul insisted that there was no conflict of interest in the two offices he holds. ‘I have been involved in such forums and associations for a long time,’ he said mentioning a number of high offices he held in the past on district committees in northern Bangladesh.
   

Rafiqul Islam, president of Dinajpur Chamber of Commerce, also a member of the business development forum said it was entirely driven by Nazrul, who previously served Asia Energy in the capacity of a consultant.
   

Rafiqul had refused to read out a pre-drafted speech handed to him at a public meeting of the forum on May 2 this year in Dinajpur. ‘I found it was contrary to our national interests.’ He told the meeting that an open pit coal mine was not acceptable considering the situation of Bangladesh. ‘We must not compromise fertile, arable land for coal extraction.’
   

The alliance of non-governmental organisations apparently comprising of 36 organisations, maintains a Dhaka office with the same address as that of Asia Energy.
   

The web pages—www.gddna.com and http://www.rangpur-dinajpur-forum.com—have identical IP addresses and other web hosting details, suggesting that the two are run and operated from a single source.
   

Hamidul Haque, chairman of the alliance, also chief executive of the Palli Gano Sanghati Parishad, said the association’s contact person in Dhaka is one Ahsan Habib, who happens to be Asia Energy’s manager for equipment, mobilisation and support. Hamid said Ahsan provided the alliance with all the necessary support for maintaining and uploading their NGO alliance website.
   

He said the platform, similar to the other platforms, was not in any way suggesting that Asia Energy be given the contract for Phulbari. ‘If they do get involved however, we will become involved in handling the environmental projects to mitigate the adverse impacts on environment and agriculture.’ But he denied that the association had any links with Asia Energy.
   

Hamid claimed the association ‘intends to accelerate the utilisation of natural resources including minerals as available in the Dinajpur region for the holistic and sustainable development involving the community’.


But an email sent by alliance to the Asian Development Bank gives a proof of its bias towards Asia Energy. It requested the lending agency to ‘reconsider its decision regarding financing the Phulbari Coal Project’ after it was reported in the media that the lending agency’s private sector division had decided to pull out of the project, thus withdrawing a $100 million political risk guarantee.
   

The email, dated April 10 this year, to relevant high officials of the lending agency including the ADB president and the country head, reads, ‘We are very much disappointed with this news. To us, this decision will not help the people of the country rather lead the energy security of the country in a vulnerable position. Because Phulbari Coal Project would be a major development [work] in the north-west Bangladesh.’
   

Denying all allegations of driving the platforms, Nazrul said, ‘Asia Energy is absolutely transparent. We have no involvement with these groups.’ Regarding an Asia Energy staff providing technical support, he said, ‘I am not aware of such a thing. I do not think it is indeed the case.’


New PRSP ready at last for NEC approval: Research groups find stagnation in poverty reduction process

August 24, 2008

Khawaza Main Uddin, NewAge, August 24, 2008

The Planning Commission has readied the second version of the poverty reduction strategy paper with a new slogan – ‘Moving Ahead’ – but without properly assessing how far the previous development document – ‘Unlocking the Potential’ — has been implemented, admit officials concerned.
   

The interim government has spent about two months of the 2008-09 fiscal year without a long-term development strategy at hand even after the expiry of the four-year period of the poverty reduction strategy titled ‘Unlocking the Potential: National Strategy for Accelerated Poverty Reduction’.
   

The draft document – ‘Moving Ahead: National Strategy for Accelerated Poverty Reduction II (2009-2011) – is scheduled to be placed for endorsement at a meeting of the National Economic Council, currently headed by the chief adviser, on August 28, according to officials of the general economics division of the Planning Commission.
   

‘We do not know whether there has been any poverty reduction as a result of the implementation of the first PRSP. The new document, too, will not be of much benefit to the poor despite the common slogan of pro-poor economic growth’, economist Anu Muhammad told New Age.
   

The government has no data on the poverty situation after the Household Income and Expenditure Survey-2005 whereas private research groups have found increase in poverty or at least stagnation in the process recently, though for a different reason – price hike of food grains.
   

Now the authors of the draft document have acknowledged the failure in achieving the targets set in the first strategy paper after various quarters, including economists, criticised the poor status of implementation due to lack of institutional capacity and political commitment to development.
   

‘Implementation failures have been so endemic that [it] is seen as a critical strategic challenge’, reads the new document stressing the need for giving more attention to effective implementation of the strategy paper.
   

Problems related to regulations, laws, projects and programmes and poor institutional mechanism have been generally identified as obstacles to implementing and monitoring the progress in poverty reduction.
   

Asked how development goals could be attained, Uttam Kumar Deb of the Centre for Policy Dialogue pointed out that the strategy paper must be made a concrete one with achievable targets and institutional mechanism to monitor the implementation process. He also insisted on evaluation of the previous document and cost estimation for the new one.
   

The new strategy paper has made an estimate of target implementation at Tk 2,54,000 crore. A resource gap between availability of funds from domestic sources and requirement of money for implementing PRSP goals has also been projected at more than Tk 61,000 crore in three-year implementation period.
   

The interim government on July 26, 2007 decided to embark on the second version of the lender-driven poverty reduction strategy following extension on April 30, 2007, of the first strategy paper for another year on completion of three years.
   

The government is also preparing a long-term participatory perspective plan setting 2021 as the deadline for making the country free of poverty and corruption.  A project styled Outline Participatory Perspective Plan will design the document, which will include a vision-2030 of a prosperous Bangladesh.
   

The general economics division was made the focal point for formulation of such development policy document and accordingly, as many as 18 thematic committees backed by consultants made various suggestions.
   

Their estimation of resource endowment needs marked a significant shift from the first strategy paper devoid of specific calculation of costs and requirements of money, which was formulated more in line with the UN Millennium Development Goals.
   

In order to expedite the poverty reduction process, the draft strategy paper has outlined five strategy blocks – pro-poor macroeconomic management, investments in important sectors for pro-poor economic growth, infrastructure building for pro-poor growth, social protection for vulnerable groups and human resources development.
   

Five more areas have also been selected in the draft document to achieve the pro-poor development – participation of all strata of the people and their empowerment, establishment of good governance, effective delivery of public services, facing the challenge of weather and climate change for sustainable development and enhancing productivity by means of innovation and extension of technologies.
   

‘The second strategy paper has been prepared in conformity with the objective of the first one – poverty reduction through pro-poor economic growth’, Jafar Ahmed Chowdhury, member of the economics division and planning secretary, wrote in the working paper on the PRSP to be submitted to the National Economic Council.
   

The division held a consultation with the stakeholders in Dhaka in March 18-20, a special meeting with experts and civil society members in June 1-2 and another meeting with the development partners on June 10. Besides, three regional consultation meetings were arranged in Barisal, Rajshahi and Rangamati.
   

The working paper noted that the draft document reflected the opinions and suggestions made in the consultations by different ministries and divisions and also the opinions of the development partners.
   

Anu Muhammad, however, said that although consultations were held to take opinions before preparing the PRSP, the suggestions made by the participants had not been incorporated in the document because of the government’s tendency towards swallowing the lenders’ recipe’.


Open letter to financial institutions investing in GCM Resources Plc regarding the Phulbari Coal Project, Bangladesh

August 21, 2008

August 2008 

110 organizations from 31 countries have endorsed an open letter to the private investors of GCM Resources Plc declaring solidarity with community representatives in Bangladesh regarding investment in the Phulbari Coal Project. The letter was sent to UBS, Credit Suisse, Morgan Stanley and Fidelity Investments. 

Latest:

Reply from UBS (PDF)

Reply from Credit Suisse (PDF)

Dear Investor: 

We are writing to you in solidarity with community representatives in Bangladesh regarding your institutionís involvement in the Phulbari coal mine, otherwise known as the Phulbari Coal Project. Community representatives opposing the project cannot be identified due to fear of recrimination under the current military backed government in Bangladesh. 

We understand that your institution has obtained or is managing over a 3 percent shareholding in Global Coal Management Resources plc. (GCM) which, through a wholly-owned subsidiary, is primarily focused and committed to the development of the Phulbari Coal Project in Bangladesh (GCM 2007 annual report).   

With this letter, we formally bring to your attention the fact that the project, and therefore your financial institution through its shareholding in GCM, is associated with numerous human rights violations and risks future abuses if project development continues.  

Such abuses violate or risk violation of the Universal Declaration on Human Rights (UDHR), the UN Declaration on the Rights of Indigenous Peoples (UNDRIP), the International Covenant on Economic, Social and Cultural Rights (CESCR), and in many cases do not meet standards under the Equator Principles, which are widely considered best practice for mitigating social and environmental impacts in project finance.  

Although the Equator Principles do not technically apply to equity financing for parent companies, several Equator banks apply the Principles to non-project finance transactions where use of proceeds is known.  In the case of GCM, it is very likely that new capital (through share issues, for example) will be deployed towards the mine; for example, from June-December 2007, GCM spent £940,000 exploring and developing the Phulbari project (Interim Report for the six months ended 31 December 2007). Especially given GCMís difficulties in obtaining project loans for the mine, equity financiers such as your institution take on a greater role and responsibility in financing this project, and the environmental and human rights abuses that are occurring. 

Following is a list of some of the human rights abuses associated with the Phulbari coal project, including reference to selected applicable international standards that have been or have the potential of being violated:  

1) On 26 August 2006, the Bangladesh Rifles, paramilitary force, indiscriminately discharged firearms into a crowd of over 50,000 residents who were demonstrating in opposition to the mine project. This shooting resulted in the deaths of three people, including a fourteen year old boy, and left over 100 people injured.  

  • Right to life, liberty and security of person, Article 3, UDHR 
  • Right to freedom of opinion and expression, Article 19, UDHR 
  • Right to freedom of peaceful assembly and association, Article 20, UDHR 

2) In February 2007, Mr. S.M. Nuruzzaman, one of the leaders of the social movement in opposition to the project, was falsely arrested and subsequently tortured. The Bangladeshi ëjoint forcesí were reportedly directed by officials of Asia Energy, a wholly-owned subsidiary of Global Coal Management, to arrest Mr. Nuruzzaman.  

  • Right to the freedom from torture, and cruel, inhuman or degrading treatment or punishment, Article 5, UDHR 
  • Right to equality before the law, Article 7, UDHR 

3) Since January 2007, Bangladesh has been under a state of ìEmergency Rule.î Through its project dealings with the Bangladeshi military regime, GCM is providing implicit support to a military- backed interim government which has suspended civil rights, including public gatherings. Though the government is currently under a process of relaxing some of these rules that violate civil liberties, it continues to be difficult for communities in the Phulbari region to express themselves freely regarding the project. 

  • Right to participate in government, and requirement of democratic elections, Article 21, UDHR  
  • Right to freedom of opinion and expression, Article 19, UDHR 
  • Right to freedom of peaceful assembly and association, Article 20, UDHR 

4) As demonstrated by the magnitude of community opposition to the project, GCM has not met the principle of free, prior and informed consultation and has not incorporated concerns of the community into project planning. GCM has not disseminated a draft Environmental Impact Assessment, Resettlement Plan, and Indigenous Peoples Development Plan to community members in an accessible form, for non-literate community memebes, or in the Bangla language.   

  • Consultation and Disclosure, Principle 5, Equator Principles 

5) With regards to the economic and physical displacement of an estimated 2,200 indigenous persons, GCM has not made any significant efforts towards obtaining their free, prior and informed consent to the project activities or to displacement, in direct violation of the right of all peoples to self-determination by virtue of which they can freely determine political status, and pursue economic, social and cultural development. Failure to consult adequately and to seek and obtain consent from indigenous peoples is in contravention of the spirit and letter of the UN Declaration on the Rights of Indigenous Peoples.  

  • Self-determination, Shared Article 1, ICCPR and ICESCR and Article 3, UNDRIP 
  • Free, prior and informed consent for any relocation, Article 10, UNDRIP 
  • Collective rights to lands and territories, Article 26, UNDRIP 
  • Control over development priorities, Article 32, UNDRIP 

6) Expected environmental damage due to the open-caste mine will result in a massive reduction of ground water, threatening the availability of potable water and irrigation for agriculture much beyond the mine life of 30 plus years.  Furthermore, without proper study, field tests, and appropriate mitigation, acid-mine-drainage is likely to contaminate both soil and water in the project area. Experts contend that adequate precautions against acid-mine drainage in Northwest Bangladesh for a mine the size of Phulbari will detrimentally affect the economic viability of the project. These issues have not been adequately addressed in project documents, despite concern raised by the community in this regard.  

  • Right to an adequate standard of living, right to health and well-being, Article 25, UDHR 

7) The Phulbari Coal Project is expected to relocate at least 50,000 people, although some studies indicate that the physical displacement impacts will include well over 100,000 people.  Additional displacement impacts will be felt by those who are economically displaced by the project and by host communities which will be expected to absorb the tens of thousands of displaced peoples. There is currently no plan to replace agricultural land and there is no available information on how livelihoods of the displaced will be restored. Loss of livelihood will inevitably result in impoverishment of displaced people, which could lead to the risk of death and poor health, in addition to the lost economic base. Concerns expressed by community members regarding the inadequacy of information about and deficiencies of plans for resettlement, compensation, rehabilitation and employment opportunities have not been satisfied.  

  •  Action Plan and Management System, Principle 4, Equator Principles 
  •  Right to an adequate standard of living, right to health and well-being, Article 25, UDHR 
  • Right to adequate housing, Article 11(1), CESCR 

8) Over 80 percent of the land expected to be taken for this project is currently used for farming and Phulbari is considered the agricultural breadbasket for the country.  Moreover, the Phulbari region remains one of the few areas in Bangladesh that does not face annual flooding.  There is no information or study on whether or how food supplies will be replaced and the subsequent impacts on food security within Bangladesh. 

  • Right to an adequate standard of living, right to health and well-being, Article 25, UDHR 
  • Right to be free from hunger, Article 11(2), CESCR 

GCM and the government of Bangladesh have made numerous public statements that, despite the human rights abuses associated with this project, show they are committed to moving forward with the mine. 

Through its investments in GCM, either on its own account or on behalf of clients, and since the company has established a special purpose entity to develop the Phulbari Coal Mine project, your institution is giving consent and support for the continued development of this flawed project. To take no action, is an indication in support of GCM and the Phulbari Coal Mine project. 

Due to the gravity, range and proportions of human rights abuses associated with the project and dealings in Bangladesh under the current political structure, and taking into account the interests of those human rights which are at risk, we respectfully request your financial institution and any other group members which may be involved in this venture, to commence an exit strategy to cease provision of all financial services to the company and divest all GCM shares over which you have control. 

We are pleased to provide you with more information upon request. For comments or questions, please contact the International Accountability Project at iap@accountabilityproject.org.  

This letter is endorsed by the following organizations: 

1. Association “For Sustainable Human Development”, NGO in Special Consultative Status with UN ECOSOC, Armenia 

2. AID/WATCH, Australia 

3. Blue Mountains Conservation Society Inc, NSW, Australia 

4. Courthouse Climate Action Group, Australia 

5. Friends of the Earth, Australia 

6. Jubilee, Australia 

7. Locals Into Victoriaís Environment, Australia 

8. Nature Conservation Council of NSW, Australia 

9. Oxfam Australia Queensland Committee and the University of Queensland Environment 

Collective, Australia 

10. Resistance, Australia 

11. Rising Tide Newcastle, Australia 

12. Sutherland Climate Action Network, Australia 

13. FIAN, Austria 

14. Oil Workers Rights Protection Organization Public Union, Azerbaijan 

15. ActionAid, Bangladesh 

16. BanglaPraxis, Bangladesh 

17. Coastal Development Partnership (CDP), Bangladesh 

18. Solidarity Workshop, Bangladesh 

19. VOICE, Bangladesh 

20. N ̇cleo Amigos da Terra, Brasil 

21. Green Policy Institute, Bulgaria 

22. FOCARFE, Cameroon 

23. Friends of the Earth, Cyprus 

24. Friends of the Earth, Finland 

25. Les Amis de la Terre, France  

26. Asienhaus, Germany 

27. FIAN International, Germany 

28. Urgewald, Germany 

29. Forum for Indigenous Perspectives and Action, India 

30. Indian Social Action Forum -INSAF, India 

31. Nadi Ghati Morcha, India 

32. National Forum of Forest People and Forest Workers, India 

33. North East Peoples Alliance on Trade Finance and Development, India 

34. Public Interest Research Centre, India 

35. Urban Research Centre, India 

36. Debtwatch, Indonesia 

37. Institute for Essential Services Reform (IESR), Indonesia 

38. Campagna per la Riforma della Banca Mondiale, Italy 

39. Japan Center for a Sustainable Environment and Society, Japan 

40. NGO Globus, Kazakhstan 

41. Community Environmental Promotion and Cultural Association (CEPCA), Lao PDR 

42. Center for Human Rights and Humanitarian Law, Nepal 

43. National Concerned Society, Nepal 

44. Nepal Policy Institute, Nepal 

45. Water and Energy Federation Nepal (WAFED), Nepal 

46. BankTrack, Netherlands 

47. Both ENDS, Netherlands 

48. Milieudefensie / Friends of the Earth, Netherlands 

49. Participatory Development Initiatives, Pakistan 

50. Umeedenao Citizen Community Board, Pakistan 

51. 11.11.11, Philippines 

52. Center for Environmental Concerns (CEC), Philippines 

53. EmPOWER Consumers, Philippines 

54. Freedom from Debt Coalition, Secretary General, Philippines 

55. NGO Forum on the ADB, Philippines 

56. ODA Watch, Philippines 

57. Philippines Rural Reconstruction Movement, Philippines 

58. Public Services International Research Unit, Philippines 

59. NGO Environmental Law Center “Armon”, Republic of Uzbekistan 

60. Friends of the Earth, Scotland 

61. Wave, Scotland 

62. Centre for Environmental Justice, Sri Lanka 

63. Aktion Finanzplatz Schweiz, Switzerland 

64. arbeitskreis tourismus & entwicklung, Switzerland 

65. Basler Appell gegen Gentechnologie, Switzerland 

66. Berne Declaration, Switzerland 

67. berwegerconsulting, Switzerland 

68. BeTrieb, Switzerland 

69. fair-fish association, Switzerland 

70. Greenpeace, Switzerland 

71. Gr ̧ne Partei der Schweiz, Parti Ècologiste suisse, Switzerland 

72. HEKS, Swiss Interchurch Aid, Switzerland 

73. medico international schweiz, Switzerland 

74. Responsible for Projects of medico international schweiz, Switzerland 

75. Schweizerisches Rotes Kreuz Kanton Zurich, Switzerland 

76. SOLIFONDS, Switzerland 

77. Swiss Red Cross Canton Zurich, Switzerland 

78. World Without Mines, Switzerland 

79. Youth Ecological Centre, Tajikistan 

80. Forest Peoples Programme, U.K. 

81. Platform, U.K. 

82. The Corner House, U.K. 

83. War on Want, U.K. 

84. World Development Movement, U.K. 

85. Adrian Dominican Sisters, U.S.A. 

86. Congregation of St. Joseph, U.S.A. 

87. Congregation of the Sisters of St. Agnes, U.S.A. 

88. Crude Accountability, U.S.A. 

89. Environmental Defense Fund, U.S.A. 

90. Friends of the Earth, U.S.A. 

91. Forest Ethics, U.S.A. 

92. Gender Action, U.S.A. 

93. Global Response, U.S.A. 

94. International Accountability Project, U.S.A. 

95. International Rivers, U.S.A. 

96. Maryknoll Sisters, U.S.A. 

97. Midwest Coalition for Responsible Investments, U.S.A. 

98. Mission Hospital, U.S.A. 

99. National Association of Muslim American Women (NAMAW), U.S.A. 

100. Oil Change International, U.S.A. 

101. Pacific Environment, U.S.A. 

102. Rainforest Action Network, U.S.A. 

103. Region VI Coalition for Responsible Investment, U.S.A. 

104. School Sisters of Notre Dame Cooperative Investment Fund, U.S.A. 

105. Sisters of Charity of Cincinnati, U.S.A. 

106. Sisters of Charity of New York, U.S.A. 

107. Sisters of the Blessed Sacrament, U.S.A. 

108. Sustainable Energy and Environment Network, U.S.A. 

109. Instituto del Tercer Mundo (ITEM), Uruguay 

110. Rural Development Services Centre, Vietnam 

 

 


Cloak and dagger over coal policy

August 21, 2008

Tanim Ahmed, NewAge, August 21, 2008

It appears that the draft coal policy began with a text heavily biased towards private investment and facilitating large margins of profit for the mining companies. Ideally, there should not be a problem with the private investor making large margins but not at the cost of national interests or doing away with all kinds of binding safeguards to protect the environment and livelihoods of thousands of people who would be displaced. 

 

The August 2006 protests at Phulbari. Photo— Andrew Biraj/NewAge

TWO years ago on August 26, a citizens’ platform led the locals to take to the streets protesting against a proposed open pit coalmine by a British mining company. The National Committee for the Protection of Oil, Gas, Mineral Resources, Power and Ports, led a procession of some 70,000 people from around the Phulbari township protesting against Asia Energy’s project that would see most of them become landless. Law enforcement agencies opened fire on the reasonably peaceful assembly just as it was about to break at the end of the day’s programme. Three people were killed, dozens were injured either by gunshot or when the law enforcers charged batons. What followed has become one of the celebrated instances of popular resistance leading to an agreement between the people of Phulbari and the government of the day. Like most other popular movements, the events of Phulbari Day was actually a culmination of almost a year’s campaign and mass awareness programmes undertaken by the citizens’ platform, popularly known as the Oil Gas Committee.
   

The local inhabitants found that this mining company gave out contradictory and sometimes erroneous information. They had little idea that the coalmine would gobble up their lands and that they would have to be relocated and begin life afresh. Although Asia Energy claimed to have conducted consultations with a few thousand households, only a few people admitted to having spoken to their representatives and refused to acknowledge those meetings as ‘consultations’ in which they had apparently agreed to the establishment of a coalmine in the area.
   

Misgivings still remain and a report published in the New Nation on August 20 does not do much allay them. Neither does a column by Mohammad Nurul Islam, a member of the coal policy drafting committee, published in Prothom Alo on August 4. Both the pieces relate to the finalised coal policy that has now been submitted for approval by the council of advisers. The report, citing sources in the Energy Division and those present at the meeting of the council in Chittagong last week, states that there were strong differences among the advisers over the amount of royalty and land acquisition issue. Apparently, it was the contention of some of the advisers that the recommended 13 per cent royalty was high and private quarters would not be interested to invest with such a high rate. Recommendations regarding the method of mining, rehabilitation of the dislocated inhabitants of the mine area and land acquisition also featured in the discussion. The policy was eventually sent back to the Energy Division with a recommendation from the council to shorten it and remove ambiguities, following which it might again be placed for approval in December.
   

In his column, Nurul Islam, a professor of the Institute of Appropriate Technology of the Bangladesh University of Engineering and Technology, states plainly that if the coal policy is approved by the council of advisers as it is, it would undermine national interests and favour the mining companies. He goes on to make several recommendations.
   

The initial proposal by Asia Energy, now Global Coal Management, in 2005, according to which Bangladesh would receive only six per cent royalty from extracted coal, was controversial and strongly criticised by different quarters. The misgivings would not appear unfounded given the context and process through which the Asia Energy project has come about.
   

Although the stipulated royalty for open pit coalmine was fixed at 20 per cent by the law prevailing till December 1995, the Bureau of Mineral Development entered into an agreement with BHP Billiton in August 1994 settling on a royalty rate of just six per cent for an open pit mine in Phulbari. Just one month before, the bureau had entered into another agreement with Petrobangla for Barapukuria at a royalty of 20 per cent. This was the first instance of irregularity betraying machinations in favour of a foreign investor.
   

The relevant law was modified in December 1995 stipulating six per cent royalty for open pit and five per cent for shaft mining of coal. When the BHP handed over their contract to Asia Energy, the government was not notified in due time.
   

The royalty rate remains an issue even today as both the report and Nurul Islam’s column points out. He recommends that this rate should be fixed at 15 per cent. But the council of advisers, according to the report, deemed 13 per cent to be too high. M Tamim, the special assistant to the chief adviser in charge of the energy ministry, however, pointed out that in other countries taxes are much higher than in Bangladesh and argued that the proposed rate was justified.
  

In its feasibility study, Asia Energy proposed that the open pit mine would to take up some 65 square kilometres although the prevailing law stipulated that it should not be more than eight square kilometres.


Once Asia Energy’s initial proposal came under fire from even the bureaucrats, particularly those heading the energy and mineral resources divisions of the energy ministry in 2005, there was a largely unanimous recommendation that it would be assessed under a coal policy that would be formulated. Since then, there has been little talk of a comprehensive energy policy or a mining policy encompassing all the different aspects.
   

The first draft was prepared and finalised on December 1, 2005 and a second draft by January 23 the following year. The two were made public and discussed. Both the drafts appeared as if they had been formulated in such a manner so as to accommodate the proposals of Asia Energy and the Indian Tata group, which was at that time vying for an open pit mine in Barapukuria as part of its $3 billion investment proposal in Bangladesh. The drafts allowed for substantial coal exports and projected such a level of extraction for which there would not be sufficient demand in the local market. The high rate of coal extraction was advocated in order to ‘ensure energy security’ for the country but would have eventually meant export of large amounts of coal.
   

The drafts were duly criticised but subsequent drafts still retained provisions facilitating exports and coal extraction in an open pit method of mining without concrete safeguards for adverse environmental impacts or rehabilitation of the local inhabitants that include a few thousand people of ethnic minority communities. The coal policy went through six drafts till June 2007 when a high-powered committee was formed with former BUET vice-chancellor Abdul Matin Patwary as chairman. The Patwary Committee, comprising eight members, was charged with analysing the sixth draft and finalising the coal policy.
   

Interestingly, this committee did not include Nurul Islam on some vague ground, but the members co-opted him into it nonetheless. The sixth version of the policy, dated June 21, 2007, was made available on the internet and public opinion was sought on it. This version remains the only one available in the public domain. Although it was put in the public domain claiming more openness, the subsequent versions were never made available. The seventh version that the Patwary Committee finalised also went through a relatively transparent and apparently participatory process with members of the media present at the meetings and different interested quarters welcome to make their submissions and deliberations. The seventh draft was submitted to the secretary for energy and mineral resources in January 2008. Since then the energy division has been working on the draft and, according to Nurul Islam, has changed the draft for the worse.
   

It appears that the draft coal policy began with a text heavily biased towards private investment and facilitating large margins of profit for the mining companies. Ideally, there should not be a problem with the private investor making large margins but not at the cost of national interests or doing away with all kinds of binding safeguards to protect the environment and livelihoods of thousands of people who would be displaced. But the process was such that with every draft the interest of the private quarters were diluted a little and provisions tweaked around a little to allow marginal benefits to Bangladesh. The Patwary Committee, therefore, had a huge task on its hand to turn the entire draft around and produce one that favoured national interests over anything else.
   

Given the controversy and criticisms, the committee members went out of their way to specify a number of provisions and even stipulated the constitution of the coal development committee. This appears to be the main complaint against them now, that they went beyond their mandate and produced something that is more like a policy and act put together. It should have been appreciated that the committee did extra work just to ensure all the bones of contention were covered. Now it seems, however, that the final draft will go through another round of modifications.
   It increasingly seems that just because the coal is there, it must be extracted and used. But there is yet to be a thorough cost-benefit analysis. There is yet to be any concrete plan that would duly quell the apprehensions of the local populace by proving that they would end up being better off if the coal mine is established and they are relocated. There is yet to be any analysis about the extent of water table draw down due to continuous flushing out of groundwater, which could have telling impact on an otherwise food surplus region.
   

There is also the consideration that this particular project happens to be related to mineral extraction and that too of fossil fuel. It is a matter of historical and anecdotal experience, as well as being the finding of an academic research by an internal evaluation of the World Bank titled ‘Striking a Better Balance’, that investment in fossil fuel extraction, be it oil, gas or coal, are typically predatory and add little to the overall development of the host economy. In fact, these investments create indirect hindrances to wholesome development and contribute to slower sustainable growth of the recipient or host economies.
   

Investments in the gas sector should suffice as learning experiences. None of the two companies have till today compensated for the blowouts that they were responsible for. There is no guarantee that Asia Energy will not follow in their footsteps. That Bangladesh immediately needs to develop its natural resources to meet future and current energy demands cannot be denied. But it cannot be at the cost of food security and livelihoods of thousands of people or irreversible environmental destruction that open pit mines have been proven to cause across the world. There is also the matter of population density that experts often point out. They say there has never been an open pit mine in such densely populated areas like Bangladesh where there are almost 1,100 people per sq km as opposed to three in Canada and Australia, 32 in United States or even 368 in India.
   

As far as Phulbari is concerned and as far as Asia Energy is concerned, the local populace will renew their pledge on August 26. Their message is a simple one. No to open pit. No to exports. No to foreign companies.