Monday, May 23, 2005

should India do more business than politics with Bangladesh?

Indian Big Business may be at odds with the traditional approach of its political leaders towards Bangladesh. Could this herald a sea change in the way the two foreign establishments interact? Or is this merely a temporary smokescreen, a phoney entente cordiale, to sign some deals before reverting to the ‘normal’ adversarial state of affairs? As it is, border clashes and the erection of a fence are raising the temperature. This ham-fisted policy may be populist but will be ineffective. It provides yet another exploitable issue. Against this background, is Big Business telling the External Affairs Ministry to “cool it” and smooth the ruffled feathers of its neighbour? Is that one reason why India is suddenly anxious to come to the SAARC summit?
The conventional view holds that relations were somehow better under the current opposition, rather than the present regime. If one ignores the posturing, it can be argued that it is actually the other way round. After all, the big industrial and energy deals are closer to fruition under the present government. There may have been more empathy with the previous government, for historical reasons, but hard business negotiations are more likely to lead to actual signatures on agreements under this administration. In other words, is it possible that, politically, relations are at an all-time low but that, in terms of business, relations are the warmest for a generation? Can this dichotomy continue? “Big Business” India operates under its own steam and may not always work in tandem with its foreign ministry.

Friends again, for now?
Somewhat surprisingly, given the controversy over gas, the Bangladeshi government has been able to agree in principle with the Indian and Myanmar governments to a pipeline to transport gas from Myanmar to India, via Bangladeshi territory. The agreement has not been signed yet and border casualties and perceived sleight, on both sides, can still scupper the deal.
Moreover, TATA Steel has just completed its feasibility study on setting up a 2.4 million tonne steel plant, and power & fertiliser complex in NW Bangladesh. This 100-year-old company is taking a $2 billion gamble that it will be able to utilise Bangladesh’s gas or coal for over a decade to produce low cost steel flat slabs. TATA will not be making this decision lightly and must have made a long-term forecast. It no doubt expects stability in fuel supply and an export exit for its steel products for years to come.
Indian Big Business therefore will have two enormous stakes in seeing a stable relationship between India and Bangladesh. The resurgent economy of West Bengal will be the prime beneficiary of the gas pipeline and will not want any disruption to supply.
Thus, one could say, India’s politicians are temporarily being forced to look for a more amicable state of affairs to ensure that its economy can move forward.

One-off or more to come?
At present, no further Indian investment proposals are officially in the pipeline. TATA Steel is aiming to be a 15 million tonnes producer by 2010 and planning a 6 million tonne project in iron-ore rich Orissa. The 420,000 tonne Bangladesh project may be the biggest industrial venture of all time in Dhaka, but is dwarfed in comparison. Since steel production is an energy intensive operation, cynics may see this as merely a clever way of sidestepping the issue of gas export from Bangladesh. If the gas won’t come to us, we will come over instead. Perhaps.
So what will it take for India’s major conglomerates to take a different slant on the investment climate in Bangladesh?
Apparently, Reliance has seriously considered entering the booming Telecom market in Bangladesh. Is it inconceivable that it, or its competitors, might follow Egypt’s Orascom Telecom in buying into this sector? A clutch of private fixed line licenses has been dished out. Hardware equipment supply agreements were signed with the Chinese, during Prime Minister Wen Jinbao’s recent visit. Is it impossible that some experienced Indian Telecom Operators would be invited to transform Bangladesh’s expensive call market into the low cost mass-market Indian equivalent?
Agro-processing is another potential sector. The abundance of sugar, jute, rice and vegetables might suggest a ready supply in the minds of some entrepreneurs. Finally, there is the issue of ‘transhipment’, i.e. using Bangladesh’s road and rail infrastructure to move goods and services to the almost land-locked Northeastern states. Would India merely utilise the dilapidated infrastructure, weakening it further? Or would it be prepared to invest in the highways and rail-track needed to handle such volumes of traffic?
It will be fascinating to see whether “Political-India” or “Big-Business-India” prevails in setting the parameters.

20 Comments:

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Cannot and would not like to comment on politics , but yes lot more business needs to be done in the mutual interest of both countries . Nothing can be better than having a buoyant and vibrant neighbour like Bangladesh . I would also like to visit this country sometime on business , after all quite a few of us have our identities linked and Bangladesh flowing in our bloodstream !

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