Friday, October 15, 2004

Bangladesh: TATA - Business sans Border sans Nationality

[ We take the opportunity to emphatically state that the negotiations on the part of Bangladesh in seeing the projects through will call for a lot more skill and integrity than we have in the BoI, which has already set a highly questionable and prejudicial record of so-called investment-scouting junkets, as also in the related apparatuses. It is imperative that we make the best use of our comparative advantage in gas resources and perhaps coal, the latter yet to be on-stream. ]

It’s business without borders
Enayetullah Khan

Seen thus, Tata’s footprint, so to speak, in Bangladesh in steel making will be nearest to its home-turf of captive iron ore mines in Jamshedpur, again close enough to Bangladesh, ‘with capacities far in excess of its current needs’, and the latter clime providing the most critical energy inputs of Bangladesh gas, or in future or immediate prospecting of coal, as also the basic raw materials and feedstock for power and fertiliser respectively

The projected Tk 12,000 crore Tata investment in Bangladesh, coming as it does as a wish that is otherwise phrased as the Expression of Intent (EOI), is part of a Tata thrust to go global. The biggest ever likely boost in FDI, as and when it materialises, is at least on the cards despite what amounts to be a sanctioned business-cost regime in Bangladesh, and some pulls to the contrary from a section of the Indian establishment — in that order.

In the grim circumstances of Bangladesh still remaining ‘at the bottom of the countries in respect of FDI inflow’, that ‘in absolute terms is lower than Afghanistan’, and on a per capita basis ‘lowest in the region’ in the words of Christine Wallich, country director, The World Bank, Tata brings good tidings for Bangladesh’s much-needed capital and technology inputs and its growth-stride. It also gives a lie to anti-Bangladesh campaigns that deter FDI, though it obliges the government to strictly maintain an enabling environment.

The ceremony of signing the EOI, by its very import, therefore, literally brought the entire government to the venue of the Bangladesh-China Friendship Centre on October 13 evening. Number 13, said to be unlucky, will hopefully cancel out the numerological superstition on the rescheduled visit of Tata supremo Ratan Tata and company after an unforeseen earlier breach in the itinerary on account of the August 21 killer blast in the metropolis.

While Sayed Kamaluddin writes in detail on the projected Tata investment on this page, we take the opportunity to emphatically state that the negotiations on the part of Bangladesh in seeing the projects through will call for a lot more skill and integrity than we have in the BoI, which has already set a highly questionable and prejudicial record of so-called investment-scouting junkets, as also in the related apparatuses. It is imperative that we make the best use of our comparative advantage in gas resources and perhaps coal, the latter yet to be on-stream. And in Tata’s case, while Ratan Tata holds the key, Tata Steel managing director B. Muthuraman and his team will steer the course of Tata’s projected investment insertion in Bangladesh with all their hands-on expertise in the field. The investment package also includes power and fertiliser.

The weekly Business World magazine, published in India, featured Tata in its two consecutive cover stories, one on its acquisition of a Daewoo commercial vehicle industry in South Korea and another on Tata steel spreading its wings. According to the steel story in the well-regarded publication, the dynamic of globalisation, and the dismantling of the tariff walls under the WTO rules-regime across the globe, have been ‘forcing the century-old industry to change the way it churns out steel’. The old model of shipping raw materials ‘to where primary steel-making capacity existed, which were invariably near the markets steel was sold in’ has given way to strategic relocation of the primary steel-making units ‘closer to the raw materials and then ship the semi-finished steel, which is far less bulky, near the final markets for finishing’.

Seen thus, Tata’s footprint, so to speak, in Bangladesh in steel making will be nearest to its home-turf of captive iron ore mines in Jamshedpur, again close enough to Bangladesh, ‘with capacities far in excess of its current needs’, and the latter clime providing the most critical energy inputs of Bangladesh gas, or in future or immediate prospecting of coal, as also the basic raw materials and feedstock for power and fertiliser respectively. That makes what the Tata management thinks, according to Business World, an ‘imminent sense’ that translates into no less eminent combination, in our view, though no pun is intended.

In this Tata venture, The World Bank and its commercial lending wing, the International Finance Corporation (IFC), have had a proxy role, I presume. The presumption is due to a frantic call to me in mistaken identity that happens to be an embarrassment of name-recognition when it comes to un-journalistic pursuits that are not my forte. The WB’s welcome involvement in this regard is also happily manifest in the Bank’s proposition to the government for earmarking $2 million, out of the $15 million WB grant to Petrobangla, towards the Gas Sector Master Plan Strategy, for a Tata proposal study by a technical committee of the government’s autonomous gas management outfit.

The set of proposals is perhaps the second biggest ever after the multinational flagship investment in Karnafuly Fertiliser Company (KAFCO) jointly with the government that has had a rather chequered, if not unwholesome, background to it in the fixation of gas price and other issues involving certain equipment. But since it is a private sector FDI, those irregularities, for which the project had to be renegotiated and delayed, are not likely to recur. And the Tatas are not said to be insisting on concessionary gas price, but on an assured supply for 20 years.

The benefits of this massive investment, besides the crumbs accruing to the middlemen, will be immense in terms of growth generation, employment, technology and management-skill transfer as well as export earnings, and the stable internal market of steel products, besides power and fertiliser. Above all, it also opens up prospects of IOC investments in new explorations that have been capped due to an absence of commensurate demand in the domestic market.

Welcome to Bangladesh. It is business without borders, and hence nationality.

Nerw Age 15/10/2004