country reportvisited bangladesh. the chief election commissioner, abu hena, has resigned. donors...

COUNTRY REPORT

Bangladesh

May 2000

The Economist Intelligence Unit15 Regent St, London SW1Y 4LRUnited Kingdom

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Bangladesh 1

EIU Country Report May 2000 © The Economist Intelligence Unit Limited 2000

Contents

3 Summary

4 Political structure

5 Economic indicators5 Annual indicators6 Quarterly indicators

7 Outlook for 2000-017 Political forecast8 Economic policy outlook9 Economic forecast

12 The political scene

17 Economic policy

20 The domestic economy20 Economic trends21 Oil and gas23 Agriculture25 Infrastructure27 Financial and other services

29 Foreign trade and payments

List of tables

9 Forecast summary10 International assumptions summary21 Foreign-exchange reserves27 Stock exchange29 Money supply

List of figures

12 Gross domestic product12 Taka real exchange rates29 Current-account balance

Bangladesh 3


Summary

May 2000

The likelihood of an election will increase in proportion with politicalvolatility. GDP growth will continue to recover. The rate of inflation willremain low. The taka will continue to depreciate. Foreign trade will remainweak but the current-account deficit will fall.

The prime minister, Sheikh Hasina Wajed, has indicated that the nextparliamentary election may be held before June 2001. The BNP-led alliance hasannounced it may form a coalition government if elected. Demands foraccountability in political funding have been increasing. The US president hasvisited Bangladesh. The chief election commissioner, Abu Hena, has resigned.

Donors have pledged US$2bn in aid. The World Bank has criticised thegovernment’s economic performance. The IMF is concerned over unproductiveexpenditure. The budget for the next fiscal year has been outlined. The pre-shipment inspection system has been criticised by importers.

Revenue collection has fallen below target. The government has increasedborrowing. Industrial production has seen a slight recovery. Inflation has beenweak. Foreign companies have been lobbying to be allowed to export gas. Anew gasfield has been discovered. Negotiations over production-sharingagreements have continued. The government has said there will be a bumperharvest. It has hinted at allowing rice exports. Imports of diammoniumphosphate have tripled. Tea production has fallen. Load-shedding hascontinued to disrupt life. The state airline, Bangladesh Biman, has obtainedpermission to use the UK airport, Heathrow. The port of Chittagong has facedworker protests and disruption. The share market has remained bearish. Thegovernment has decided to sell its joint-venture shares. The Securities andExchange Commission has been criticised. The Dhaka Stock Exchange haselected a new chairman.

Exports have fallen below target. Visa forgeries in the garments industry havecontinued to grow. The US has rejected a request to increase readymadegarments quotas. The Asian Development Bank has committed new funds to aten-year poverty reduction programme. Japan has granted debt relief on part ofits international debt.

Editor: Kilbinder DosanjhEditorial closing date: May 19th 2000

All queries: Tel: (44.20) 7830 1007 E-mail: [email protected] report: Full schedule on www.eiu.com/schedule

May 19th 2000

Outlook for 2000-01

Economic policy

The domestic economy

The political scene

Foreign trade andpayments

4 Bangladesh


Political structure

People’s Republic of Bangladesh

Parliamentary democracy, following a constitutional amendment in September 1991

The prime minister is the chief executive and the head of the cabinet (Council ofMinisters), which the prime minister selects; the president has a largely ceremonial role,but appoints members of the cabinet and the judiciary, and has the power to dissolveparliament

Jatiya Sangshad, a unicameral legislature, consisting of 300 members directly electedfrom single territorial constituencies and 30 seats reserved for women; the legislature iselected for a five-year term

June 12th 1996; next election due by September 2001

Sheikh Hasina Wajed’s Awami League (AL) won the largest number of parliamentaryseats in the 1996 election, which was overseen by a caretaker government. The JatiyaParty (JP) provided the AL with the support necessary to form a majority government,but withdrew its support in March 1998. A member of the JP holds a cabinet post in theAL government. The Jatiya Samajtantrik Dal (JSD) also has a representative in thecabinet. Last cabinet reshuffle in December 1999

Awami League (AL); Bangladesh National Party (BNP); Jatiya Party (JP-Mizan-Manju);Jamaat-e-Islami (Jamaat); Jatiya Samajtantrik Dal (JSD)

President Shahabuddin AhmedPrime minister & minister ofdefence establishment & energy Sheikh Hasina Wajed

Agriculture Motiya ChowdhuryCommerce Abdul JalilCommunications Anwar Hossain Manju (JP)Education A S H K SadekEnvironment & forestry Syeda Sajeda ChowdhuryFinance S A M S KibriaFood Amir Hossain AmuForeign affairs Abdus Samad AzadHealth & family welfare Sheikh Fazlul KarimHome affairs Mohammad NasimIndustry Tofael AhmedLaw & justice Abdul Matin KhasruLocal government, rural development & co-operatives Zillur RahmanWater resources Abdur Razzak

Disaster management and relief Talukdar Abdul KhalegueEnergy & mineral resources Professor Rafiqul IslamHealth & family welfare M Amanullah

Farashuddin Ahmed

National legislature

Form of government

Official name

National elections

National government

Main political organisations

Key ministers

The executive

Key ministers of state

Central bank governor

Bangladesh 5


Economic indicators

Annual indicators

1995a 1996a 1997a 1998a 1999b

GDP at market prices (Tk bn)c 1,170.3 1,301.6 1,403.1 1,548.3 1,749.3

GDP (US$ bn)c 29.1 31.9 32.9 34.1 36.6

Real GDP growth (%)c 4.4 5.4 5.9 5.7 5.2

Consumer price inflation (av; %) 8.5 4.1 5.2 8.3 7.0

Population (m) 118.2 120.1 122.0 123.8b 125.7

Exports of goods fob (US$ m) 3,733.3 4,009.3 4,839.9 5,141.5 5,465.5

Imports of goods fob (US$ m) –6,057.4 –6,284.6 –6,587.6 –6,862.1 –7,503.8

Current–account balance (US$ m) –823.8 –991.4 –327.3 –189.8 –516.3

Foreign–exchange reserves excl gold (US$ m) 2,339.7 1,834.6 1,581.5 1,905.4 1,603.6a

Total external debt (US$ bn) 16.3 16.0 15.1 16.4 17.1

Debt–service ratio, paid (%) 13.8 11.7 9.9 9.1 9.8

Exchange rate (av; Tk:US$) 40.28 41.79 43.89 46.91 49.10a

May 15th 2000 Tk51.00:US$1

% of % ofOrigins of gross domestic product 1998/99c total Components of gross domestic product 1998/99c total

Agriculture 30.0 Private consumption 76.4

Manufacturing 8.9 Government consumption 14.0

Construction 6.0 Gross fixed investmentd 14.0

Trade 8.9 Exports of goods & services 18.5

Transport & communications 10.6 Imports of goods & services –22.9

Public administration & defence 5.9 GDP at market prices 100.0

Banking & insurance 1.9

GDP at market prices incl others 100.0

Principal exports 1998/99 c US$ m Principal imports 1998/99 c US$ m

Garments & knitwear 2,715.6 Textiles & yarn 1,672.7

Fisheries products 306.2 Machinery & transport equipment 910.4

Jute goods 244.5 Cereal & dairy products 867.3

Leather 160.3 Iron & steel 347.0

Raw jute 56.5 Petroleum & petroleum products 303.7

Main destinations of exports 1998 % of total Main origins of imports 1998 % of total

US 35.7 India 16.7

Germany 10.5 China 7.8

UK 9.1 Hong Kong 6.8

France 6.6 Japan 6.5

Italy 6.1 Singapore 6.4

a Actual. b EIU estimates. c Fiscal years ending June 30th of year stated. d Includes stockbuilding.Sources: GDP, GDP growth and origins of GDP; rice and jute production: from the Bangladesh Bureau of Statistics, Monthly Statistical Bulletin of Bangladesh. Consumer price inflation; population;exports (fob), imports (fob) and current-account balance; reserves and exchange rate; components of GDP: from IMF, International Financial Statistics. Debt data: from World Bank, GlobalDevelopment Finance. Fiscal-year exchange rate; export and import breakdown: from the Statistics Department of the Bangladesh Bank, Economic Trends. Destination of exports and origin ofimports: from IMF, Direction of Trade Statistics.

6 Bangladesh


Quarterly indicators

1998 1999 1 Qtr 2 Qtr 3 Qtr 4 Qtr 1 Qtr 2 Qtr 3 Qtr 4 Qtr

OutputIndustrial production index (1995=100) 113.9 120.6 122.5 126.1 113.0 127.5 128.5 n/a % change, year on year 12.5 6.9 –3.5 2.3 –0.8 5.7 4.9 n/a

PricesConsumer prices Dhaka (1995=100) 113.8 116.0 120.1 124.3 123.9 123.2 127.7 n/a % change year on year 7.0 7.0 7.6 11.5 8.9 6.2 6.3 n/aJutea (US$/tonne) 245.3 258.7 260.0 272.3 250.0 258.0 294.3 n/a

Financial indicatorsExchange rate Tk:US$ (av) 46.02 46.30 47.06 48.25 48.50 48.50 49.31 50.03 Tk:US$ (end-period) 46.30 46.30 47.10 48.50 48.50 48.50 49.50 51.00Interest rates (%) Deposit (av) 8.33 8.41 8.24 8.70 8.85 8.85 8.65 8.62 Discount (end-period) 8.00 8.00 8.00 8.00 8.00 8.00 7.00 7.00 Lending rate (av) 14.00 14.00 14.00 14.00 14.00 14.00 14.00 14.50M1 (end-period; Tk bn) 152.98 158.89 155.57 163.97 166.93 172.50 170.05 184.93 % change, year on year 7.1 4.8 6.4 7.4 9.1 8.6 9.3 12.8M2 (end-period; Tk bn) 530.47 558.69 563.79 597.56 599.75 630.27 646.54 689.89 % change, year on year 9.5 10.2 10.6 11.4 13.1 12.8 14.7 15.5

Foreign trade (Tk bn)Exports fob 42.37 45.12 51.18 40.95 41.93 45.34 57.78 n/aImports cif –78.67 –83.62 –77.12 –88.13 –92.37 –106.25 –83.78 n/aTrade balance –36.30 –38.50 –25.94 –47.18 –50.44 –60.91 –26.00 n/a

Foreign payments (US$ m)Merchandise trade balance –486.6 –352.8 –341.2 –540.0 n/a n/a n/a n/aServices balance –112.0 –156.9 –155.0 –105.5 n/a n/a n/a n/aIncome balance –28.1 –18.1 –35.3 –26.0 n/a n/a n/a n/aCurrent-account balance –94.8 4.1 –62.2 –36.9 n/a n/a n/a n/aReserves excl gold (end-period) 1,721.4 1,721.4 1,686.1 1,905.4 1,520.0 1,501.3 1,630.9 1,603.6

a Raw Bangladesh BWD, fob; Chittagong/Chlna.Source: IMF, International Financial Statistics.

Bangladesh 7


Outlook for 2000-01

Political forecast

With about a year or less to go before the next general election, which musttake place by September 2001, both the Awami League (AL) government andthe four-party opposition alliance led by the Bangladesh Nationalist Party(BNP) are beginning their political campaigns. (Under the constitution theruling AL must hand over power to a caretaker government three monthsbefore the election—effectively June 2001.) The caretaker government willhave the constitutional responsibility to hold the polls in a free and fairmanner within three months, following the resignation of the incumbentparty in power.

The election may well take place by the end of this year or early next year, asJune is traditionally a rainy month. The dates for the next general election willbe contingent upon the incumbent's own choices and considerations, and notthe BNP-led opposition. The prime minister, Sheikh Hasina Wajed, has hintedat an early election, but has pointed out that this is not a concession to theopposition demand, but to prevent the monsoon season from disrupting thepolls.

Political forces will become further polarised as the campaign season starts. Thepolitical parties will be supported under their traditional banners—the pro-liberation AL and the anti-liberation BNP. (This refers to those who supportedor opposed the “liberation” war in 1971, where Bangladesh broke away fromPakistan.) However, while the AL appeals solely to the pro-liberation forces, theBNP-led opposition appeals to both the anti-liberation and segments of pro-liberation supporters. Apparently, the AL is also gaining grounds with theyounger generation, those born after the liberation of the country and now oldenough to vote. The BNP-led opposition has not yet indicated whether it willform an electoral alliance based on a seat-sharing scheme or campaign asindividuals (see The political scene). The ruling AL is unlikely to form anelectoral alliance, although it does enjoy the support of 11 small left-orientedparties.

The BNP-led alliance is now obliged to reassess its programme in the electoralpower struggle, and hence subordinate the "one-point" movement to oust thegovernment, but street demonstrations, processions and strikes will continue.The ruling AL, under the guise of maintaining order, will continue its anti-opposition demonstrations. This will ensure that confrontational politics willcontinue. Several sensitive issues, such as the death sentence currently hangingover the killers of Sheikh Mujib, the father of the prime minister, Ms Hasina,relations with India, and the alleged misuse of the recently enacted andcontroversial Public Safety Act (PSA), may ignite the situation further.

Bangladesh’s relations with its neighbours and bilateral donors will remainuncomfortable. The government remains wary of India’s influence in theregion, and friction continues over accusations by Bangladesh that Indiansecurity forces have killed Bangladeshi nationals. Bangladesh’s bilateral and

International relations

Domestic politics

8 Bangladesh


multilateral lenders have criticised the main political parties for their failure toend the politics of confrontation.

Economic policy outlook

Both the major parties—the Awami League (AL) and the BangladeshNationalist Party (BNP)—are officially committed to free-market policies.Despite a segment of the AL leadership still being wedded to the socialisticprinciples that the party exposed in the early 1970s, the AL will continue in itsattempts to liberalise the economy. Pro-state-control forces, such as tradeunions and left-wing politicians, are at ease with the AL. The BNP is a demon-stratively business-friendly and market-oriented party. Bangladesh currentlyhas a highly liberalised trade regime, which was orchestrated by the BNP whileit was in power during 1991-96. Both the parties welcome foreign investment,but it is likely that the pace of reforms will be further expedited if the BNPreturns to power, as most of the AL’s electoral constituencies are anti-privatesector-oriented.

The overall budget situation has deteriorated in recent years. The governmentcontinues to subsidise or provide public guarantees for financially weak loss-making state-owned enterprises (SOEs) and nationalised commercial banks(NCBs) with high levels of non-performing loans. In addition, the govern-ment’s tax collection has been below target, mainly because of weak growth ofnon-food imports, resulting from continued stagnation in the manufacturingsector and troubles with the recently introduced pre-shipment (PSI) measures.It is also expected that budget targets for current expenditure will overshootowing to higher than expected interest payments on domestic debt and unseenexpenditure such as the implementation of the new national wagecommission. The situation is likely to deteriorate further, if the governmentgoes ahead with the implementation of the new wage scale for industrialenterprises, focusing on election year gains.

Privatisation efforts will stall, as the prospect of a general election in less than ayear stops the ruling party from selling state assets. Despite a falling trend inthe losses of SOEs in recent years—they fell from Tk14.1bn (US$276.5m) infiscal year 1996/97 (July-June) to Tk8.3bn in 1998/99—they remain a severedrain on the government budget. The bulk of these losses are financed throughborrowings from NCBs. A failure to reduce expenditure or increase revenue bybroadening the tax base or through privatisation will maintain pressure on thefiscal position. This will prevent Bangladesh from moving out of its cycle ofhigh non-productive expenditure at the expense of development.

The government has been pursuing an expansionary monetary policy, asdemonstrated by substantial growth of 15.2% in the broad money supply inthe first half of the current fiscal year (1999/2000). In addition, the non-interest-bearing cash reserve requirement (CRR) was reduced from 5% to 4% inSeptember 1999. However, the increase in monetary growth was accompaniedby an almost 39% increase in government borrowing during the same period:the effectiveness of this has been limited by a squeeze on the banking systemas liquidity has been reduced through the sale of Treasury bills to finance the

Policy trends

Fiscal policy

Monetary policy

Bangladesh 9


deficit. This has resulted in private credit growth remaining weak—excessliquidity in the banking system increased to Tk51.3bn at end-December 1999compared with Tk37bn at end-December 1998. According to the World Bank,however, this is more due to increased caution being exercised by the banks intheir choice of new loans and increased new lending rates, rather thancrowding-out caused by excessive government borrowing. As a result, theauthorities will continue attempts to maintain a loose monetary policythroughout the forecast period. The effectiveness of this will be restrained asbanks will shy away from offering fresh loans, and the government willcontinue borrowing from domestic sources to finance politically motivatedpolicies and projects in view of the forthcoming general election.

Economic forecast

Forecast summary(% unless otherwise indicated)

1998a 1999b 2000c 2001c

Real GDP growth 5.7 5.2 4.8 5.1

Industrial production growth 4.0 3.6 4.2 5.8

Agricultural production growth 2.9 5.0 4.1 4.3

Gross fixed investment growth 10.0 12.7 8.9 9.9

Unemployment rate (av) 2.4 2.4 2.4 2.5

Consumer price inflation

Average 8.3 7.0 5.1 6.2

Short–term interbank rate 14.0 14.1 13.5 13.5

Government balance (% of GDP) –5.4 –6.6 –6.4 –5.3

Exports of goods fob (US$ bn) 5.1 5.5 5.9 6.4

Imports of goods fob (US$ bn) –6.9 –7.5 –7.7 –8.1

Current–account balance (US$ bn) –0.2 –0.5 –0.5 –0.4 % of GDP –0.6 –1.4 –1.2 –1.0

Total foreign debt (year–end; US$ bn) 16.4 17.1 17.4 18.1

Exchange rates (av) Tk:US$ 46.91 49.10 51.79 54.46 Tk:¥100 35.83 43.09 48.60 52.43 Tk:€

d41.88 46.01 52.89 50.51

a Actual.

b EIU estimates.

c EIU forecasts.

d Ecu before 1999.

World growth will continue to recover in 2000-01, although it will remainbelow trend. Real GDP growth in the US—Bangladesh’s main export market—isexpected to strengthen to 5.1% in 2000, from 4.2% in 1999, before decreasingto 3.1% in 2001. This will help to maintain export growth, although a failureto raise production and competition will prevent Bangladesh from taking fulladvantage of this. Export growth will also be strengthened by an expectedrecovery in Bangladesh’s other leading markets—the EU and Japan. Theexpected rise in international food prices will be limited by ample domesticsupplies following a good rice harvest, but the import bill will face pressurefrom rising industrial raw material and oil commodity prices.

International assumptions

10 Bangladesh


International assumptions summary(% unless otherwise indicated)

1998 1999 2000 2001

GDP growthUS 4.3 4.2 5.1 3.1OECD 2.4 2.9 3.7 2.8EU 2.7 2.2 3.1 2.8

Exchange rates (av)US$ effective (1990=100) 119.3 116.3 118.9 114.5¥:US$ 130.9 113.9 108.0 105.0US$:€

a1.12 1.07 0.93 1.00

Financial indicatorsUS$ 3–month commercial paper rate 5.3 5.2 6.5 6.6¥ 2–month private bill rate 0.7 0.3 0.1 0.6

Commodity pricesOil (Brent; US$/b) 12.8 17.9 24.5 20.0Gold (US$/troy oz) 294.1 278.8 290.0 300.0Food, feedstuffs & beverages

(% change in US$ terms) –13.9 –18.6 –2.1 4.9

Industrial raw materials (% change in US$ terms) –19.6 –4.3 16.2 9.9

a Ecu before 1999.

The economy has recovered from the floods in 1998, but this recovery hasfailed to reach all sectors. Three successive bumper harvests, in the fiscal years1998/99-1999/2000, have led to a revival of the agricultural sector, butmanufacturing sector growth has remained weak. GDP growth is likely toremain weak as the political situation deteriorates and the pace of economicreforms slows, the banking sector remains in the doldrums, state-ownedenterprises remain loss-making, corruption and excessive bureaucracy continueto drag down the economy, and external balances and foreign-exchangereserves remain fragile.

The government has already slashed its projected GDP growth to 5.5% in1999/2000 (year ending June 30th), from an earlier projection of 6.4% for1999/2000, which predicted that the agricultural sector would grow by 8.7%and manufacturing by 10%. New estimates suggest that the agriculture andmanufacturing sectors will grow by only 5% and 3.2% respectively. The EIUforecasts GDP growth of only 4.8% in 1999/2000. We are less optimistic aboutthe prospects for the agricultural and industrial sectors, and expect growth to bejust 6.6% in the industrial sector, although the bumper crop in early 2000 has ledto a slight increase in our forecast in agriculture to 4.1%. Poor infrastructure andinefficient resource allocation will continue to act as major obstacles tosustained growth. Political instability and the related work stoppages, and aweaker than expected recovery in export growth, will continue to drag downgrowth in the manufacturing sector. This is expected to continue throughoutthe forecast period, with the result that the rate of GDP growth in 2000/01 willincrease only slightly to 5.1%, largely owing to stronger growth in theagricultural sector.

Two successive bumper harvests and inflows of food aid lowered the inflationrate to just over 3.8% year on year in December 1999. This trend is likely to

Inflation

Economic growth

Bangladesh 11


continue as food prices will remain weak. This will push the overall rate ofinflation down, as food expenditure constitutes over 60% of the consumptionbasket nationwide. Weak capital markets and weak private-sector creditdemand—the result of poor investor confidence caused by political volatilityand crowding-out by excessive government borrowing—will ease pressure onprices. These factors, together with lacklustre GDP growth, will preventinflation from rising to historical levels in the forecast period. However,increased government borrowing from the domestic market and a continuedrecovery in non-oil and oil commodity prices may ignite import- and demand-induced inflationary pressures in the latter part of the forecast period.Nevertheless, the recent strength in domestic food output will result in theannual average inflation rate falling to 5.1% in 1999/2000, before increasing to6.2% in 2000/01 as the economy continues to strengthen, albeit slightly, and,as mentioned above, commodity prices increase.

The taka was devalued by 4.4% in calendar year 1999, as the governmentattempted to improve the country’s export performance and following pressurefrom leading export bodies in the country, as well as the World Bank and theIMF. The currency will remain under pressure, as high import payments andother outward remittances, in the form of higher debt-servicing costs, togetherwith a loss of export competitiveness, increase the need for furtherdevaluations in 2000. A further easing of inflation and an improvement inexport performance will reduce pressure on the taka towards end-2000 and in2001. We thus expect the annual average rate of depreciation to remain low, at5.2% and 4.9% in 2000 and 2001 respectively.

Exports will continue to recover over the forecast period, but not at the rate ofpre-1998 levels, when they grew at a double-digit rates. Merchandise exportgrowth hit a recent all-time low of 2.9% (national accounts basis) in 1998/99,because of floods in 1998, but subsequently recovered to 7.2% year on yeargrowth by December 1999. Despite this improvement, the government’sexport targets for this fiscal year are unlikely to be met. Export competitivenesswill suffer because the taka still remains overvalued vis-à-vis the currencies ofthe South-east Asian countries, and because of the deepening energy crisis,narrow export base and the increasingly unstable political environment. Inaddition to these concerns, exports will also suffer owing to a failure to raiseproduction, the quality of goods, or reliability in the key readymade garmentsindustry (RMG). However, subdued import growth, owing to a weakness inimport-intensive manufacturing activities during the rest of 2000, and a lowerfood import requirement, will prevent a further deterioration in the tradedeficit in 2000. It will narrow further in 2001 as exports strengthen, helping tooffset part of the increase in the import bill resulting from stronger domesticdemand and commodity prices.

The balance-of-payments situation remains fragile, largely as a result of weakexport growth. An increase in interest payments on the external debt will causea deterioration in the income balance over the forecast period and exert furtherpressure on the current account. We expect inward workers’ remittances,which helped to keep the current-account deficit at around 2% of GDP(national accounts basis) in the last fiscal year, to rise in 2000-01, assuming a

External sector

12 Bangladesh


sustained recovery in oil prices and in South-east Asian economies. However,remittances will not totally cover the trade deficit and Bangladesh will stillneed bilateral and multilateral loans to meet its financing requirement. As aresult of these factors, we expect the current-account deficit to be around 1.2%of GDP in 2000 and 1% in 2001.

The foreign-exchange reserves position is currently weak, with import cover ofbarely two months. According to the Bangladesh Bank (the central bank),foreign-exchange reserves (excluding gold) stood at US$1.6bn at end-March2000, compared with US$1.67bn at end-November 1998. Despite weak importpressures and weak domestic demand, the slowdown in export growth willprevent any strong improvement in the reserves position. The continuedstrengthening of foreign direct investment (FDI) has so far failed to raisereserves, as FDI is concentrated in the gas sector where imports of capitalequipment have resulted in an outflow of dollars in line with the investment.

The political scene

With about a year to go before the next general election, both the rulingAwami League (AL) and the opposition alliance led by the BangladeshNationalist Party (BNP) have now turned their eyes effectively on the nextgeneral election. The AL government’s five-year term expires in mid-2001,when it will be required under the constitution to hand over power to acaretaker government to hold parliamentary polls in the next three months.The polls, however, may take place at the end of this year or early next year.(The prime minister, Sheikh Hasina Wajed, also hinted, with no indication ofyielding to the opposition demand for holding polls immediately, at bringingthe poll forward to prevent the monsoon season from disrupting the polls.)

The country’s politics, however, remain confrontational, with the four-partyopposition alliance—composed of the BNP, Jatiyo Party (Ershad), Islami Oikyo

All eyes are on the nextparliamentary polls

Bangladesh 13


Jote (IOJ) and Jamaat–e–Islami—continuing its demand for the resignation ofthe government and the holding of an immediate general election under acaretaker government. However, the AL continues to rebuff the demand asunconstitutional, and has repeatedly stated that it will hold a parliamentaryelection only at the end of its five-year tenure. The BNP-led opposition, whichhas long been accusing the AL government of failing on all fronts, and for its“anti–people, anti–state, anti–religious, autocratic and inhuman activities”, hassponsored at least 15 days of nationwide and regional strikes in the last threemonths, in an effort to force the resignation of the government. The sameparties have also continued to boycott parliament, which they started in thefirst part of 1999. The opposition movement received further impetus recently,as AL supporters mounted street protests to pressurise the country’s judiciary toexpedite its action on Sheikh Mujib’s ”death reference case”.

The opposition alliance is now working out details to form an electoral alliancefor the next general election and possibly a coalition government if elected.Whether the proposed electoral alliance will be based on a seat-sharingscheme—they agree not to run in areas in which another alliance member isstrong to prevent spreading votes—or under individual flags and symbols is yetto be decided. The alliance has already formed all-party action committees(APACs) throughout the country, with representatives from all parties in thealliance. The newly formed APACs have sponsored scores of joint meetings anddemonstrations in different parts of the country in recent months. Pursuingtheir existing goals of forcing the government to resign, the release of politicalprisoners, the repeal of the recently enacted Public Safety Act (PSA), andsafeguarding the sanctity of the constitution and the judiciary. (They accusethe AL of politicising the judicial system.)

Burying their bitter past, the leaders of BNP, JP, IOJ and Jamaat—the formerprime minister, Khaleda Zia, former president, HM Ershad, Moulana SH AzizulHuq, and Professor Ghulam Azam—addressed several mass rallies from thesame platform at district and divisional headquarters, accusing the ruling partyof violating its election pledges and misappropriating public funds, making thecountry a free market for smuggled goods from neighbouring India, and usingthe PSA for repressing the opposition. Dubbing the government as “corrupt,inefficient and tyrannical”, Ms Zia said that there was no alternative to savethe people but to topple it.

The ruling AL, however, sees no logic in the opposition’s “one-point” demand.Ms Hasina, at a press briefing after her return from the US in mid-April, statedthat the opposition alliance was conspiring to topple her government to savethe killers of Sheikh Mujib—Sheikh Hasina’s father—and to snatch away thehard-earned voting rights of the people, at a time when the country wasmaking economic progress and earning a good reputation abroad (under theAL rule). She told the opposition that there was no chance of holding the nextgeneral election before the scheduled date: “The tenure of the currentparliament is coming to an end in June next year and my government willhand over power to a caretaker government for holding the next elections in afree and fair manner at that time.” Ms Hasina also welcomed the fact that the

The opposition consolidatesits position

The AL rejects oppositiondemands

14 Bangladesh


opposition seemed to be shifting its focus to winning the next election, ratherthan its so-called “one point” demand.

The US president, Bill Clinton, paid a one–day visit to Dhaka on March 20th,on the first leg of his South Asia visit that also took him to India and Pakistan.But his visit—the first ever by a US president in the country’s 29-year history—was marred by disappointments, as he was forced by security concerns toabandon a visit to Jatiyo Smiriti Saudha (national martyrs’ memorial) in Savar,a symbol of the nation’s martyrs in the liberation war in 1971. A visit to ashow-piece village—Joypura in Manikgonj near Savar—that would havedemonstrated the achievements of Grameen Bank (a bank that concentrates onloans to the poor) in poverty alleviation through micro–credits to the poor wasalso cancelled. Apparently, a “terrorist” threat from a Saudi dissident, OsamaBin Laden, led to such abrupt changes to Mr Clinton’s itinerary in Bangladesh.

In addition, two natural gas exploration contracts between the Bangladeshgovernment and US oil companies, which were to be signed on this occasion,fell flat, mainly because Bangladesh did not agree to export gas. The companieswere not satisfied with the small domestic market of Bangladesh for ensuringsufficient returns to their investments. In recent years US companies haveinvested more than US$500m in gas exploration in Bangladesh. Thanks tostrong domestic resistance to the sale of gas to India, Ms Hasina repeated thatBangladesh would be willing to export surplus gas only after it had securedreserves sufficient to meet 50 years of domestic demand. The country has anestimated 15trn cu ft in proven reserves, expected to last some 30 years.Unofficial estimates, however, put the figure at 40bn-50trn cu ft. Mr Clintonoffered to send a team from the US geological survey to assess the reserves.

Mr Clinton also rebuffed a request to increase the Bangladeshi quota forgarments exports to the US, on the grounds that a 10% annual increase in thequota was already built in. Bangladesh currently exports close to US$2bn inclothing products to the US each year. Mr Clinton also expressed his inabilityto extradite three men convicted of assassinating Mr Mujib, as the US has noextradition treaty with Bangladesh. They have been sentenced to death byfiring squad in Bangladesh and the judgement now awaits the approval of thehigher courts.

Two successful deals involving the telecommunications sector, worthUS$450m, were signed in the presence of the US commerce secretary, WilliamDaley. A USAID financial aid programme was signed with a local non-government organisation (NGO) to prevent and monitor human trafficking inthe presence of the secretary of state. Mr Clinton also announced severalinitiatives, including US$97m in food aid, a US$50m four-year programme toencourage energy development for Bangladesh, Nepal and India and a ten-yearUS$30m plan to set up a clean energy programme.

Mrs Zia, in a brief meeting with Mr Clinton, talked about the state of humanrights, democracy, the law and order situation, and what she termed asrepression of the opposition, the collapse of the administration, the ineffectiveparliament and the inability of the government to complete economic and

President Clinton visitsDhaka

The visit resulted in newgas contracts

Bangladesh 15


administrative reforms. She maintained that the opposition was forced to taketo the streets as the AL government did not allow opposition members to talkin the parliament on national and international issues, including the Gangeswater-sharing agreement and the peace accord in the Chittagong Hill Tracts.

The controversial Public Safety Act (PSA), enacted in mid-February 2000, wasamended by the parliament on April 5th, relaxing the provisions of bail forconvicts and dropping the threat of criminal prosecution against policeinvestigators. The appellate court can now grant bail to a convict after exam-ining the gravity of the offence, related documents and evidence. The originallaw denied the courts the authority to grant bail before the disposal of anappeal petition. The trial court, however, cannot grant bail on an accusedduring the investigation, which can last up to 75 days. The provision forcriminal prosecution of investigating officers for wilful negligence of dutywhen protecting a suspect has been dropped, but the provision ofdepartmental actions against such offences remains. The amendment alsodenies the accused to be an “approver”, unless he confesses to the offence.

The amendment, as well as the original PSA, was passed by the parliament inthe absence of opposition members belonging to the BNP and its allies. Thisfollowed an amendment on the advice of the president, Shahabuddin Ahmed,who on February 14th signed the original bill into law. The BNP-led oppositionnot only opposed the bill, saying it was aimed at punishing the opposition,they also held several days of strikes throughout the country demanding repealof the act. More recently, addressing several rallies in different parts of thecountry, Ms Zia claimed that the government was using the act againstinnocent people, including leaders and workers of the opposition, while “self–declared god-fathers of criminals, who are raising social insecurity and tension,basked in their protection under the ruling party”.

Controversy over the PSA is already increasing, as by end-April 360 casesinvolving more than 2,000 people had already been filed across the country.These arrests do not include the arrest of more than 47,000 people under a“combing” operation across the country over the past year.

The issue of the high court’s hearing of the “death reference” of the SheikhMujib murder case, to confirm the death sentences on 15 former army per-sonnel by a district court in November 1999, has engendered considerablecontroversy. At least four division benches of the high court refused to hear thecase for a number of reasons. Some of the benches refused to take up the caseahead of many other death reference cases pending, while others refused for adifferent reason, saying that they felt embarrassed personally. These refusals, aswell as deferment of the death reference case by the high court, have sparked arow between the courts and the government. In an effort to expedite the case,the ruling party got thousands of its activists and several AL politicians tomarch through the streets in mid-April. A white cloth wrapped around theirhead symbolised shrouds, meaning that they were ready for self-immolationfor the cause of speeding up the disposal of the death references. (In 1999 MsHasina castigated the high court judges for giving too many bail sentences and

The Public Safety Bill isamended

The Sheikh Mujib casesparks controversy

16 Bangladesh


narrowly escaped contempt of court, although the judges admonished her andwarned her not to make remarks which were contemptuous to the judiciary.)

The Bangladesh Development Forum (BDF)—a grouping of countries andinternational agencies that assist Bangladesh’s development efforts—in itsannual meeting in Paris on April 13th-14th criticised the existing politicalsituation in Bangladesh as detrimental to foreign investment and reforms. Ajoint report stated that the country had made little progress in cultivatingmutual tolerance of differences in the public arena, which makes it difficult toaddress matters of national importance properly. Economic growth and thedrive towards poverty alleviation suffered directly as a result, and social,economic, civil and political rights remained unfulfilled, it said. The report alsocame down heavily on the political parties and their leaderships, judiciary andpolice, and the bureaucracy for their actions, which bred corruption.

Donors wanted to know how the government would ensure equal possibilitiesfor all political parties to reach voters through different media, such as radioand television, in the forthcoming parliamentary election, and how trans-parency and accountability in election funding will be established. They statedthat with the election due a little more than a year from now, the majorpolitical actors needed to commit to dialogue that could lead to meaningfulreconciliation in the political sphere.

The Paris consortium of the BDF identified corruption as the number oneproblem that adversely impacted Bangladesh’s economic growth and impairedits development performance. The World Bank, and donor countries andagencies, suggested that official misconduct during the three decades ofBangladesh’s independence had resulted in a loss to GDP growth of between2.1% and 2.9% each year. The World Bank claims that per head income incorruption–free Bangladesh could have been doubled to US$700, instead ofUS$350 now, reflecting the harmful impact of bribery and kickbacks.

Sustainable growth could be accelerated and the costs of official corruptioncould be cut if the government concentrated on its primary duties of ensuringan appropriate policy environment, a sound legal system and a law and ordersituation that fostered security for individuals and property, instead of over-extending its regulations and controls to areas that could be better taken careof without its intrusion. Many utility services that the state now delivers poorlyand corruptly could be entrusted to the private sector, many regulatoryfunctions burdened by complexity and arbitrariness could be simplified,closing backdoors to dishonest officials and lowering barriers to the productiveforces of the market.

The World Bank report on corruption also criticised political parties forcollecting contributions without accountability and transparency. This wasfollowed by calls from business leaders in the country to carry through politicalreforms. In mid-April, Abdul Awal Mintoo, the president of BangladeshFederation of Chambers of Commerce and Industry (FBCCI), the apex body ofthe business community in the country, demanded an exemption from thepolitical cost of running a business, stating that “all political parties collect

Donors remain critical ofthe political situation

Corruption is the mainproblem

Accountability for politicalparty funds demanded

Bangladesh 17


contributions from businesses, and their funds are not accountable”. Therewere also calls for the election commission to be given an adequate budget andmanpower, and to be restructured so that it could function independently andmonitor violations of electoral laws and the code of conduct for contestants.

The finance minister, S A M S Kibria, joined the debate by stipulating thatframing a law to control political contributions by consensus would be apositive step forward, since all political parties depended on politicalcontributions. However, true to the usual politicising of discussions, Mr Kibriathen described the move by the business community and others as an attemptto destroy the democratic process in the country.

The International Jute Organisation (IJO), a Dhaka-based UN body, wasliquidated on April 10th, as its policymaking body—the international jutecouncil—failed to adopt a successor instrument to give a fresh lease of life to it.Established at the initiative of UN Conference of Trade and Development(UNCTAD) in 1984, the IJO’s initial agreement was extended in 1989 up to2000. The agreement expired following all 15 members of the EU (out of 25members of the IJ0) voting against the extension at its 28th session of the IJOheld in Dhaka on April 10th.

The IJO crisis surfaced in early 1999 when two of its founding members—Indiaand Thailand—withdrew, accusing it of a lack of efficiency and accomplishingnothing significant over the years. Seemingly, a breakthrough was achievedwhen India returned on December 23rd 1999. But the jute-importing EUmembers mounted stiff opposition to the renewal of the agreement. An earliermeeting in Geneva on March 27th-31st ended without their participation. Thelast chief executive of the organisation, Henri L Jason, told the media that “thedecision to close down the IJO was a consequence of non-co-operation fromthe jute importing countries”. About 70% of the IJO budget came from fourjute exporting countries—India, Bangladesh, China and Nepal—with the restfrom EU members.

Bangladesh has expanded its air surveillance coverage by procuring two moreair defence radar from Russia. The “look down” radar will have a scan radius of80 miles and will detect low-flying intruding aircraft. One radar will beinstalled in Bogra, in the north-west, and the other at Moulvi Bazar, in thenorth-east, within two to three months. With these additions, Bangladesh willhave a total of six radar stations and up to 60% of the country will come underradar coverage. The radar purchases follow the controversial MIG 29s boughtrecently from Russia at a cost of US$125m (1st quarter 2000, page 13).

Economic policy

The Bangladesh Development Forum (BDF), in its meeting in Paris on April13th-14th, agreed to grant Bangladesh US$1.8bn-2.2bn in aid—close to thefigure requested by Bangladesh—with the condition that the aid flow woulddepend on the pace of economic reforms and good governance. The BDF,

The IJO ceases to exist

Two more air defenceradars are being installed

Donors pledge US$2bn inaid

18 Bangladesh


comprised of 27 donor countries and agencies, expressed serious concerns overpolitical instability, rampant corruption and the slow pace of reforms. Donorsinsisted that Bangladesh make concerted efforts to curb corruption in order toreduce poverty (see The political scene). They also called for containing deficitfinancing by reducing public borrowing, exporting gas, and privatising powergeneration and transmission activities.

The World Bank, in its economic update prepared for the BDF meeting in Paris,criticised the government for its poor fiscal performance, its failure tostrengthen growth in manufacturing activities (owing to a loss of momentumin structural reforms witnessed since the mid-1990s), and for its fragile externalbalances—as typified by slow export growth and low foreign-exchangereserves. The government’s performance for fiscal year 1999/2000 (July-June)shows “signs of further deterioration” said the update, holding consolidatedlosses of state-owned enterprises (SOEs) along with increase in non–performingloans responsible for the deterioration. In the last fiscal year, the overall budgetdeficit increased to 5.15% of GDP.

Taking part at the BDF meeting in Paris, the IMF found “an unsustainableeasing of fiscal discipline” as the greatest cause of concern aboutmacroeconomic management in Bangladesh. The IMF was particularly criticalof the government’s huge borrowing from the domestic banking system, whichsurged to Tk45bn (US$882.4m)—2.1% of GDP—during the first nine monthsof the current fiscal year (1999/2000). The IMF representative in Dhaka, RonaldHicks, stated that “this is triple the full-year target in the official monetaryprogramme and more than double the amount borrowed over a full year in thewake of the floods in 1998/99”. He identified five channels through which lackof financial discipline threatened the country’s macroeconomic stability:

• a shortfall of tax receipts, which were more than 10% below target so far inthe current fiscal year;

• continued mismanagement of SOEs, together with the government’sreluctance to adjust the prices of utility services;

• the boosting of unproductive expenditure in the current fiscal year, forexample by the purchase of expensive military equipment and wage increasesin bankrupt SOEs;

• the mid-year launching of a number of new projects with dubiouseconomic benefits, which were being financed through high-cost foreignsupplier’s credits obtained on non–transparent terms; and

• continued subsidised loans by the insolvent, nationalised and specialisedcredit institutions to sectors with low credit worthiness, including agricultureand loss-making SOEs.

In his official statement at the Paris consortium, the finance minister ofBangladesh, S A M S Kibria, contradicted the World Bank report on corruption,saying it rarely produced irrefutable evidence. Citing recent reforms in tax andcustoms administration, he said the government took a number of systematic

The World Bank criticiseseconomic performance

The IMF is concerned overunproductive expenditure

Mr Kibria rebuffs WorldBank criticism

Bangladesh 19


measures to reduce the chances for corruption in revenue collection. Mr Kibriatold donors that necessary changes were being made in the Bank CompaniesAct and Financial Institution Act, in an effort to strengthen procedures for loanrecovery, penalties for default and greater effectiveness of bankruptcy pro-ceedings. He also cited the fact that loan classification and loan-lossprovisioning rules have been tightened, bringing down non-performing loansin private banks from 45% in 1994 to 29% in 1999. However, he did notelaborate on the position of nationalised commercial banks (NCBs), which arebleeding under the heels of defaulted loans.

Assuring the development partners that his government had made progress onreforms, Mr Kibria claimed that the government’s pro-poor policies hadresulted in the decline of poverty incidence from 47% in 1996 to 44.7% in1999. He pointed out that according to the World Bank the economy waspoised to grow at a rate of 5.5% this fiscal year, compared with 4.8% in1998/99 and 5.2% in 1997/98. In addition, he also stated that macroeconomicmanagement was sound, savings and investment showed a significant increase,and inflation was under control. The revenue/GDP ratio was 8.9% in the lastfiscal year, but was expected to exceed 10% this year. While he agreed that thebudget deficit—expected to be around 5% this year, compared with 4.6% inthe last fiscal year—was a matter of concern, he said that the balance ofpayments was expected to show a surplus of US$317m in 1999/2000.

The government, in its memorandum presented at the Paris consortium, hasoutlined a tentative national budget of Tk358bn (US$7bn) for the next fiscalyear that begins in July 2000, Domestic resource mobilisation was anticipatedat Tk248bn (US$5bn), the other Tk110bn was expected to come from foreignaid and other domestic resources. The external aid for 2000/01 was likely to beTk90.7bn, comprising of Tk74.6bn project aid, Tk9.2bn commodity aid andTk6.9bn food aid. The budget projected Tk193bn in revenue expenditure(known as revenue budget) and Tk165bn in development expenditure (knownas annual development programme or ADP). Donor countries, however,suggested combining these two parts of the budget into one in order toimprove management of resources—from domestic as well as foreign sources.

The preshipment inspection (PSI), made effective from mid-February to checkrevenue leakage and make imports hassle-free, has been found to be creatingmore problems for the importers than solving them. Imports have declinedremarkably since the adoption of the PSI, claims the national board of revenue(NBR), which came under fire recently for failing to meet the target of revenuecollection. But business organisations complain that production in theirfactories and industries has been disrupted due to delays in import clearingprocedures. A government-appointed monitoring committee of the PSI dis-covered three major problems with the scheme. First, banks were sendingcopies of letters of credit (LCs) through couriers to local PSI companies. In mostcases that took 3-12 days, resulting in delays in the issuance of PSI certificates,as the PSI companies cannot issue certificates without copies of LCs. Second,the PSI needed to verify the genuineness of the value-added tax (VAT) and taxpayers’ identification (TIN) registrations before issuing the certificates. But in

The budget for the nextfiscal year is outlined

PSI spells trouble forimporters

20 Bangladesh


more than 70% cases, PSI agents had found the registration numbersinaccurate. Finally, delays were also being experienced owing to the non-availability of the clean report of findings (CRF) from the PSI company fromthe country of product origin, without which importers cannot release theirgoods. While other countries exchange the CRF by coded e-mail, Bangladeshhas adopted a system whereby the CRF is mailed by courier, which increasesthe time required (as a copy is needed for customs, importers and the bank aswell as the PSI agent). In a meeting in mid-April, the monitoring committeeasked Bangladesh Bank (the central bank) to make sure that the copies of allLCs are sent by the issuing banks to the PSI agent by the next day of issuanceof the LCs, and asked that the NBR should continuously update the VAT andTIN registration numbers.

The domestic economy

Economic trends

Under a new method of national accounts calculation, introduced recently bythe Bangladesh Bureau of Statistics, the overall estimate for GDP in fiscal year1999/2000 (July-June) has been re-estimated at Tk2.4trn (around US$48bn),almost 30% higher than last year’s GDP, when it was estimated at Tk1.8trn(US$36bn). According to the new method, per head income also jumped by13%, to US$396, from US$350 in 1998/99. The new method of GDPcalculation includes 15 economic sectors, replacing the old method that hadonly 11 sectors, to determine the national income as per the 1993 recommend-ations of the UN. This increase in GDP and per head income may eventuallylead to reclassification of Bangladesh from a least developed country (LDC) to adeveloping country (DC) under the UN system of economic classification ofnations. As an LDC, Bangladesh currently enjoys facilities such as quota-basedexports of garments to the US and tariff concessions for exports to EU countriesunder the generalised system of preference (GSP).

Revenue collection during the first nine months of the current fiscal year wasTk102.86bn, 14% short of the target of Tk119.28bn, but 0.4% higher thanrevenue collection during the corresponding period last year. The nationalboard of revenue (NBR)—the government agency responsible for revenuecollection—blamed the shortfall on a shortage of manpower, inadequatelogistics and a fall in imports. However, the low level of revenue collectionmight also reflect an overall slowdown in domestic economic activities.Domestic resource mobilisation remains a major constraint, and the increasingshare of revenue expenditure going to salaries and allowances of governmentofficials—41.6% of the total in the current fiscal year—is a worrying trend.

Government borrowing received critical attention from both donors and localeconomists as it shot up to Tk40.8bn during the first six months of the currentfiscal year, representing Tk16bn or 152% growth year on year. Governmentborrowing from the country’s banking system rose by 435% year on year to

Revision has GDPincreasing by 30%

Revenue collection hasfallen short of targets

Government borrowingis up

Bangladesh 21


Tk52bn over the same period. Net non-bank borrowing of the governmentfrom the public through saving certificates rose to Tk15.6bn, showing a 36%rise over last year’s amount of Tk11.5bn. Such a phenomenal increase ingovernment borrowing, which the IMF blamed on government expenditure inunproductive projects, as well as the bailing out of the loss-making SOEs, hasbeen criticised for crowding out bank credits for the private sector, andincreasing the government’s future debt-service liabilities. The government hasalready been forced to allocate Tk20.7bn, or 11.6% of its revenue expenditure,for the payment of interest on domestic debt this fiscal year. Interest paymenton domestic debt was 12.6% of revenue in 1997/98 and rose to 13.5% in1998/99. However, the finance minister, S A M S Kibria, has claimed that therehas been no crowding out of credit to the private sector due to governmentborrowing, arguing that both interest rates and the inflation rate would behigher if this was the case.

After last year’s lacklustre performance, the country’s industrial production inthe first four months of the current fiscal year 1999/2000 (latest figuresavailable) showed a rising trend. Industrial production indices registered 5.2%year-on-year growth during the July-October period (although the period ofcomparison was during 1997/98, when the country was ravaged by devastatingfloods). Manufacturing growth continues to remain weak owing to a loss ofcompetitiveness, infrastructural bottlenecks and a lack of social stability, arecent World Bank report observed.

According to the Bangladesh Bank (the central bank), foreign-exchangereserves fell to US$1.6bn in March from US$1.8bn in February. This wasconfirmed by IMF data, which indicate that reserves fell to US$1.6bn inJanuary 2000, the lowest level in several years.

Foreign-exchange reserves(end-period unless otherwise indicated)

1995 1996 1997 1998 1999 Jan 2000

US$ bn 2.34 1.83 1.58 1.91 1.60 1.55

Source: IMF, International Financial Statistics.

Oil and gas

Pressure on the government to allow gas exports to India is mounting. Foreignoil companies involved in gas and oil exploration in Bangladesh have beenlobbying for permission. They find the small domestic market of Bangladeshtoo small to ensure returns on their investments. The World Bank and theAsian Development Bank (ADB) have advised the government to export gas inorder to improve its fragile foreign-exchange reserves position, and entice moreforeign investment. Exports of gas was also on the agenda during the visit ofthe US president, Bill Clinton, in March (see The political scene). Therepresentative of the American Chamber of Commerce (AmCham), ForestCookson, suggested that permission to export gas could raise foreign directinvestment (FDI) from the US to Bangladesh to US$2.3bn within two to three

Industrial production hasseen a slight recovery

Pressure for gas exportsmounts

Foreign-exchange reservesremain weak

22 Bangladesh


years if the current projects were completed and Bangladesh allowed gasexports to India.

Although the ruling Awami League (AL) and the main opposition BangladeshNational Party (BNP) see nothing eye to eye, they seem to agree on one thing,that Bangladesh must not export natural gas immediately. The prime minister,Sheikh Hasina Wajed, told Mr Clinton that Bangladesh would be willing toexport gas only after ensuring 50 years worth of domestic demand wasguaranteed first. A similar position was held by the BNP. The BNP added thatthe government must assess the domestic gas needs for industrial andhousehold use, power generation, vehicles and other sectors of the economy,before beginning exports. It, however, criticised the government for signingpower-sharing agreements with foreign companies “secretly”, in defiance ofthe national petroleum policy formulated in 1993. It called for transparency ingas-related matters, and for debates on gas policies both inside and outside theparliament.

Unocal Bangladesh Limited, a US company, discovered another major gasfieldin February in block 14 (Moulvi Bazar, Sylhet). Drilled to a total depth of 2,400metres at a cost of US$2.6m, the Moulvi Bazar number 3 well was tested at arate of 72m cu ft of dry, clean gas per day. The well lies on a vast subsurface ofgeological anticlinal structure spanning 13 km in length north to south andwith an east to west width of 2 km. This is the first well in Bangladeshcompleted as a “monobore” well design, a design that was originally developedin Unocal’s operations in Thailand and Indonesia. Unocal and its subsidiarieshave in the past also announced significant gas discoveries in blocks 12 and 13,at the Jalalabad and Bibiana gasfields respectively.

The government in early April awarded block 7—located in the south-westernregion, west of existing Shabazpur gasfield—to Unocal Bangladesh Limited.This will be in partnership with the Bangladesh Petroleum ExplorationCompany Limited (Bapex), a subsidiary of Petrobangla, the state–run oil, gasand mineral resources company. Unocal became the first among 22 companiesthat took part in the second–round bidding in 1997 to enter a long-awaitedproduction-sharing contract (PSC). This is also the first time that Bapex hasformed an alliance with an international gas exploration company. Theagreement gives Unocal five years to conduct exploratory drilling, making anexception to the normal practice of three years.

In mid-February the government gave Tullow—a small Irish company—and itsallies Chevron and Texaco permission to drill three exploratory wells in block9. Tullow was selected to develop block 9 in 1997, and was to drill tenexploratory wells during the first three years of its contract. While defeatingstronger bids by Shell, Mobil, Texaco and Petronas, the government has takenthree years to make a final decision on giving the drilling permit to Tullow, asthe company had apparently failed to prove its financial strength. The partner-ships with Chevron and Texaco helped to remove this obstacle. In addition,the number of wells required to be dug has been reduced to only the best

Both AL and BNP opposegas exports

A new gasfield is discovered

Block 7 goes to Unocal

Tullow is given block 9

Bangladesh 23


three. Unlike other oil companies, Tullow, Chevron and Texaco are not seekinga gas sales guarantee through Petrobangla’s gas sales agreement.

Negotiations are in progress for signing more PSCs with other companies thattook part in the first formal international bidding in 1997. Earlier,international oil companies were awarded gas blocks on a selection basis. Inthe 1997 bidding for 15 gas blocks, the government received 37 proposals forappraisal and exploration works in 12 blocks. Three blocks—1, 2 and 23—didnot attract any bidder. Negotiations with the companies lingered over threeyears, apparently because of the politically sensitive issue of gas exports, whichoil exploring companies have been strongly advocating to ensure quick returnson their investment. Political opposition to gas exports still remains strong, butgas exports to India will probably start after the next general election scheduledfor June 2001.

A joint venture of Bangladesh’s compressed natural gas company (CNGS) and aChinese company, Tianzin Company (TC), decided to set up 51 compressednatural gas (CNG) filling stations in different parts of the country at a cost ofUS$14m. The wider use of CNG, it is hoped, will help towards curbing airpollution, a major and growing problem in urban areas.

The Bangladesh Renewable Energy Development Company Limited (BREDC), asubsidiary of the state-owned power development board (PDB), startedfunctioning in early March. Its role is to streamline, strengthen, popularise andexpand renewable energy technologies in Bangladesh on a commercial basis. Itwill mainly function to disseminate, manufacture, finance and supply differentrenewable energy technologies, in order to meet the challenges of providingpower to the vast population living in rural areas. Unlike its parent company, itis expected to operate on a commercial basis.

Agriculture

Another bumper harvest—the third in a row—has been achieved. A bumperboro rice (dry season) harvest, expected to exceed 10m tonnes, is currentlybeing harvested. This follows two bumper harvests—a boro rice harvest of over10m tonnes in April-May 1999 and an aman rice (wet season) harvest of 9.5mtonnes in August-November 1999. With aus rice production of 1.7m tonnes,total food grain production in 1999 was a record 22.3m tonnes. Excellentweather conditions, an adequate supply of inputs in the market, along withsheer good luck, all contributed.

Successive bumper harvests, however, are a mixed blessing for the government.While it definitely gives political mileage to the ruling party, especially at atime when the next general election is just around the corner, it has also putthe government in an uncomfortable situation, as all its silos are full and it stillhas to procure rice from the market to stabilise prices. This price support willadd further pressure on the budget deficit. One reason for the sharp increase ingovernment borrowing in the current fiscal year has been payments for the

Negotiations over PSCscontinue

A joint venture for CNGdistribution is agreed

A PDB subsidiary companyis established

Another bumper harvestis likely

The harvest brings mixedblessings

24 Bangladesh


unnecessary procurement of 250,000 tonnes of aman rice in December-January,on top of 600,000 tonnes of boro rice procured in September last year. Thegovernment already has stocks of more than 1.5m tonnes, which is almostdouble the usual amount held. The silos were partially emptied following thedistribution of 75,000 tonnes of food grains during the September-Octoberperiod, under the vulnerable groups feeding (VGF) programme and increasedallocations for the food-for-work programmes. The government has, however,yet to decide whether it will launch another procurement drive, consideringthe anticipated sharp fall in rice prices, which will depress the incomes of therural population.

Thanks to successive bumper harvests, Bangladesh, usually a rice importingcountry, is now actively considering exports of rice. The government hasalready shelved its planned import of food grains for the current fiscal year,although the budget had a provision for importing up to 400,000 tonnes ofrice and wheat (1st quarter 2000, page 20). The government is now consideringexports primarily due to the lack of silos able to preserve the rice, rather thanthe fact that the country has a surplus. Thanks to the doubling of food grainproduction over the last two decades, Bangladesh has now achieved near self-sufficiency in food grains. The estimated food deficit is now around only 1.1mtonnes, compared with over 4m tonnes annually in the recent past.

The rapid increase in the use of diammonium phosphate (DAP) fertiliser hasminimised the pressure resulting from growing demand for urea rice this year.The domestic production shortfall was about 0.4m tonnes in this fiscal year,with the remainder being imported. Despite only being introduced toBangladesh recently, DAP has become increasingly popular. Since itsintroduction in 1997, annual imports have tripled in three years. Production ofurea rice by domestic factories is expected to be about 1.7m tonnes this fiscalyear, compared with a demand of around 2.2m tonnes per year. Use andimports of DAP picked up at a galloping rate during the last boro rice seasonbecause of the positive results of using it in the previous year. The governmentappears to be considering establishing a DAP factory in the state sector, withhelp from China. Currently, Bangladesh has six urea rice factories—all in thestate sector—which incurred a loss of Tk1.04bn (US$20.39m) in fiscal year1998/99 (July-June).

Tea production in Bangladesh fell to 44.2m kg in calendar year 1999, comparedwith 56.2m kg in 1998. The drop in production in 1999 is attributed to badweather, and has afflicted most of the tea producing countries. Despite theresulting global shortfall in production, domestic tea producers faced a dullmarket, as both demand and prices of tea slumped in the weekly auctions heldin the port city of Chittagong. This reflected less demand from foreign buyers,in particular, Pakistan, Afghanistan and the Commonwealth of IndependentStates (CIS) countries.

Bangladesh is poised for an improvement in production this year, asunexpected early rain and favourable weather will boost volumes and enablethe tea estates to cover the backlog following the prolonged drought in 1999.

Rice exports are beingconsidered

DAP import has tripled

Tea production has fallen

Bangladesh 25


The production target for this year is fixed at 60m kg, compared with a targetof 56m kg last year, and the first auction of the current season, which began onApril 25th, has shown an upward trend in prices.

Production of sugarcane may suffer a setback this year, again due to hostileweather, pest attack and a failure to use modern farming techniques.Production has been experiencing set backs since 1992-93, mainly because ofthe non-adoption of the transplantation method of farming, which mayincrease sugar production by three to four times. A decision to adopt thismethod, made back in 1987, remains unimplemented. (Neighbouring Indiarecently doubled its sugarcane production by adopting this method.)Bangladesh’s frail sugar refining industry currently suffers from shortage ofsugarcane, while the state-owned trading agency of Bangladesh has justfinalised a deal to import 25,000 tonnes of sugar at a cost of US$58m.

Infrastructure

With the start of summer, frequent power failures and load-shedding returned.Dhaka city alone suffers from a 200-mw power shortage almost daily. Residentsof different parts of the city often face disruption to power supplies twice a day,and sometimes throughout the day or night. Load-shedding is largely the resultof a suspension of power generation due to repair and maintenance works inold plants, and an increase in seasonal demand for power. Older plants areeither out of operation or operating poorly owing to maintenance problems,while most of the new power plant projects are still years behind. For example,the 450-mw Meghnaghat plant and the 360-mw Haripur plant in Narayangonjdistrict are not expected to be commissioned before 2001. Bangladesh is nowcapable of producing around 2,500 mw of electricity per day, but the country’srequirement is estimated to be around 2,700 mw and rising by 10% a year,with only 15% of the population currently having access to electricity.According to the prime minister, Sheikh Hasina Wajed, who is also in charge ofthe Ministry of Energy, seven power plants are currently under construction inthe public sector, and she believes that these will reduce the problemsexperienced by the population in the near future.

However, the fate of the 450-mw Meghnaghat power plant, being developed bythe AES corporation of the US, has become uncertain, as AES and the PowerDevelopment Board (PDB) have been entangled in threats and counter threatsabout cancelling the agreement. The drama heightened in mid-April, as thePDB gave final notice to the AES to take over the possession of the site for theproject within seven days, but the AES refused to do so accusing, the PDB ofmaterial breach of contract, and claiming that the site was not developed asper the provisions of the land lease agreement (LLA). The impasse continues,making the fate of the project uncertain.

The PDB has also declined to purchase power from the Rural Power CompanyLimited (RPCL), a company owned by the Rural Electrification Board (REB),claiming that its prices are too high. While the RPCL offered Tk2.09 (US$0.041)

Production of sugarcanehas suffered

Massive load shedding isdisrupting life

The fate of the Meghnaghatpower plant is uncertain

Stalemate in powerpurchase from RPCL

26 Bangladesh


per kwh, the PDB is willing to pay only Tk1.5 kwh/kwh. The REB itselfpurchases about 300 mw from the PDB at a rate of Tk1.77/kwh. The PDB hadearlier agreed to purchase power from the RPCL, which commissioned the firstof its two plants—the 70-mw plant in Mymensingh—in November 1999. Itssecond unit, now under construction, would add a further 70 mw. The RPCLwas formed in 1994, with REB owning 51% of the equity, and has beenworking with a consortium formed with Mitsui Engineering and Ship BuildingCompany of Japan and European Gas Turbine SA of France.

The government recently renewed the letter of intent for the development ofthe western region integrated project (WRIP), proposed by Unocal, a US oilcompany. Under the WRIP project, Unocal expects to supply gas to the westernregion from the Shabazpur gasfield, which may contain more than 400 bn cu ftof recoverable natural gas. WRIP also proposes the construction of a gaspipeline from Bhola to Khulna and power generation of 350 mw from threeplants. The government has, however, asked Unocal to have the BangladeshPetroleum Exploration Company Limited (Bapex) as its partner in the project.Bapex is a subsidiary of Petrobangla, the state–run monopoly of oil, gas andmineral resources, and while Unocal is already in partnership with Bapex inexploring gas (see Oil and gas), this may prove an obstacle as the US companyis unlikely to need a domestic partner for this project.

With permission obtained in early February from British authorities to useHeathrow airport in London for operating its Dhaka-New York flight, thenational airline, Bangladesh Biman Airlines has now decided to introduce aonce weekly flight between Dhaka and New York via Dubai and London (fromJune 3rd), while continuing the existing twice a week flight to New York viaDelhi and Brussels. According to officials, Biman is also going to procureanother DC-10-30 and its fourth Airbus 310-300 aircraft, to facilitate the newoperations and to reduce pressure on its fleet of five existing DC-10-30 aircraft.

Biman has been operating the New York flights through New Delhi andBrussels for the last two years, following a row with KLM Royal Dutch Airlinesover the use of Schiphol airport for the New York flight. KLM refused to allowBiman landing sharing rights after it withdrew operations from Dhaka in 1997,forcing Biman to use Brussels and raising its already high operational costs. Itwill soon add another frequency on the London route, connecting Manchesterin UK. (There is a large Bangladeshi community in the UK, the group that theairline largely caters for.)

The country’s largest seaport at Chittagong has plunged into a new crisisfollowing worker opposition to the government’s decision to collect Tk1.5bnfrom the funds of the Chittagong Port Authority (CPA) and to the setting up ofa private terminal in the port city. Continuous labour unrest at the port,coupled with a scarcity of modern equipment, had already compelled foreigncompanies to withdraw their ships from the Chittagong-Singapore route.Domestic importers and exporters are also facing increasing problems. Theworkers had earlier launched a movement against the construction of a privatecontainer terminal by the American-based SSA. In addition, the ongoing

The WRIP project iscontinued

Biman is to use HeathrowAirport

The Chittagong port is introuble

Bangladesh 27


construction work of the New Mooring Container terminal, at a cost ofTk7.37bn, and procurement of cargo/container handling equipment at a costof Tk3bn, are being hampered. Workers have alleged that the government hasbeen deliberately obstructing the implementation of these developmentprojects to justify its plan to construct a private container terminal. Politicalleadership in the port city appears to be solidly behind the workers, as they arebacked by the mayor of the city, Mohiuddin Chowdhury, and a local memberof parliament belonging to the BNP, Mir Nasiruddin. An all-party actioncommittee (APAC), made up of supporters of the main opposition parties, hasthrown in its support behind the workers.

Bangladesh has lifted restrictions on the installation of very small apertureterminals (VSATs) in a bid to end the monopoly of a few vendors and makeInternet use cheaper. Government officials at the end of March said that therewill be no restrictions on receiving licences from the state-owned BangladeshTelegraph and Telephone Board (BTTB), for installation of VSATs. Currently,there are only seven VSAT service providers in Bangladesh. The annual VSATlicence fee was also cut to US$3,500 from US$8,000, to bring down the cost ofdata transmission and the government is said to be working on a digital datanetwork (DDN), to enable Internet service providers (ISPs) to speed up trans-mission to two megabytes/second from the present 128 kilobytes/second.

Financial and other services

The share price indices of both the Dhaka Stock Exchange (DSE) and theChittagong Stock Exchange (CSE) remained sluggish during early 2000,reflecting subdued domestic investor sentiment. The market has not recoveredsince December 1996, when the DSE crashed following price manipulation byseveral brokerages. The downslide continued until early 2000, although thistrend was reversed slightly in the last quarter, with the DSE All Share PricesIndex rising by 6% to 521.2 points on April 30th, from 491.99 points onJanuary 20th 2000. Market capitalisation of the DSE also increased by 9% toTk48.73bn from Tk44.74bn (US$900m) during the same period. The CSE shareprice index increased by 8% to 1,093.50 on April 30th, from 1,010.55 onJanuary 20th 2000, and has remained in this upper range during May. Thismay reflect government attempts to jumpstart the market.

Stock exchange1995 1996 1997 1998 1999 2000a

No. of listed companies 188 201 222 224 244 237

Market capitalisation Tk (m) 49,998 25,8410 107,827 62,264 44,739 48,732

DSE All Price Share Index (High) 903 3,648 2450 760 546 522

DSE All Price Share Index (Low) 698 751 711 573 462 503

a Up to April 30th and May 1st.Source: Press reports.

Curb on VSATs goes

The share market remainsin a bearish mood

28 Bangladesh


In a bid to boost up the stockmarket, on April 30th the government decided tooff-load its portion of shares in four unlisted joint-venture companies byselling them back to their partners. The chairman of the Privatisation Board,Kazi Zafarullah, said that the government’s shares in the German-Bangladeshjoint venture, Siemens Bangladesh, had already been paid for while those inBerger Paints Bangladesh were due to be paid. Two Dutch companies—VanOmron Tank Terminal and International Oil Mills—were expected to be paidsoon, he added. The government holds a 42.3% stake in Berger Paints, 32% inSiemens, and 50% in both Van Omron and International Oil. The governmentalso off-loaded its shares in ten local companies listed on the DSE throughInvestment Corporation Of Bangladesh (ICB), the country’s state-ownedinstitutional investor.

The parliamentary standing committee on the Ministry of Finance blasted theSecurities and Exchange Commission (SEC)—the country’s stockmarketwatchdog—for the continued depression in the stockmarket. The SEC failed tobring funds from the commercial banks to the stockmarket and could not helpset up a single private mutual fund, the committee remarked on February 1st.It also appointed a three-member subcommittee to monitor the SEC’s activities,and to suggest ways for infusing spirit into the bourses. The subcommittee alsorecommended the restructuring of the SEC to allow private-sector represent-atives to sit on the SEC’s governing body.

The SEC filed a case against Mark Bangladesh Shilpa and Engineering Limitedon April 11th for alleged misuse of investor funds, overvaluation of its assetsand improper utilisation of IPO funds. A report, commissioned by the SEC,suggests that Mark Bangladesh raised Tk390m (US$7.65m) from the country’sprimary share market in 1996 but the real worth of the company’s plant andmachinery was only Tk54m. The company, in its audited balance sheet onJune 30th 1998, however, claimed the value of its machinery and plants wasTk505m.

The current vice-chairman of the DSE, Shahiq Khan, was elected as the newchairman of the bourse at an annual general meeting on March 30th, while anelection was used to choose the new senior vice-chairman and the vice-chairman. This was the first time in its history that the full 12-member body ofthe exchange’s council had elected its leaders. (In the past the positions werefilled by consensus and this is a move towards greater transparency.) The DSEcouncil, after two years of delay, also elected four new councillors.

The nationalised commercial banks (NCBs) and state-owned financialinstitutions had filed 35,642 cases against defaulting borrowers by the end ofFebruary, in an effort to realise outstanding loans of Tk40bn (US$784.3m). Allfour NCBs—Sonali, Janata, Agrani and Rupali—are the worst sufferers of thedefault culture that threatens the viability of the banking system in thecountry. The NCBs alone filed 35,507 cases with the commercial courts and135 cases with the bankruptcy courts, none of the cases has been disposed ofso far. The specialised banks, such as the Bangladesh Shilpa Bank (BSB) and theBangladesh Shilpa Rin Sangstha (BSRS) also filed cases against defaulters.

Government to sell joint-ventures shares

The SEC comes under fire

Company in 1996 sharescam is sued

The DSE elects a newchairman

Over 35,000 cases arepending against defaulters

Bangladesh 29


Bangladesh operations of the ANZ Grindlays Bank are being handed over tothe Standard Chartered Bank (SCB)—as a part of the takeover of the ANZoperations in the Middle East and South Asia by the SCB—under a US$1.3bndeal signed between the companies in late April. The integration, however,might take about 12 to 18 months. The ANZ is currently the largest foreignbank in Bangladesh—with Tk22bn in deposits and Tk14bn in advances, and 15branches and booths, adding to the SCB’s existing deposit base of Tk11bn.

According to the IMF, money supply (M2) in 1999 rose by 15.5% year on yearto Tk689.9bn (latest figures available) from Tk597.6bn in 1998. The moneysupply (M1) in 1999 also increased, rising by 12.8% year on year to Tk184.9bn.The growth in all components remained steady for the whole year, but jumpedsignificantly in December—which was a religious month in the Muslimcalendar—as money supply increased to match the traditional increase inspending that occurs.

Money supply(Tk bn unless otherwise indicated)

1998 1999 1 Qtr 2 Qtr 3 Qtr 4 Qtr 1 Qtr 2 Qtr 3 Qtr 4 Qtr

M1 152.98 158.89 155.57 163.97 166.93 172.50 170.05 184.93 % change, year on year 7.10 4.76 6.37 7.43 9.12 8.56 9.31 12.80

M2 530.47 558.69 563.79 597.56 599.75 630.27 646.54 689.89 % change, year on year 9.50 10.20 10.6 11.40 13.10 12.80 14.70 15.50

Domestic credit 567.78 598.47 609.67 637.43 662.98 678.77 694.61 735.77 % change, year on year 12.41 12.92 11.16 13.03 16.76 13.42 13.93 15.42

Source: IMF, International Financial Statistics.

ANZ and StandardChartered banks to merge

The money supply hasincreased

30 Bangladesh


Foreign trade and payments

The country’s export earnings during the July-February period reachedUS$3.69bn, compared with a target of US$3.82bn. However, while income was3.4% below target, it was 9.9% higher than the corresponding period of theprevious fiscal year. Export income was helped slightly by a rise in the exportprice index of 0.42%. Primary products registered a 16.5% increase in volumewhile experiencing a 16.8% fall in price index. Industrial goods, however,experienced an increase in both export volume and price terms, rising by10.2% and 0.62% respectively. Exports of major items, such as readymadegarments (RMG), knitwear, raw jute and jute goods, and tea all failed to reachtheir corresponding targets.

RMG exports fetched US$2bn, which was 5% short of a target fixed atUS$2.1bn. Knitwear fetched US$785m, a rise of 25% year on year. Jute goodshave followed a similar pattern, failing to reach their targets but raising exportyear on year. Leather goods fetched US$128m, which was 6.3% higher thantheir target and 20% higher than the export income of the correspondingperiod last year. Frozen food exports also demonstrated a similar trend. Theindustry fetched US$211m, surpassing the target set by 7%. In line with weakinternational tea prices for tea at the lower end of the market, tea exports nose-dived, with 4.5m kg of tea worth US$12.2m exported, compared with a targetof US$27m.

The US government rejected Bangladesh’s request for a 30% increase in itsquota for garments exports to the US market, saying that if the quota forBangladesh is increased, the quota for other countries would have to beadjusted as well. The request was made during a visit by the US president, BillClinton, on March 20th. However, the US ambassador in Dhaka, JohnHolzman, pointed out that there was a possibility of a “quota merger” if thegovernment of Bangladesh improved labour standards and allowed tradeunion activities in the two export processing zones (EPZs) in the country. Inthe meantime, an understanding was reached between the Bangladeshgarment manufacturers’ export association (BGMEA), the US, and theInternational Labour Organisation (ILO), to sign a fresh memorandum formonitoring the child labour situation in garments factories by May 2001. Thecurrent agreement, signed in July 1995, will expire in June this year.

In mid-March a parliamentary committee of the Ministry of Commercecriticised the export promotion bureau (EPB)—a state-run agency responsiblefor monitoring exports—for failing to take adequate measures against visaforgery in garments exports to US. Apart from damaging the country’s imageabroad, such forgeries deprived the country of export earnings to the tune ofTk45bn (US$1bn) last year, the committee observed. The politicians accused asection of EPB officials of involvement in corrupt practices—the EPB could notdetect any forged visa document until the US authorities did so and referredthem to the EPB. Similar corrupt practices led to the suspension of frozen food

Exports fall short of theirtarget

The US rejects a RMG quotaincrease

Visa forgeries in garmentsindustry continue

Bangladesh 31


exports to the EU market, which then required the government to use hecticlobbying to resume frozen food exports to the region. A five-member UScustoms department team, that visited Dhaka in early April, identified severaldozen garments factories which were involved in visa forgery for the purposeof exporting garments to the US.

Bangladesh signed an agreement with the Asian Development Bank (ADB) inearly April to halve the country’s poverty level by 2010. The head of the ADB,Tadao Chino, signed the agreement in Dhaka, committing a loan amountingup to US$500m a year. Under the agreement, Bangladesh will receiveUS$350m-400m as soft loans with an annual interest rate of 1%, while the restwill come as hard loans.

A US$52m financial institutions development project (FIDP) was launched inlate February with a US$47m credit from the World Bank, to stimulate thefinancial market and support the policies of non-bank financial institutions(NBFIs). The World Bank head in Dhaka, Fred Temple, described the objectiveof the project as providing medium- and long-term lending to private-sectorenterprises through non-bank sources, such as the capital market. The projectwill aim at increasing diversity in financial instruments, including bondissuance and other commercial instruments.

Japan granted ¥2.46bn (US$24.6m) in debt relief to Bangladesh as part ofinternational efforts to ease the burden of heavily indebted developingcountries, according to an agreement signed in late March. The grants willcover the principal and interest on yen-denominated loans that matured in thethird quarter of fiscal year 1998/99 (July-June), and will be used for purchasingthe goods necessary to develop the economy and improve social welfare. (Theassistance is based on a debt-relief programme launched in 1978 by creditornations on the initiative of the UN Conference of Trade and Development.)

The Kuwait Fund for Arab Economic Development (KFAED) committed aUS$40m loan on April 25th towards the financing of the US$142m GreaterDhaka-Chittagong power transmission and distribution project (Phase III). Theproject is aimed at meeting the growing electricity demands of Chittagong cityand the adjacent industrial areas, as well as Cox’s Bazar town, by 2005. It willincrease the potential supply to the area by 240 mw and serve about 106,000new consumers.

ADB gives assistance onpoverty reduction

World Bank projectlaunched

Japan grants ¥2.46bn indebt relief

Kuwait gives a grant for apower project

country reportvisited bangladesh. the chief election commissioner, abu hena, has resigned. donors...

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