MNCs In Bangladesh: Corruption, Commission And The Company men
By Anu Muhammad
20 June, 2014
Countercurrents.org
The present government of Bangladesh seems to have become more aggressive than it was in its previous tenure about finalizing and signing agreements, and implementing big projects in energy and power, and in transport and communications sector. Expensive and risky projects, sometimes clearly against national interest, are being finalised without any parliamentary discussion or public consultation, any consideration of the consequences, and importance given to criticism and/or opinion from independent experts. Who are actually making decisions about these projects? How are these projects? Why is such haste?
In Confessions of an Economic Hit Men (2006), John Perkins , defined economic hit men (EHM) as ‘are highly paid professionals who cheat countries around the globe out of trillions of dollars. They funnel money from the World Bank, the US Agency for International Development (USAID), and other foreign “aid” organizations into the coffers of huge corporations and the pockets of a few wealthy families who control the planet's natural resources.'
The tools that the economic hit men use, writes Perkins, ‘include fraudulent financial reports, rigged elections, payoffs, extortion, sex, and murder.' ‘They play a game as old as empire, but one that has taken on new and terrifying dimensions during this time of globalization', he adds.
It is little wonder then that global companies spend more on advertisement or public relations (PR) activities, and lobbyists or ‘economic hit men' than they do on research and development! Economic hit men seem to bring more corporate success than research does.
It would not be difficult to spot economic hit men in ministries, high level meetings and late-night parties that features key policy makers. A lot of consultancy reports, feasibility studies have been piled up in ministries to justify predetermined projects. Corruption, commission and company men detremine the course of actions of many policy makers. ‘No' becomes ‘yes' and disasters are masked as development. Eventually, these manipulated projects appear as ‘development' project in the budget document, included in the government's priority list. Costs of public projects go up to cover the commissions, bribe and PR expenditure.
If these are not the cases, how can one justify the project to destroy Sundarbans, the world's largest mangrove forest, project to kill rivers and wetlands, project to evict millions of women and men, project to increase national indebtedness, project to increase energy velnuribility, project to marginalize or degrade national capabilities, project to make education and health care as expensive commodities?
Compensation of US$ 5 billion from Chevron and Niko still unrelaized
It has been learnt from newspaper reports and other sources that International Oil Companies (IOC) have started PR activities to have more onshore blocks for gas exploration in Bangladesh, which was been kept for national agencies earlier. It seems that they have received some green signal from the government.
What has been our experience with the old onshore production sharing contracts (PSC)? Facts and figures do not match with the propaganda. Some facts are given as follows:
1. Privatization and bringing international oil companies ( IOCs) into the energy sector has increased public expenditure instead of ‘reducing drainage of public resources' as claimed by the World Bank and the company men. For example, at least one 500 MW power plant could be built every year by the money spent as subsidy for purchasing gas from the IOCs. It is increasing as their share is growing.
2. When Bapex-Petrobangla spends Tk. 1 billion to drill a well, the IOCs do the same at a cost two to six times higher. This contradicts the argument usually given that the IOCs are more efficient and would reduce the cost of production.
3. We now purchase gas from national companies at tk 25 per thousand cubic feet; on the other hand we are purchasing the same at the price (in foreign currency) 8 to 10 times higher from the IOCs in onshore blocks. Now the price is increasing further. Recent deals for offshore blocks make this 20 times more.
4. Successive governments have periodically increased gas and electricity price to reduce subsidy caused by increasing IOC share. Rising cost of production and of living an obvious outcomes.
5. Bangladesh lost 550 billion cubic feet of gas due to the blow-out in Magurchhara ( 14 June 1997 ) and Tengratila (January and June 2005). This amount of gas equals to gas used for power generation for nearly 2 years for whole of Bangladesh . These two blow out hit hard on the ‘efficiency of IOC' myth.
6. Compensation due from Chevron of the United States and Niko of Canada for these disasters is yet to be realized. The average import price of the gas lost in Magurchara and Tengratila amounts to more than US$5 billion, which is nearly five times of budget allocation for energy sector in 2014-15. No governments since 1997 have taken any step to realize the compensation. On the contrary, reports reveal their opposite role. It is also worth mentioning that the World Bank, the Asian Development Bank or other international financial institutions that used to be very vocal about everything, have remained silent for long about this compensation issue.
All relevant facts show that, by leasing out most of the resource- rich onshore gas blocks to the IOCs, Bangladesh has become a hostage. The cost of production of gas and electricity thus fiscal burden, has increased in a linear rate. Instead of saving public money, drainage and corruption increased manifold. In disguise of development increasing burden has piled up on the country and the people!
Offshore blocks and energy insecurity
Deals on offshore blocks are going to multiply the already existing burden. On February 17, two PSCs were signed with Indian public sector oil and gas company ONGC Videsh under revised PSC-2012. ONGC was awarded two shallow water blocks SS-04 and SS-09 in the Bay of Bengal . According to the agreement, the Indian company will spend $103.2 million during the initial exploration of the two blocks in eight years. These two blocks cover nearly 14,000 square kilometers in bay.
Earlier on June 16, 2011 , Petrobangla signed production sharing contracts with the US Company ConocoPhillips for two deepwater gas blocks -- DS-10 and DS-11 -- in the bay under PSC 2008. This contract gave ConocoPhillips the right to explore oil and gas from two deep-sea blocks with investment of US$111 million in five years. The two blocks cover an area of 5,158 square kilometers and have a water depth of 1,000-1,500 meters.
There was strong public protest, including two general strikes in 2009 and 2011, against the deal before and after its signing. But the government continued with this.
ConocoPhillips later demanded increased price for the gas from the offshore blocks and expressed its willingness to expand its gas exploration activities in Bangladesh and ‘requested' the government to give it preference in the following round of international bidding for offshore gas blocks.
In PSC-2012, export provision of the earlier model was dropped, most likely to prevent further public outrage. But some cunning revision was made to ensure better deal for the companies, and worse for the country. In fact, this was revised in order to fulfill demands forwarded by the foreign oil companies. The revised document (PSC 2012) raises the price of gas almost 70 per cent to $6.50 per unit (1,000 c ft ) ; provides scope of yearly increase; raise the share of the company concerned in the cost recovery phase to 70 per cent of oil-gas from 55 per cent in PSC-2008; burden s Petrobangla with payment of 37.5 per cent in corporate tax on behalf of IOC s ; and allows the IOCs t o sell its share of gas to a third party .
In sum, the latest deal makes gas and oil much costlier for Bangladesh than before. After adding all costs and taxes, it may become costlier than even imported gas. It is true that export option is not kept in PSC 2012, but export prohibition is not there either. Therefore if gas is discovered in more than one block, and if it goes beyond 7 tcf, it will be surplus for the country at a specific time. There will be no choice but to export natural gas/resources. That would certainly bring quick profit for the companies but would make Bangladesh more vulnerable to energy insecurity. Is it the reason why the government has kept the much demanded ‘prohibition of export of mineral resources bill' in cold storage of parliament? Is it the reason why the government silently endorsed the export option of gas resources in the national export policy? Who actually makes these decisions?
From Sundarbans to Phulbari
Things are not limited in oil gas deals; big projects like Ruppur nuclear power plant without EIA, Coal based power plants by destroying Sundarbans, river, wet land are certainly projects for irreparable damages for the country. There are many in the pipeline.
When corruption and commission decides the course and nature of deals, when corporate interests dominate the ‘development' agenda, when international ‘development' agencies and ministries turn into centre of corporate lobbyists then the country obviously experiences ‘resource curse phenomenon'.
Because of the reign of local-global profiteers and grabbers, thus ‘development' becomes disastrous for present and future generation. The government and the company men, in order to show these projcets as TINA (there is no alternative), consistently work to block thinking and discussion on real alternatives. The economic hit men win.
The country has different experience of hope too. Peoples resistance stopped the Phulbari open pit mining project in 2006, forced Asia Energy (GCM) to leave the area. People sacrificed their lives to save lives and livelihood of million people, to save water resources of the country, to save fertile land and also to save coal resources. However, the corporate lobbyists are still engaged to find ways to revive the disastrous project by bribing corrupt policy makers and hiring goons in the area. The company is making money in fraudulent share market business in alternative investment market in London illegally showing Phulbari coal mine as their own. However, they could not come back to the area because resistance remains alive and powerful.
Anu Muhammad is Professor of Economics, Jahangirnagar University Email: [email protected]
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