Bangladesh must ensure efficient and optimum use of its own primary fuel, especially the high quality coal reserves, for achieving its national vision of middle income country by 2021 and developed economy by 2041.The government must take decision for mining coal now without further delay. Alongside, exploration of petroleum resources needs expediting through engagement of IOCs in addition to BAPEX. Industrialization will not achieve momentum if Bangladesh becomes exclusively dependent on imported fuel. Development plans will also get affected.
Dhaka Chamber of Commerce and Industry (DCCI) President Abul Kasem Khan said this in an exclusive interview with EP Editor Mollah Amzad Hossain.
Bangladesh has announced national vision for achieving middle income country status by 2021 and developed economy by 2041.There is no alternative to development of infrastructure for economic development through rapid industrialization.What are your views about the present state of infrastructure development?
I would like to start from a different perspective. Reviewing the history of investment in South Korea and China over the past three decades, we find these countries invested 9% and 10% of their GDP respectively for infrastructure development. But in 2011, Bangladesh invested only 1%. In recognition of challenges to investment, the government now has taken initiative to increase it. It is now about 3%.But for facilitating achievement of mid and developed country status this must be increased to at least 6% in coming years. Otherwise, the economy would not get required momentum.
We are aware that as a trade body DCCI is working with the government in many areas. Have you given any proposal to the government for infrastructure development?
DCCI has in house home works. On the basis of that we are in constant discussion with the government about infrastructure development over the past 4-5 years. We are of the opinion that the government should continue investing 10% of GDP for several years. But in consideration of resource constraints, we suggested for 6% of GDP. This will be double the present investment.
The present annual investment is US$7.5 billion. It has to be increased to US$15 billion as soon as possible. The government alone cannot do this. Like India and Thailand,the government has to follow PPP model and do these adopting BOOT or BOO investment strategy.
Local commercial banks provide 5-7 years term loans at high interest rate. They lack capacity for long-term low interest lending for infrastructure development. Private sector can raise capital from money market. But capital market regulations do not allow any venture accessing local share market before three years after its registration.
In my opinion,the government-approved infrastructure as greenfield projects must be allowed to access to share market for raising capital. Bangladesh Bank while announcing monetary policy also indicated that local banks are unable for providing long-term loans. Bangladesh Bank also stressed upon finding alternatives. In our opinion, capital market can be the major alternative source. Capital for infrastructure development can also be raised through issuing bonds.
Besides, the government must bring all major infrastructure development projects under PPP and open these for foreign investment.The government financing or donor financing can be done for less attractive and service sector projects. These are not being done now.
Once infrastructure development is done, Bangladesh like India, Thailand and Vietnam would start getting premium. This will act as impetus to achieving mid and developed economy status.
Do you think present organizations are capable for implementing your suggestions? Should there be any separate organization set up?
You are spot on. DCCI has suggested for setting up a separate agency for infrastructure investment, implementation management and monitoring. We gave given it a name National Infrastructure Development Monitoring Agency (NIDMA). There can be a high powered advisory council headed by honorable Prime Minister. Ministers, Secretaries and head of all apex bodies of business organizations can be members there.
The government has adopted many mega projects for infrastructure development. Some on own initiatives, some under joint venture and some more under PPP. But for lack of implementation capacity, most of the projects are getting delayed. Moreover, these are also not being implemented properly. Bangladesh does not have required numbers of experienced and competent human resources for project implementation and monitoring. Consequently, economic activities are suffering a great deal. The project costs are also increasing 20-30%.
The advisory council of the proposed NIDMA in quarterly meetings can review whether right projects are adopted. They can give necessary instruction to projects those are not advancing properly or lagging behind. The discussion at the highest level can help resolve issues for those projects which are not moving smoothly for any or many reasons. These will help implement projects within time and budget. Instruction from the highest level would help resolve critical issues delaying projects.
There is no option to expediting infrastructure development for achieving 2021 and 2041 visions. There is no doubt that we have fallen way behind. In 1990, Bangladesh and India were almost at the same level as of infrastructure. But India now has moved well ahead of us. We must remember that there is no alternative to achieving logistic efficiency for remaining internationally competitive in cost of doing business.
Public Private Partnership (PPP) remains a hot topic of discussion for some years. But it could not be even started properly in Bangladesh yet. What do you think bureaucracy or weakness of private sector is responsible for this?
PPP has advanced considerably. There are budgetary allocations. A board has been created for initiating PPP. But no investor or trade body has participated yet. This needs to be ensured. We don’t think attractive projects for PPP have not been identified yet. We cannot say any momentum is being created.
Entrepreneurs are usually selected through tender process. We have to find appropriate way of selecting PPP partner (s). Many local business organizations have required capital. But for absence of required experience and other conditions imposed, they cannot invest. One option can be selecting PPP partners from among the highest taxpayers.
The government could achieve notable success in increasing power generation through contingency and mid-term planning. But most of the baseload power projects are being delayed. What are the reasons you think?
I think fuel supply deficit and lack of experience in large projects may be the reasons. Energy insecurity has been created from indecisiveness of the government about exploring and exploiting own primary fuel resources. Baseload power projects would not have lagged way behind if government could take right decision for exploiting own discovered coal resources on time.
You are talking about own coal. The government could not take decision about mining own coal. As a trade body leader how do you look at it?
We are all along advising the government for initiating mining of own coal after finalizing coal policy in view of achieving long-term energy security. But unfortunately in last nine years, the government could not take any decision. We are aware of water management, farmland rehabilitation and environmental impact challenges associated with coal mining. We are also aware of the open pit and underground mining method debate. I strongly believe that if mining coal is economically viable, it must be exploited and used for power generation without anymoredelay.
Example of Singapore can be quoted here. Jurong area was a reserve forest and sanctuary for crocodiles. Singapore government set up industrial zone clearing the forest. Singapore government told the protestors, “We must feed the people first.” They did exactly what they needed at that time. After 50 years they have developed deeper forest around that location.
We think the government must create public awareness for utilizing own primary fuel resources. Bangladesh would be deprived from lower cost power access if it fails to exploit its own coal reserve.
In its early years of previous term, the government as contingency and short term measures for confronting power deficit opted for diesel and furnace oil based power generation. Business community welcomed it. But such initiative still goes relentless even after nine years of the government in consecutive terms. What do you say?
For confronting the existing and emerging power crisis,costly liquid fuel (furnace oil and diesel) based power generation expeditiously was the only option. We supported the government initiative as short-term contingency measure. At the same time, we also expected that the government would achieve success in implementing medium and long-term power generation plans.Mid-term plan achieved success but none of the large baseload power plants programmed under long term has started commercial operation yet. Consequently what was contingency plan has now being extended well beyond the term. New power plants are coming. This was not expected at all.
Power crisis continues for delays in imported coal and LNG-based power generation. What do you think can be options other than expensive imported liquid fuel?
We are not against acquisition of fuel required from any sources.But this must not be done leaving our own primary fuel buried underground. Initiative must be taken right now for mining own superior quality coal. Simultaneously, exploration campaign for new petroleum resources at offshore and onshore must be expedited. Of course we have to also import primary fuel for managing deficit.
Government has taken up major initiative for exploring petroleum resources using national E&P company BAPEX. What are your views?
Please note that exploration of petroleum resources must be better planned and better coordinated. Resolving maritime boundary disputes with Myanmar and India has been acknowledged as a major success of the present government. But failing to achieve any success or even failing to start deep water exploration till now is unfortunate, though India and Myanmar advanced well ahead. We must critically evaluate our failure and take appropriate action as soon as possible.
The initiative for drilling 108 wells by BPAEX is appreciable. But experts observe that BAPEX alone cannot do this. The proven recoverable reserve of our gas is depleting fast. In my opinion, BAPEX alone cannot meet the exclusive obligation for onshore exploration. IOCs must also be engaged side by side of BAPEX through PSC in onshore also.
PSC financial and fiscal incentives must be updated following the documents of neighbors for attracting IOCs in Bangladesh.
Government has taken major initiative for industrialization aiming at achieving national visions of 2021 and 2041.But acquisition of fuel and ensuring sustainable supply at affordable price remains a huge challenge. What are your views?
There are few Export Processing Zones and different industrial belts. Quality power supply on uninterruptible basis is not available there. Gas supply situation is more critical. The government has gone for another Specialized Economic Zone (SEZ). Sustainable supply of quality power and fuel is essential for achieving 2021 and 2041 visions. These must be supplied at appropriate price so that industries retain competitiveness in global market. Hence, exclusive or major reliance on imported fuel may not let us achieve that.
Do you think the growth rate of industrialization is appropriate for transforming into a developed economy? If not, what are your suggestions?
Industrial growth is now remains at a standstill situation for energy crisis. Higher growth of industrialization means growth at 27-30%. It cannot be achieved without sustainable supply of quality power and fuel at appropriate competitive price. From DCCI, we submitted to the government a comprehensive proposal for exploring, exploiting and utilizing own fuel resources. Situation could have been very different now had the government paid heed to our suggestions and acted accordingly. Many interested foreign investors are returning after primary discussions with us knowing about the uncertain power and fuel supply situation.
Experts have observed that Bangladesh would become over 90% reliant on imported primary fuel if local coal reservesare not exploited. What are your views?
It will create a deadly impact on Bangladesh economy.Around 100% imported fuel could be the only option if Bangladesh does not have own primary fuel. We can support such move as Bangladesh has substantial reserve of superior quality coal at mineable depth.
Initiative has been taken for LNG import for meeting gas deficit. It is being told that LNG will be supplied at cost price meaning imported price. Can local industries remain competitive at that price?
There is no immediate solution for meeting present gas deficit other than importing LNG at this moment. But supplying LNG at cost price won’t keep local industries competitive at all. We have planned to arrange a workshop at the end of the month for LNG import and its probable pricing impacts on industries. We will propose a pricing mechanism for LNG. Industries, however, have to be gradually made capable for absorbing the price shock. If industriesare asked to absorb the entire price shock, straightaway stagnancy would be inevitable.
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