Week of Global Action Against Debt and IFIs 2008

September 22, 2008

September 2008

We urge you all to join the Week of Global Action against Debt and International Financial Institutions – a week of various forms of citizen’s actions and mobilizations worldwide from October 12 to 19, 2008.

Download the call (PDF)

The Week includes many special dates:

October 12 – Continental day of resistance to colonialism and neocolonial neoliberalism (Americas)
October 13 – Day of Action against Debt, IFIs and Climate Change
October 14 – Day of Action against IFIs, Debt and Privatization
October 15 – Day of action for Debt Repudiation (anniversary of the death of Thomas Sankara, ex-president of Burkina Faso who called for debt repudiation just before his assassination)
October 16 – Day of Action for Food Sovereignty
October 17 – Day of Action against Poverty 

Together let us challenge and confront northern governments, international banks, transnational companies, and multilateral institutions such as the IMF, World Bank, and WTO to take responsibility for debt domination and illegitimate debt.

Let us also demand past and present governments and government officials in the South to be accountable for their role in the debt problem.  Let us declare our readiness to stand in solidarity with those who choose to repudiate illegitimate debt. 

Let us pursue alternative and responsible financial relations, principles and standards to stop the re-accumulation of illegitimate debt.  These will involve major changes in international and national structures, processes and policies towards the establishment of equitable and just economic, financial and political relations.

Initial Conveners:
Global and Regional entities:
Jubilee South, CADTM International Network, Southern Peoples’ Alliance of Ecological Debt Creditors, Oilwatch South America, Jubilee South/Americas, Asia-Pacific Movement on Debt and Development/JS Asia and Pacific, Hemispheric Social Alliance (Americas)

National and locally-based entities:
Observatori del Deute en la Globalizació (Cataluña, Estado español), Irish Coalition on Debt and Development, Jubilee USA Network, Dialogue 2000 (Argentina), Jubilee South Network Brazil, Brazil Network on International Financial Institutions


Bangladesh govt asks Unilever, Aventisto offload shares: TNCs ignore repeated calls for going public

September 20, 2008

Asif Showkat, NewAge, September 

The industries ministry has again asked Unilever and Aventis to offload their 10 per cent shares, including five per cent stakes of the government in each of the two global consumer goods and pharmaceutical giants.

The government made the fresh offer after the two multinational companies sought to acquire the government stakes, industries ministry officials said.

The ministry had sought legal opinion from the stock market watchdog, Securities and Exchange Commission, about selling the government’s five per cent shares out to the public.

‘We’ve asked the SEC to initiate legal procedure to allow offloading of the shares in the two multinationals,’ said a high official of the ministry, who attended a meeting Tuesday on how to offload their shares.

Rules allow the majority shareholder of a company to buy the stakes of the smaller shareholder if the latter agrees to sell its shares.

However, in this case, the government wants to sell its five per cent shares to the public and asks both Unilever and Aventis to offload another five per cent shares through the country’s two stock markets.

The issues were discussed Tuesday at an industries ministry meeting, presided over by Mahbub Jamil, special assistant to the chief adviser, and attended by senior officials of Unilever, Aventis and SEC.

Officials of the two multinational companies offered to buy the government stakes while the industries ministry proposed that the government’s five per cent shares should be sold in the country’s capital market.

The Unilever Bangladesh board earlier rejected a similar proposal of the industries ministry to offload five per cent of its 39.5 per cent stakes in the company. The government holds about 40 per cent stake in the Bangladesh operations of French drug maker Aventis, now known as Sanofi-Aventis.

The government had decided to offload at least five per cent of its stakes in the multinational companies such as Unilever and Aventis by April 2006 as part of its wide-ranging plan to strengthen the country’s capital market.

But no visible progress could be made in more than two years since then due to indifference of the multinational companies, industries ministry officials said.
 ‘Unilever shares are already being traded in Pakistan and other regional capital markets. But here the company is opposed to the government’s proposal to offload a small amount of its shares,’ said economist Professor Abu Ahmed.

Multinational companies can enjoy tax exemption if they offload shares in the stock markets, he pointed out.
 The capital market expert expressed his strong reservation about the company’s proposal to buy the government’s stakes instead of offloading their shares in the stock markets.
 Formerly known as Lever Brothers Limited, the Anglo-Dutch fast-moving consumer goods company has been operating in the country since 1964, with the government holding minority shares.
   Renamed as Unilever globally, the company is the market leader in Bangladesh with its popular beauty soap brand Lux and about 40 other toiletries and consumer brands.

Unilever Bangladesh has been witnessing double-digit growth since 1990s with annual gross turnover estimated at $200 million, maintaining its stronghold in the country’s fast-growing consumer market. Experts said Unilever stocks would be the most sought-after ones in the capital market if it decides to go public.

An inter-ministerial meeting held last week at the finance ministry reviewed the progress of the government’s plan to bring quality shares, including those of multinationals and public sector companies, to the country’s stock markets.

The meeting was told that multinational companies had ignored repeated appeals of the industries ministry for taking steps towards share offloading, while listing of state-owned enterprises also faced hurdles from bureaucracy and litigations.

The government’s year-old plan to bring major state-owned companies, including the good performing ones, to the capital market also did not see much progress.
 The finance ministry meeting that reviewed the status of the government’s plan found that only three out of nearly 40 state-owned enterprises had so far offloaded their shares. They are Jamuna Oil Company Limited, Meghna Petroleum Limited and Titas Gas.

The decision of offloading of the shares of other companies did not progress due to procedural delays. Legal restriction held back the offloading of the government’s 25 per cent out of 51 per cent stake in Usmania Glass Sheet manufacturing company.

The government has also planned to offload more of its shares in Atlas, National Tubes and Eastern Cable, which are already listed with the stock market.
 Earlier, finance adviser Mirza Azizul Islam had instructed officials to complete asset valuation of some of the fully government-owned companies by June to pave the way for their listing with the stock market.

A committee was formed comprising officials of SEC, Investment Corporation of Bangladesh and industries ministry to find out by June 2008 whether shares of any of the state-owned sugar mills can be offloaded.

A worrying week on Wall Street

September 20, 2008

Al Jazeera, September 19, 2008

The collapse of America’s fourth largest investment banks and fears about the stability of other financial institutions have led to some on the most tumultuous days in Wall Street’s history. Al Jazeera’s John Terrett reports on a week that has seen the Dow Jones index have its best and worst days in over half a decade.

Wall Street teeters, the Empire and China shake

September 20, 2008

The Real News, September 18, 2008

Markets nosedive, recession spreads, world financial system shaken. 

The World Bank and water privatisation: public money down the drain

September 19, 2008

EURODAD, 18 September 2008

Though the World Bank may be changing its formerly dogmatic approach to full privatisation of the water sector, key cases in Tanzania, Armenia, Zambia and India highlight that the Bank may not be learning quickly enough and that the poor may be left both without improved water and paying for botched privatisations.

At Water Week in Washington in May, Bank vice president Kathy Sierra asserted that privatisation was not “the only answer” – there was the full spectrum of public-private mix of investments instead. Only a few days earlier, a senior World Bank official, Shekhar Shah, reported in New Delhi how the Bank had “learned the hard way” that it was not correct to leave it to the private sector.

But the statement by Lars Thunell, head of the Bank’s private-sector arm the International Finance Corporation (IFC), at World Water Week in Stockholm in August shows that the Bank is still not interested in pursuing public solutions to water provision: “We believe that providing clean water and sanitation services is a real business opportunity.”

Currently the IFC’s focus is on creating the right conditions for private investors, including a $100 million fund, called IFC Infraventures, to “provide risk capital for early stage development of infrastructure projects in the poorest countries, but also to encourage more public-private partnerships.” Thunell also claimed: “The debate is shifting. Instead of ‘should the private sector be involved in water?’ the question is ‘how can we work together for sensible and fair solutions?'”

Tanzanians’ nightmare 

A fair solution has still not been reached in Tanzania, where the Bank-supported privatisation of water services resulted in sharply higher water prices, little improvement in supply and the eventual termination of the contract with UK-based multinational Biwater in 2005 (see Update 55, 46). In August this year, the Bank’s International Center for the Settlement of Investment Disputes (ICSID) issued its ruling in Biwater’s lawsuit against Tanzania, and found that while technical breaches of Biwater’s investors’ rights did occur, Biwater was not entitled to compensation because the breaches were worth zero in monetary value and the termination of the contract was inevitable.

“The Tanzanian water privatisation project was a scandal right from the beginning,” said Vicky Cann of the World Development Movement. “It is absolutely right that this Court has found that Tanzania owes Biwater nothing, but shocking that Biwater saw fit to drag the government of such a poor country through the courts in the first place.”

Even though the ICSID has refused Biwater’s claim to compensation, the Tanzanian people will have to carry the financial burden of $140 million loan without benefiting from improvement in their water sector. The lawyer who defended the Tanzanian government suggested that the World Bank should pay reparations to Tanzania as “the whole affair was the prescription of the World Bank. It will be fair that they should pay the government”.

At the very least, as Mussa Billengeya from the Tanzanian Association of NGOs said, “The failure of this policy should be a lesson to the World Bank, aid donors, and governments that privatisation is not a solution for problems in developing countries. In fact, this failure has added a burden to a country that is already struggling to reach its international poverty target on access to water.”

Armenia water corruption 

In August US-based NGO Government Accountability Project (GAP) released a new report investigating the corruption allegations facing the water privatisation project in Armenia’s capital Yerevan (seeUpdate 57).

Armenia borrowed from the World Bank in 1998 to restore the Yerevan water utility, with water-sector multinational ACEA eventually winning the contract to take control of the facility. During the course of the first two years, complaints about unreliable service and contaminated water increased, and the exclusion of local vendors from ACEA tenders led to allegations of corruption.

The GAP report validates the finding of an Armenian parliamentary commission set up to investigate the project in 2004. The parliamentary study revealed that the representative of the international operator ACEA, in collaboration with corrupt state officials, had diverted project materials and equipment to commercial enterprises for personal gain. The study also showed that costly improvements to the systems had been abandoned and replaced by improper for-profit schemes and that the representative of the international operator had used his position to establish a network for the purpose of embezzling public funds.

In 2007, the Commission sought advice from GAP after the Bank failed to investigate the allegations. GAP has been equally unsuccessful in getting the Bank’s Department for Institutional Integrity to investigate what seems to be a flagrant case of project-related corruption. The Bank may be unwilling to take its share of responsibility to redress the harm done or compensate citizens who have lost millions in public funds.

Upfront investment needed 

Privatisation and commercialisation of water in the developing world has suffered – and still does – from several flaws. Companies that took over contracts for water management soon realised the lack of short-term profitability of a sector that required large investment. Unable to fully offset their costs, the companies failed to invest with negative effects on citizens who faced increases in tariffs and declines in access. Often governments could not supervise company performance or hold them accountable as proper regulatory frameworks were not in place.

In a policy brief released by the UNDP-sponsored International Poverty Centre in June, academics Hulya Dagdeviren and Degol Hailu conclude that “So far, Zambia’s liberalisation strategy has emphasised tariff rationalisation. This has failed to ensure full cost recovery and has further constrained affordability and accessibility. The correct policy prescription is up-front public investment to renew and extend infrastructure.”

So why has the Bank not warmed to this policy prescription? A new book analyzing the Bank’s water privatisation agenda in India from Indian NGO Manthan Adhyayan Kendra blames the Bank’s structures for producing knowledge (see Update 54, 53). Author Shripad Dharmadhikary writes: “the Bank’s process of generating knowledge is flawed and exclusionary. It excludes common people, and their traditional expertise and knowledge. The Bank’s knowledge is frequently created by highly paid, often international, consultants, who have little knowledge of local conditions. The knowledge creation is mostly directed towards arriving at a pre-determined set of policies – privatisation and globalisation. This knowledge creation is often selective, in that information, evidence or experiences that do not support these pre-determined outcomes are ignored.”

Based on case studies of the Indian water sector review in 1998, the Bank-support Public-Private Infrastructure Advisory Facility (seeUpdate 56), water privatisation in Delhi, and a project for water restructuring in the Indian state of Madhya Pradesh, Dharmadhikary finds that “[the Bank’s] policies have cut people’s access to water, led to environmental destruction, resulted in displacement and destitution of people, stifled better options for water resource management, have had huge opportunity costs, and privileged corporate profits over social responsibility and equity.”

Remunicipalisation wave 

Though the World Bank seems to be unwilling to counsel countries on how to reform public services, developing countries looking for advice can now use a new web site on the de-privatisation of water services. The so-called water remunicipalisation tracker provides information on different cities globally that have successfully taken back public control over water. It is a participatory initiative to which global activists can contribute.

The site, promoted by European NGOs Corporate Europe Observatory and Transnational Institute, says “It’s apparent that a global remunicipalisation wave is emerging.” It indicates that “Approaches differ depending on local circumstances but undoubtedly lessons can be learned from the different but inspiring experiences of remunicipalisation.” That seems to be more than the Bank is willing to offer.

Dhaka Wasa plans 20pc hike in water tariff

September 18, 2008
Dhaka Wasa is planning to increase water tariff by 20 percent, only after a month it slapped a five percent increase in tariff.   

Dhaka Wasa Managing Director (MD) engineer M Raihanul Abedin said, “The Board has approved increasing water tariff by 20 percent and the proposal has already been sent to the LGRD ministry for final decision.”

“The Dhaka Wasa Board has the mandate to increase tariff up to five percent annually. The Board increased tariff by five percent in July after three years. But it is not sufficient to meet the expenditure as the salary of Wasa employees were increased by 20 percent,” he said. 

He said due to frequent power outage, they have to run pumps often by generators, which is contributing to a rise in water lifting cost. 

However, the decision of increasing tariff without improving the service of Wasa facing systems loss has raised questions.

Transparency International Bangladesh (TIB) Chairman Prof Muzaffer Ahmad said, “An organisation needs to tackle systems loss before increasing tariff.”

“Wasa should improve its service first,” he said, adding that it should conduct a survey before making such decisions.

However, the Dhaka Wasa MD is confident of providing the city residents with better service in the near future. 

“We shall install more water treatment plants to increase our production. Water supply in the city will improve after implementation of the Asian Development Bank (ADB)-funded Dhaka Water Supply Sector Development Programme at a cost of Tk 1,456 crore. Moreover, we shall purchase 75 generators,” he added.

Food security inexorably linked to farmers’ security

September 18, 2008

Tanim Ahmed*, NewAge, September 18, 2008

The future of small and marginal farmers and small-scale food production, and thereby food security to a large extent, revolves around access. It involves access to land and natural resources, access to inputs, access to finance, access to services and access to markets

QUITE in line with its predictably renewed focus on agriculture and in a bid to tap into the emerging global credit demand arising out of the food crisis, the World Bank has recently finalised another deal with the military-controlled interim government as part of its hastily designed ‘Global Food Response Programme’.

A release of the lending agency dated September 14 reads that the agency and the interim government have successfully concluded negotiations for a $130-million Food Crisis Development Support Credit. The proposed programme, claims the release, will assist the Bangladesh government to implement its ongoing policies and pro-poor programmes to cope with high food prices.

The World Bank also signed an agreement of about $62 million last year that focuses on agricultural technology and research. The new credit package has components that include food price policy, social protection mechanisms, increasing domestic food production and marketing response while the previous programme focuses on technology and research.
   There is no doubt that one of the primary preconditions for sustainable food security is food production. As such, there is no alternative to increasing food production.

However, merely production of enough food cereals is not enough because people must also have the purchasing capacity to procure enough food from the market to survive. In order to ensure that on a sustainable basis, the livelihoods of the small and marginal farmers must also be brought into focus. These small and marginal farmers not only form the backbone of the domestic economy and feed the entire nation, but also constitute almost half the labour force and an overwhelmingly large portion of the people living in poverty.

Attainment of meaningful food security would then naturally require such measures that ensure livelihoods of this vast number of people on the margins. At the same time, meaningful food security, since it is related to agriculture, requires interventions not just at the research end or in areas that lead to higher productivity but also in areas that can bring about positive change in the current agricultural system and benefit the small farmers. In that context, food production and increased focus on research would only be addressing a small segment of a much larger problem.

The future of small and marginal farmers and small-scale food production, and thereby food security to a large extent, revolves around access. It involves access to land and natural resources, access to inputs, access to finance, access to services and access to markets.

The first requirement for any agricultural activity is land. But as yet there are no land use policies that govern the future of arable land and its redistribution. There is a perceptible concentration of arable into a few hands in different corners and pockets of the country with increasing investment in agribusiness. It also implies that small and marginal farmers will become increasingly landless. One study finds that if all government khas land is distributed among all the landless people in Bangladesh, it would ensure ownership of up to 100 decimals of land per head.

Considering that the only means to increasing profit from agricultural businesses and large-scale investment is through the acquisition of ever larger acreage and that there are no effective ceilings on land ownership, especially relating to arable land, larger tracts will continue to be concentrated in a few hands as contract farming and corporate agriculture emerge. Acquisition of more land would necessarily mean that few moneyed quarters would be buying land from a large number of small farmers. This could also be seen as the primary source of livelihood for thousands becoming concentrated into the hands of a few seeking to maximise commercial gains.

Although land reforms in the neighbouring West Bengal had seen marked improvement in agricultural productivity, this is a topic that would be frowned upon since the very concept goes against a social norm rooted in medieval feudalism. Ruling establishments, being an extension of that very feudal class, would instead turn to the second best option. But even on that front there has been little progress. In an open market, especially the predatory type that the governments generally practise in Bangladesh, the authorities are unlikely to initiate land reform or even initiate such policies that strive towards redistribution among the landless. As for the landless agricultural labourers there are no laws or regulations that even recognise farm labour as a formal sector. There are yet to be any laws stipulating minimum wages and other rights and privileges that apply to industrial labour.

Moving on to agricultural inputs, mainly seed, fertiliser and pesticide, there is a constant shortage at the farmers’ end, especially in case of fertilisers. One thing to note here is that the country’s agricultural system has gradually become seriously dependent on chemical inputs and from the initiatives undertaken by the military-controlled incumbents it appears that even in case of seeds, farmers will very quickly shift from traditional or high-yielding varieties to terminator seeds and then on to genetically modified seeds. Whether it was by design or default, whether it is a matter of conscious policy choice or not, the fact is that although the agricultural system is moving away from its traditional and natural roots to one dependent on artificial inputs, the government is losing its ability for effective intervention. Private quarters are gradually taking up the market of seeds and pesticides, often with little effective quality control or assessment of environmental impacts of pesticide.

In fact, the government machinery is increasingly being used in favour of private companies selling certain brands of products. Although there is substantial debate about unquestioned acceptance of terminator technology the policymakers have not engaged in consultation with the experts, scientists or farmers’ representatives to hear their opinion. On the other hand, the government has not scaled up its activities and initiatives appropriately to ensure that input supply matches with that of the rising demand. As a stopgap measure, the government declared a programme to produce 10 tonnes of organic compost at the union level under each sub-assistant agriculture officer. It only indicates the lack of concerted and coordinated plan on this front.

It is widely recognised that chemical pesticides and herbicide destroy soil fertility severely and runoff from these lands ending up in nearby rivers and canals often kill off entire fish populations. Use of chemical pesticides has also severely limited fish production, which is part of the traditional rice farming system growing in the stagnant waters of paddy fields. Yet, there are no bars on sales of chemical pesticides, nor is there any effective stress on use of natural and integrated pest management system.

That the farmers do not have access to sufficient finances is only evident. In fact, there are no genuine agricultural loan packages from the government and the criteria applied by even the state-owned nationalised banks for agricultural loans automatically exclude the marginal farmers. The only mechanism meant for providing small farmers with some funds is the small loans of Tk 5,000 riddled with irregularity and corruption but even that is hardly an agricultural loan.

Compared to the loan packages, for instance ‘marriage loan’, ‘education loan’, ‘housing loan’ or ‘holiday loan’, meant for urban consumers of private banks, the so-called agricultural loans do not take into consideration the crop cycle, its profitability, it growth cycle or its vulnerability. On the other hand, the urban consumer’s education loan factors in all those considerations. Besides this small loans programme there are no other policies or regulations that stipulate lending to the small farmers from any other financial institution or bank, private or public.

With increasing instances of extreme weather events such as floods and cyclones and droughts, apparently fallouts of climate change, the small farmers’ vulnerability is also increasing. In this regard, there has been much talk about crop insurance but no effective initiative. Additionally, and in case crop insurance is instituted, there remains the question of monitoring financial institutions and regulating them appropriately to prevent cases of fraud where fly-by-night operators might make away with large amounts of deposits as insurance premiums, never to be seen or heard from again.

 It is a general complaint that agricultural extension offices are not active enough and cannot really be relied upon. There is quite understandably a serious constraint of resources in the extension services but at the same time agricultural services could be strengthened and activated. Apparently, there are over 20 different services at the upazila level from the government including agricultural marketing, information, extension and veterinary services besides a host of others. Only a handful of these services are actually active so as to benefit the farmers.

The farmers might benefit substantially from increased services and information through the agriculture department. Before that concrete and meaningful roles of each different department must be ascertained and duly assigned in consideration of farmers’ demands, needs and consultations with them. The agricultural services are a classic instance of gradual withdrawal of the state from providing services to the citizens. Its revival will require substantial mobilisation of resources and sincere effort from quarters concerned. However, if revived prioritising the farmers’ needs it could add substantial value to agriculture in general.

Finally, all efforts would come to nought if the small farmers’ ability to effectively participate in the market spurred by the ‘invisible hand’ is not ensured. The small and marginal farmers can hardly participate effectively in the market selling their produce to the highest bidder. It is a commonplace scenario that marginal farmers are compelled to sell their produce to a certain party without any negotiations, which turns it into a buyers’ market at the periphery and a sellers market at the centre, where the urban consumer is almost hostage to the suppliers and the prices they fix.

Farmers’ access to the urban market, or even the local market, and providing them with the facility and scope to sell their produce could potentially benefit the farmers as well as the urban consumers. This would also require serious efforts from the authorities since it would immediately disturb the status quo.

This entire set of programmes would require strong political commitment so that it is supported by appropriate and corresponding policies and regulations ensuring the welfare of the peasants. This political commitment should also see farmers or producers’ organisations taking shape in order to be able to gain strength in numbers and allow them to bargain for their demands unitedly.
   But the current loan packages that promote increased assistance for marginalised groups and increased spending on research besides a few other tweaks in the agricultural system would hardly address the underlying problems failing Bangladesh’s small farmers and thus impeding attainment of food security.

*Tanim Ahmed regularly writes for NewAge. Contact: tanimahmed@gmail.com