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ADB And The Case Of
Phulbari Coal Project

By Anu Muhammad

19 May, 2007
Countercurrents.org

On March 9 2007 Washington Post reported, 'The Bush administration has objected to a proposed open-pit coal mine in Canada near the Montana border, citing the potential for irreversible environmental damage to Glacier National Park, pristine trout streams and the largest natural lake in the West. ....About 25 miles north of the border, the Cline Mining Corporation of Canada wants to lop off the top of a mountain and over the next 20 years haul away 40 million tons of coal -- in a drainage that forms the headwaters of the North Fork of the Flathead River.....The North Fork of the Flathead, which the federal government says would quickly be contaminated with heavy metals and other mining pollutants, forms the western boundary of Glacier Park. It then flows south into Flathead Lake, often described as the largest pristine lake in the nation and a major recreation site.'

While the US administration obstructed Canadian open pit mining in a mountain area because of 'potential for irreversible environmental damage to Park and natural lake about 25 miles north of the border', US backed institutions and agencies are pushing Bangladesh Government to go ahead with open pit mining in a densely populated and agricultural land area against experts opinion and strong public opinion.

ADB push for Phulbari Project

At a press conference on March 27, the Asian Development Bank (ADB) country director in Bangladesh, Hua Du, expressed the ADB's eagerness for the quick decisions in favour of big Indian corporate giant Tata's proposals related with gas and coal, and the British based company Asia Energy's (AEC) Phulbari Coal Project (PCP). Both are for open pit mining. 'Business is business', she said categorically (Holiday, April 1, 2007).

It is important to note that about 70,000 people were gathered in Phulbari on 26 August 2006 to protest against the proposed open pit mining project. Law enforcers opened fire on them as they were returning home from the protest rally. Three persons were killed and hundreds wounded. Twenty of the wounded people were rendered permanent suffering, one is still in hospital with permanent disability. The action of the law enforcers, however, could not kill off the protest. More people took to the streets in a mass uprising. After days of relentless protest, participated by Bangalee, Adivasi (indigenous), women, men, senior and children, the government relented and entered into an agreement with the protestors represented by National Committee to Protect Oil, Gas Mineral resources, Port and Power.

That historic social contract clearly stated, among others,

1. 'Phulbari coal project will be scrapped and Asia energy will leave the country.'

2. 'No open pit mining will be allowed anywhere in the country'.

3. 'Steps will be taken for development and utilization of coal only after proper consultation with the people keeping national interest intact'.

Meanwhile, a committee of experts, formed by the government, submitted its report in which it observed that the Phulbari project should be cancelled in environmental, economic and legal grounds. However, as Hua Du's statement suggests, nothing can change the bank's mindset.

Why is the bank so enthusiastic to back Asia Energy on the one hand and remain indifferent to experts' opinion about, and the local peoples clear NO to, the project on the other? Why is profit for a company preferable to agencies like ADB even if it costs peoples lives, livelihood and environmental disaster although their written commitments say otherwise?

ADB for Projects of Mass Destruction

If anybody looks at the ADB funded projects and their consequences in Bangladesh one will not be surprised over its present role on the Phulbari project. The ADB is generally known as the 'World Bank of Asia', that always goes hand in hand with the World Bank and the International Monetary Fund in pursuing neoliberal policies that put corporate profit as the supreme objective at the cost of people's lives and environment. It may be unknown to the people of developed countries, whose money is spent on these institutions in the name of development and poverty reduction; however, we, in the peripheral countries find this a 'business as usual' practice of the ADB, as it is for the World Bank and the IMF, albeit on a much larger scale.

The ADB has so far funded numerous projects in Bangladesh. The ADB-funded project in forestry has created deforestation in different places and made forest land a private business. Development projects of institutions like ADB, for example, in Chokoria, Cox's Bazar destroyed forest and salinized land in order to give space to export oriented shrimp cultivation. Shrimp cultivation ruined land and enviroment of the coastal region. The project in Modhupur turned forests into rubber plantation and land of cash crop, gave business to a few and created high insecurity amongst the indigenous people.

On March 18, Choles Ritchil, a leader of the indigenous Garo people living in the Modhupur forest area, was killed after barbaric torture by the government forces. Earlier another leading person was killed on January 3, 2004 by police firing for opposing an eco-park project. The ADB has been involved in projects for social forestry and many other plantation and cash crop projects. These funding and policies towards deforestation, privatization and marketization strengthened market and business orientation in different regions. A network of beneficiaries of this orientation want to go further by evicting Garo people in the name of ill conceived Modhupur forest Eco-Park project, under which a wall is being constructed around 3,000 acres of Modhupur forests. This wall is a threat to the forest and the livelihood of the Garo and other indigenous people. Beneficiaries supported by ADB projects become desparate to go with eco park project and other plantation that need destruction of indigenous peoples lives, livelihood as well as the forests.

The ADB funded projects in water and irrigation gave business to local-foreign consultants and contractors a good business but created permanent water logging in different parts of the country. In southern part of Bangladesh, the success and failure of the ADB projects put lives of about two million people in a horrible situation.

In the education sector, the ADB projects created path for privatization, high corruption and disastrous reform. Protests from teachers and students compelled previous government to stop from implementing 'reforms' but huge money wasted in the process. The ADB was successful in lending but Bangladesh became indebted for creating the mess.

In the energy sector, the ADB has been involved since early 1980s in formulating policies to privatize common property and to create favourable path for foreign corporate organizations. Along with the World Bank, the ADB projects helped multinational companies to grab natural resources on terms and conditions that are very unfavourable for the people, along with the dismantling of national institutions and erosion of capabilities.

More than 80 per cent of the ADB loan has so far been given to the public sector in different countries. This may give a false impression that the loans given to public sector helped strengthening public institutions. In fact, the loans were meant for just the opposite -- to dismantle public institutions and national capabilities.

The same instruments and similar arguments are being used to rationalize further control of coal and gas resources by Tata and Asia Energy (now named as Global Coal Management) in multiple disastrous projects. The ADB has been using its power and influence derived from public money of different countries to serve companies at the cost of people and environment.

This is a roadmap to ensure gravitation of businesses to big corporate bodies and yet creating and trumpeting a myth that these are for development and poverty reduction. People in Phulbari gave their lives to stop the open pit mining project, making clear that they will not accept any foreign direct investment that goes against national interest and creates disaster for present and future generations. The ADB makes its stand clear against that people's verdict.

After declaration of emergency on January 11, the people's fundamnetal rights remain curtailed to a large extent. It seems that Asia Energy and its backers are trying to take it as an opportunity to go ahead with anti-people disastrous projects.

Natural gas, coal and oil: constraints for Bangladesh

In order to ensure energy security for a country like Bangladesh and to find the best possible path to explore natural resources we need to keep in mind that oil, gas and coal are non-renewable resources, cannot be reproduced; that these resources are limited, while domestic demand is growing; that global uncertainty and conflicts on oil, gas and coal mark insecurity for the weak countries; and that energy price is rising and has become unpredictable.

To ensure best possible utilization of energy resources in present and future, every steps concerning exploration, production and utilization of these resources should be transparent. The contracts patronized by the ADB or the World Bank or the IMF have always been secretive. To ensure energy security, the sector should be organized with an objective to fulfill energy demand (present and future) of people and the productive sectors; the peoples ownership and authority over their own resources must be ensured; and development of national institutions and capability must get the highest priority.

However, main features of government policies derived from the ADB and the World Bank support to date are:

There has never been any attempt so far to have comprehensive energy policy and related steps that is consistent with national interest and energy security of the people.


Non-renewable resources have always been considered as something tradable.


Privatization and commercialization of gas, coal and oil has been on the top priority.


Global agencies systematically worked to grab the resources in favour of global corporate. Foreign - aided development projects were utilized to formulate policies in this regard. The energy sector study project of 1982, the energy regulatory commission in 1993, the gas sector master plan and the coal policy in 2006 are some of the examples where World bank, Asian Development Bank were involved.


Dismantling of national agencies, undermining national capabilities, ignoring national needs in short and long term have been common.

In fact, global capital is in confrontation with people all over the world, among others, on three issues:

whether people and the country should own and have authority over their own lives and natural resources or global corporates should be allowed to take over; whether natural resources should be used or preserved for the maximum utilization for the development of the country or to be extracted in a big way to maximize profit of foreign big companies; and whether resources will remain common property or turned into private property of corporates.

People in general and Phulbari in particular and many experts opine in favour of utilizing resources as common property, for badly needed development; not to be plundered or wasted or make disaster.

Phulbari Coal Project: Why people and experts oppose?
The Phulbari coalfield was the latest discovery among the big four coalfields found in Bangladesh since independence. In 1994 the then government signed agreement with the BHP of Australia. In 1998, BHP transferred its right to one year old British- Australian company Asia Energy.

Asia Energy was preparing itself for open-pit mining. It said in its documents, 'Mining by the open cut method is new to Bangladesh, but it is a proven and highly productive and safe method in similar geological and hydrological conditions in other parts of the world such as Australia, India, Indonesia and Germany.' It goes without saying that projecting such a sweeping comparative statement as expert opinion is ill motivated. Leaving aside other criteria, the population and water aspect in Phulbari is entirely different from the reality in other countries like Australia or Germany even India or Indonesia.

The AEC further stated in defense of open-pit mining: 'Adoption of this method will permit the fullest extraction of coal resources, and will augment duration of the mining period and thus enhance socio-economic opportunity, income prospects and gains for the Bangladesh economy.' It was not made clear who would bear the cost and who would be the beneficiaries of this 'fullest extraction'! We know the beneficiaries are company and allies while losers are the people and the country.


Key points of the Project are:

The latest figure for the extractable quantity of coal in Phulbari is 572 million tonnes. Besides coal, the mine contains high-grade silica (sand), ceramic clay, Madhupur clay and gravels and rocks of high quality.

· The coalfield will extend over 135 square kilometres. Again, the area, which can be affected directly or indirectly during the mining operation including de-watering, will be nearly 656 square kilometres.

· This area is very fertile, paddy output is high, and nearly all the land yields three crops per year!

· The business activities in the non-agricultural sector are also expanding fast.

· The density of population is very high, 4245 per square kilometres.

The company says, as the mine advances during the first 5 to 10 years, between 15,000 and 20,000 people will have to be resettled, and over the 30-year life of the mine, the total number of people resettled could be 50,000. According to the local sources, the affected number of people may go beyond 2,00,000!

· Because of the coal-mining operations, the production activities of the entire area in agriculture, livestock, fisheries and forestry will be totally destroyed and will remain unproductive for an indefinite period! The products here include aman, aus, IRRI and Boro varieties of rice, wheat, mustard, potato, corn, banana, sugarcane, jute, chilli, garlic, onion, vegetables of all varieties, and numerous fruit-bearing and timber trees.

· There are also rivers and canals, beels, and fish farms numbering over a thousand, and farms that rear ducks, hens and cattle, etc. Besides, there are many shops, and business and commercial houses. Economic activities in the entire area will come to an end.

· Desertification will ruin lives and livelihoods in greater area beyond mine site.

· Water contamination in the mining area may affect total water system of the country because of its network.

· Asia Energy stated that 'during the operation of the mine, 2,100 short-term and 1,100 long-term positions would be available for employment'. It has been deafeningly silent about the fact that livelihood of over 2,00,000 people will be destroyed by its operation.

· If we consider only coal in the mine, Asia Energy could make profit Taka 1,500 billion (more than US$ 200 billion) in thirty years.

· On the other hand, Bangladesh could receive, by way of 6 per cent royalty and taxes, $7 billion in 30 years. In this context, it should be noted that currently the export earning of Bangladesh has exceeded US$ 10 billion per year. Bangladeshis working abroad send foreign exchange remittances worth around US$ 5 billion per year.

Experts on soil sciences, water and geology further stated that, Asia Energy's mining process could dry up underground water aquifers over an area of roughly 324 square kilometres, with an ecological effect that is difficult to quantify in money terms.

· The company will install over 80 'dewatering tube-wells' in the mining area to pump water out of the mine in order to access the coal, which lies below it. Although Asia Energy proposes 'aquifer injection' systems to prevent a water level drawdown, the local ecology may be irreversible.

· Asia Energy has also proposed that the earth that will be dug up for the mine will be converted into a hill that is 14 square kilometres in area and 385 feet high, also featuring a lake that will cover 6 square kilometres. This huge land area will become irrecoverable for agriculture, causing further loss of livelihood, locally. (New Age, August 31, 2006)

Considering the adverse effect on production and economic activities, Bangladesh will suffer huge deficit for the project in addition to loss of coal resources and environment. Peoples suffering will be immense.

Problems, Flaws and Irregularities with the project:

There are many problems with the project, each of these goes against national and international legal, environmental and human rights preconditions. Expert committee pointed out some flaws and irregularities too. We may sum up different legal and other procedural problems with the project and deceptive activities by the company as follows:

1. The contract signed with the Asia energy shows royalty to be paid to the government of Bangladesh as 6 per cent of the production, although the original contract with BHP had been 20 per cent.

2. The coalfield was transferred from BHP to Asia Energy in 1998, but no gazette notification was served at the time.

3. Submission of development plan as the Phulbari project needed a deposit of 3 percent bank guarantee but no deposit was made.

4. According to Mines and minerals Rules 1968 (amended in 1987 and 1989), clause 41, only 400 hectares is allowed for open pit, but the Asia Energy project is for nearly 6000 hectares. The land allocated for the mine was more than 10 times than the existing law permits.

5. According to clause 43 of the above rules, leases can be made only for 10 years and extension can be made upon review but in Asia Energy's case, it is for 35 years.

6. According to international law, practices and convention, any development project requires consent of local people where the project is to be implemented. Asia Energy has made lies and false campaign on this claiming that people have consent on the project.

7. The company did not publish its plan and document to the people of the area and did not go for circulation. Only thing they circulated is a propaganda sheet hiding consequences but glorifying the project.

8. UN convention categorically stated that if any project area has indigenous inhabitants than it is mandatory to have full consent from them. The Phulbari project was in progress completely against the opinion of the indigenous people.

9. After obvious failure to convince people on the project Asia Energy was engaged in bribing people with cash and kind to become informer against agitating people, they also tried to terrorize people by hiring and organizing mastans and goons.

10. Long before getting the final work order Asia Energy started mobilizing capital from London AIM stock market. ` Some 48 million shares were floated in 2004, rocketing up to a price of 900 pence a share by March 2005, for a total market capitalization of over $800 million, six months before the Department of Environment of the Government of Bangladesh granted Environmental Clearance for mining on 11 September 2005. Asia Energy envisioned a $1.1bn (£578m) investment and was negotiating for backing from the Asian Development Bank and the US Ex-Im Bank.' (Analytical monthly review, October 15, 2006).

People or Corporate profit

Therefore, the Phulbari project is economically irrational, environmentally disastrous to a scale unprecedented in the country. It is also legally flawed, corrupt and deceptive. It is nothing but another project of mass destruction.

We must recall that in 1964 USAID funded a hydroelectric project in Chattagram, south east of Bangladesh, that evicted nearly one hundred thousand indigenous people. Most of them are still not resettled, not being compensated. Although that project generated some electricity, but permanent conflict created by the project still exacts a high toll on Bangladesh. Power generation is also now facing crisis. Meanwhile whole peaceful and beautiful landscape turned into an area of conflict, gave birth to insurgency, resulted militarization, caused regular casualties and drainage of public money. Distrust, violence, blood bath continues. USAID was successful project wise, generations in the country have been paying for their sin.

If we compare this with Phulbari coal project in gain loss, in environmental, peoples displacement and agricultural destruction, in desertification of huge area and as well as contamination of water system in the country, we find the later as much more disastrous in many ways. Nevertheless, the ADB is showing its determination to go with the project. If this can make a success Tata will come with another open pit for Barapukuria, the adjacent area.

People in Phulbari area showed their determination to protect their lives, resources and national interest. If anybody now goes ahead with the project, in effect, asks for genocide in different forms. Now Bangladesh government needs to clear its position, whether it has any concern for people, resource and environment of the country or it is reduced to servicing agency of global corporate bodies. People of the countries that dominate the ADB (Japan and the US) have to take a decision whether they want to see their money being utilized to invite genocide, mass destruction, environmental disaster just to satisfy vulgar greed of a company.

(The article is an abridged version of a paper presented at a symposium organized by Peoples Forum on ADB, Kyoto, Japan, May 5, 2007)

E-mail: anujuniv@gmail.com

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