Energy sector and incongruous donor assistance

Beyond the specificity, it is an open secret that the major donor's continued interferences have led to a thorny public relations problem in Bangladesh. I have spent years in learning about energy issues since the mid sixties. Analyses on the politics of oil and gas, as it marked the turning point for the course world events are taking, has always attracted me. While I was working with the government, studying petroleum laws and attending international seminars and conferences, I tried to relate that knowledge with the development strategies of energy sector in Bangladesh. I also started learning the behaviour, motivation and working of the donor community since early seventies. Perhaps the most interesting part of my learning experience came through interactions with the donor agency officials, starting in 1972. For instance, Mr V V Desai, a mission chief, in the gas sector, from ADB HQ Manila, left a positive impression about donor assistance. Sadly, later in the 1990s, Mr S Chandar of ADB and Mr Banerjee of the Wold Bank damaged the good images I carried for long. The latter two mid level officials were keener in carrying out peer with senior bureaucrats and ministers in Bangladesh rather than the actual business transactions about projects and programmes.

On one occasion, I was startled to hear that one visiting Bank mission chief secretly furnished his tentative recommendation prior to a wrap-up meeting to the chairperson. The same recommendations were finalised in a formal meeting as government proposal! There were also allegation that one resident representative (stationed in Dhaka) of a donor agency used to behave like governor-general of the British India regime. In his deliberations he even pretended to have identified all key efficiency and equity issues and their policy implications (even political implications), including the main elements of a parastatal reform agenda that merit consideration. In fact, the main elements became mandatory and later turned in to convenants in the Aide-Memoire and negotiating documents presented in pink, green and white colour covers. Their basic assumption was that the parastatals that include the state-owned corporations (entities) or SOEs and boards, department enterprises (DEs) etc are inefficient and corrupt.

Indeed, there are some truths in some of their findings. But, would the major donor agencies staff touch their hearts and admit that they did not put confusing details in their documents? Actually, they were keener to furnish half cooked and half-baked mission reports so that they are able to come back many times over. At times the donor delegation members, particularly the head of the mission, resorted to convert operations, even contact over telephone consultants and contractors to discuss about the project! It is perhaps true that the shortfall in returns of some SOEs has been particularly very high, highest being for BPDB, followed by DESA, BOGMC (Petrobangla) and BPC. But haven't the donors been supporting the integrated operation of BPDB until early 1990? For some mysterious reason, the World Bank suspended financing BPDB for the past over one decade, but the donor never forgot to furnish wrong prescriptions to the SOEs. DESA was a whimsical creation of the World Bank. It became a new energy enterprise inheriting all the vices of BPDB.

Petrobangla, a state owned enterprise, engaged in exploration to marketing of gas, was a profit earning entity: it provides around Taka 2,000 crore annually as tax and compulsory dividend to the government exchequer. But the major donor agencies never bothered to advice the government that as a standard practice elsewhere in the world, certain percentage of earning should be ploughed back to Bapex for further gas exploration and development. Instead, through the back door they put pressure on the government to offer more blocks to foreign private companies (IOCs) so that at some point or the other they can make Bangladesh a hostage. One simple instance would make the statement clear. Over the past at least three years, Bapex was not allowed to drill any exploratory or development well for gas. Consequently, the demand of gas became more than supply. Furthermore, any mishap even in one well would create a shortage of 30 million cubic feet per day or an electricity production loss of 120 megawatt from the existing low supply. Indeed, to meet the future domestic gas demand a new IOC-dependence syndrome was created. It is alleged that due to donor pressure Unocal has been asked first to develop Moulvibazar structure (without proper reserve estimate and certification) by 2004 and then Bibiyana by 2007 finding that the prospect for export of gas by pipeline to India is gradually waning due to people's pressure. Incidentally, Petrobangla had prepared programme for development of Titas and Habiganj gas fields respectively in 2002, but it was not supported nor the government provided any funding. Thus, a case of donor and government connivance ensued, leading to a likely gas and power shortage in the summer of 2004!

Then there is a clear violation of contracts (PSCs) signed in the mid 1990s by the IOCs. Unocal proposed gas pipeline project to India on 29 October/04. All now know the donor agencies' tacit support to the illegal gesturers of foreign oil companies. One must appreciate that the PSCs were not signed to make Bangladesh a hostage; rather they were like internationally practiced commercial contracts for mutual benefit (the most recent terminology is win-win). Around the world one can find that the oil and gas companies reinvest around 20 per cent of their revenue earning for new explorations. There was a clear decision by the government that four per cent of total revenue earned by the government will be set-aside for Bapex for future exploration. The decision was later downsized to two per cent. At the end of the day, even that two per cent was not given to Bapex! Instead, IOCs were patronised at the behest of donors to drill wells for gas. No World Bank or ADB Mission has ever taken any initiative to discuss the economic justification of finding the Proven Gas Reserve through internationally reputed independent certifying company or companies as was done under public pressure by Unocal for assessing the reserve of Bibiyana gas field, almost two years after its discovery.

The challenge for Bangladesh is to exploit its gas reserves effectively, expand its domestic gas market so as to make the optimal use of its only commercial energy resource (natural gas) and enhance its contribution to the nation's enormous development financing needs. On the other hand, the inefficient power sector operations have imposed a high cost on the economy, through inadequate access, poor quality and high transaction cost of services including about 30 per cent revenue loss (due to theft). The urgency of power sector reform to enhance cost recovery by curbing system loss can hardly be overemphasised. But due to donors' undue interference, even the holding company concept (under BPC) is going to fail . Until very recently, both Petrobangla and BPC were profitable organisations. Now the donors are out to prove that BPC is also inefficient and costly. Finally, the concept of regulatory commission could have been a welcome development provided the government did actually offer independence to ERC. The donors appear to be satisfied with the conflicting provisions (reportedly they assisted the government to prepare the document) because in future conflict between the government and the ERC it may offer scope to them to enter into the new ball game.

Nuruddin Mahmud Kamal is a retired government official.