Bangladesh faces dilemmas over exploitation of its two major natural resources, gas and  geography. For now, suspicion of India is winning out over economic benefits.
IHT May 28. 

by Philip Bowring

Dhaka: Should a poor country squirrel scarce capital for fear
of a rainier day in the future, or invest now in a better
tomorrow? Should a relatively small country protect itself by
closing up or opening to a giant neighbour?

Bangladesh faces both these issues and so far is tending
towards pessimistic  answers, frustrating those who think it
has more potential than its government assumes.

Both questions come together in the matter of natural gas, the
one exportable commodity of which Bangladesh has a potentially
large surplus. But how much of a surplus and for how long? And
should it be sold to India -- the only viable export market.
Would not that make Bangladesh even more beholden to its giant

Bangladesh has proven ackowledged reserves of a solid if
unexceptional 10 trillion cubic feet (tcf) of gas, and
probably at least another 5 tcf of proven and unannounced
reserves. However potential is vastly greater according to 
industry experts. They believe that finding as much  as 50 tcf
on could be achieved given intensive drilling in easily
accessible locations both onshore and offshore in the
relatively shallow Bay of Bengal.

International companies were till quite recently keen to sign
up to exploration contracts on the assumption that prospects
were good and markets in India, including industrialised,
densely populated, energy deficient West Bengal which could be
reached by exension of the existing gas grid. However, falling
energy prices and the ongoing ban on gas exports has
discouraged the very exploration  which ought to make
Bangladesh more comfortable about selling gas.

Just exporting 500 million cubic feet a day would use up only
3.5 tcf over 20 years yet earn $500 million a year. Bangladesh
will to have to export if domestic gas consumption, which must
be partly paid for in dollars and is subsidised in terms of
local currency, is not to put the fragile balance of payments
under even greater strain.

Ironically, domestic consumption is another problem for
producers. It has not been growing as fast as expected due to
delays in building power stations so that even new gas fields,
such as developed by Unocal in the northeast which was
inauguarated last month, will be operating at well under
optimum capacity. Reduced cash flow as well as uncertain sales
prospects are likely to discourage further exploration.

One anwswer to nationalist objections to selling gas might be
to export downstream products -- electricity and fertiliser
instead. But these require massive inputs of capital which
Bangladesh does not have. Indian investors might be willing to
finance a major power project on the border, but that would
require a level of self-confidence and decision making that
has been lacking in Dhaka, which has singularly failed to meet
even local power needs. So the conversion option for now
remains theoretical.

The result of failure to pursue gas possibilities vigorously
leaves Bangaldesh expecially vulnerable at a time when the
phasing out of quotas could leave it successful garment
exports facing greater competition, and hinders investment in
infrastructure which could spur new industries. 

The India issue may be more crucial than the size of gas
reserves. Apart from a hill-country border with Burma,
Bangladesh is surrounded by India, which makes many worry
about Indian pressure and influence. But look at the map
another way. Bangladesh commands the northern end of the Bay
of Bengal, the deltas of two great rivers and a seaport and
railway system which were once -- and could easily be again --
the gateway to northwest India, now reached from the rest of
India via a narrow corridor bordered by Bangladesh and Bhutan.
Many believe Bangladesh would strengthen its position by being
more open to India, and making efforts to improve rail and
river communication and earn good from transit business.

There are reasonable suspicions of India. Upstream water
shortages have meant that it has got the raw end of a deal on
Ganges water sharing. India has shied away from multilateral
projects which agencies such as the Asian Development Bank
have been encouraging in the region, or even those under SAARC
(South Asian Association for Regional Cooperation). It prefers
to use its weight in bilateral discussion. Lack of Indian
reciprocity to Bangladesh tariff cutting has enabled Indian
manufacturers to increase their share of the local market.

But whether from an economic or geopolitical perspective,
Bangladesh might be better advised to leverage its few
strengths -- gas and geography -- in way which would promote
local development and make India more dependent on Bangladesh
than can ever by the case while Dhaka adopts a defensive




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