Wednesday, October 31, 2012

Whither Bangladesh’s Economic Diplomacy?

Daily Sun
Anniversary issue
October, 22, 2012
M. Serajul Islam 

A major thrust of the AL Government in foreign policy in its last term in office (1996-2001) was emphasizing upon the importance of economic diplomacy. In fact, economic diplomacy was the cornerstone of the Government’s foreign policy goals in that term.  On her official visits to China soon after assuming office in July, 1996 and to Japan a year after, economic diplomacy was the key element of Prime Minister Sheikh Hasina’s foreign policy initiatives. Wherever she went abroad on that term, the Foreign Ministry and its Embassies/High Commissions were mandatorily required to arrange investment seminars, meeting business people and investors, etc, to allow the Prime Minister to pursue economic diplomacy. 

In that term, the AL had come to power through a democratic election held under a caretaker government that it had forced upon the BNP led government that introduced the amendment to incorporate the Caretaker Government (CG)  system in the constitution. It went before the world to claim that the CG system was its contribution to democracy; to help developing countries hold free and fair elections to reflect popular will in the change of government. In that term, Sheikh Hasina went to the World Summit on Micro-credit in Washington in 1997 holding the hands of Dr. Mohammad Yunus claiming with him credit for establishing micro-credit on the world stage that was then beginning to capture the imagination of the western world.  

The Prime Minister was also able to push Bangladesh-India relations ahead achieving an agreement on the Ganges Water Sharing and the Chittagong Hill Tracts Accord in that term.  She was under no external pressures. In the country she was in control of domestic politics except for the usual pressure from the opposition.. Thus she was able to lead the government with a sense of direction and purpose where pursuit of economic diplomacy fitted into foreign policy and governance like the hand into the glove. 

In her current term in office, the performance of her government in economic diplomacy has become a victim of the government’s over-all failure in governance.  The mess made by the government with the funding for the Padma Bridge is in everybody’s mind and the major subject of discussion in the country at present. Its failure to deal with the World Bank diplomatically on the latter’s concerns over allegations of corruption led to Bank to postpone its loan of US$ 1.2 billion and later cancel it altogether. With the World Bank actions, the two other co-financiers, the ADB and JICA, also withheld their contributions for the US 2.7 billion project. 

The government went on media campaign against the WB after the cancellation instead of negotiating with it to meet the latter’s concerns. The Prime Minister, her ministers and party leaders accused the World Bank in undignified languages that insulted an international financial institution that has so far contributed over U$ 16 billion to Bangladesh’s development efforts and with over US$ 4 billion in the pipeline without accounting for the amount for the Padma Bridge, all at highly concessional rates. The Prime Minister promised to build the PB from domestic resources to raise nationalistic passion against the WB that led to frenzy for collecting money resulting in the death of a student in Rajshahi. The Prime Minister was hailed for her courage and the WB projected as a corrupt, oppressive financial institution by the government and AL leaders. 

In the end, however, the government went back to the WB and submitted itself totally to the conditions of the Bank to reactivate the loan, conditions that are so humiliating that the Bank never dared to impose such conditions on any other country before. The government sacked a Minister; sent an Adviser and a Secretary on leave and cancelled the contractual appointment of another senior bureaucrat to convince the Bank that it was ready to accept all its demands for reactivating the loan. The Prime Minister’s Adviser Dr. Gowhar Rizvi was sent to Washington to personally inform the WB that the Government was ready to accept the three remaining demands that the Bank had made many months earlier to provide the loan.  

One demand included the creation of an international panel of experts that will decide on the “progress, adequacy and fairness” of the ACC’s investigations on the Bank’s allegations of corruption. Under this demand, the Bank’s representatives will be a part of the ACC’s investigation team and the ACC will have no power to withhold anything. This demand has not just taken away the ACC’s independence; it has taken away a little of the country’s sovereignty. Another demand will put the Bank and its co-financiers in control of procurement that has led some analysts to call the project as a turnkey one. The Bank also mentioned categorically that the funds will be released only after these conditions are fulfilled no doubt openly flagging its distrust of the government. 

The government’s handling of the PB loan will stand out as an example of economic diplomacy at its worst. It messed up negotiations by dismissing the Bank’s allegations on corruption outright when made at first and going on the offensive. Its cardinal error was to fight the Bank in the media instead of negotiations; allowing party and government leaders to abuse the Bank at will and then meekly surrendering to all the demands of the  Bank to get the loan. Once the Bank agreed to return conditionally, it went to the media to claim victory for the government! In fact the Prime Minister said that the Bank activated the loan because it did not find any proof of corruption. This led the Bank had to issue a harsh statement accusing the government of “misrepresenting” facts and reminded it that loan will not be activated till its concerns about corruption are resolved.  

The government’s failure in economic diplomacy has been visible in many other instances as well. Its dealing with Japan is an excellent case study for assessing the government’s disappointing performance in economic diplomacy. When the Finance Minister was making frantic efforts to pull off a positive reaction from the WB after accepting most of its demands before the government’s most recent capitulation, he had said that the President of JICA will talk on Bangladesh’s behalf with the President of the WB. In fact, the way the news was given to the media, the Minister tried to give the impression that the President of JICA had gone to Washington mainly to plead Bangladesh’s case. In expecting Japan to take up Bangladesh’s cause with the WB, the Finance Minister was blissfully unaware about the way the government has handled its bilateral relations with Japan. 

Japan has been Bangladesh’s most important development partner since Bangladesh’s independence.  In the past four decades, Japan has contributed to most of the major economic infrastructure projects of the country. In addition, Japan has also contributed to critical areas of socio-economic development of Bangladesh. Yet this government treated Japan like Japan should be grateful to Bangladesh and not the other way round. For instance, Bangladesh kept the Ambassador’s post in Tokyo vacant for over a year and a new Ambassador has been sent to the post just recently. The previous Ambassador was withdrawn under embarrassing circumstances. He was accused by a Japanese woman who worked in the Bangladesh Embassy of sexual harassment, a charge that in the Japanese context is as demeaning and offensive as it can get.  

The Ambassador was kept in his post while the Bangladesh government conducted its investigation!  Common sense should have dictated the Bangladesh Government to withdraw him using one of the many options that are available in conduct of diplomatic relations to take care of Japanese sensitivities. The Ambassador was withdrawn after a delay on many months for investigations to be completed that found him guilty as charged. On return, he has been allowed to carry on with his job in the Foreign Ministry as a Director-General like business as usual. 

Other countries send their best senior career diplomats   or in case of political appointments, individuals of highest distinction, as Ambassador to Japan.  Vice President Walter Mondale was US Ambassador to Japan. It is common place in Japan’s diplomatic circles to come across many ex-ministers as Ambassadors representing their countries. Yet for some unknown reason, the government chose a junior Joint Secreteray who turned out to be an embarrassment for the Government as its Ambassador to Japan. His appointment must have made Japan unhappy; the failure to withdraw him immediately after the accusation of sexual harassment and to have allowed him to join MFA as Director-General without any action against him must have seriously offended Japan. 

It is a wonder of sorts that after such faux pas, the government lacked the sense to keep the post vacant for over a year!  In the diplomatic parlance, a post at Ambassador’s level is kept vacant this long to send a negative message. One wonders what message the Bangladesh Government was trying to send to Japan. After a year of dementia (there is no other way to explain why Tokyo was kept vacant for a year), the Ambassador to Italy has been sent to Japan. Unfortunately, the new appointment has come too late to undo the diplomatic damages already done. The insensitivity over the issue of recalling the last Ambassador and the long delay in sending the new one no doubt are examples of poor conduct of diplomatic relations in general and economic diplomacy in general given Japan’s unquestioned importance to Bangladesh. 

The Finance Minister’s briefing to the media about JICA President’s offer to plead the case of Bangladesh to the WB to reactivate the PB loan after it was cancelled last June is another example that showed little awareness of Japanese sensitivities. For those who understand Japan and the WB know that on the cancellation of the PB loan, the WB must have consulted JICA in a professional manner, outside the media where both were on the same page before the WB made its announcement.  Even if there was a possibility of Japan requesting the WB for reactivating the loan after Bangladesh government submitted to the demands of the WB, it was another diplomatic faux pas to have revealed it in the media as the  Finance Minister had done. Diplomacy does not work that way.  

The Finance Minister and other Ministers of this government unfortunately seem unaware that the conduct of diplomacy is delicate where confidentiality and discretion are matters of essence.  People at WB/JICA do not conduct diplomacy through the media because it is the surest way to kill diplomatic initiatives. In this term, it is not just diplomatic sensitivities that this government has forgotten; it has even forgotten how Japan conducts its aid relations.  The way it handled another mega project, namely the   22 km metro rail project in Dhaka is an example where those conducting economic relations have shown a sudden lack of awareness about Japan’s way of conducting aid relations that they should have known like the back of their hands from nearly 4 decades’ experience of aid relations with Japan. 

Japan agreed to fund through JICA, 80% of the estimated cost of US$ 2.7 billion for the project. Four aid missions came to Dhaka to negotiate the details of the project and its funding. After everything was in place and the agreement was ready for signing, the Air Force objected to allow the metro rail project through the old airport. The cabinet decided to change the route expecting Japan to agree. Japan did not because it is unimaginable in the way Japan conducts its aid reactions that changes will be made when an agreement is at the signing stage. What our negotiators failed to realize is that once the negotiations were complete, authorities in Tokyo went ahead and made the necessary provisions in the budget.  Once the funding fell through, the authorities had nearly US$ 2 billion in its hand that it did not know where to reimburse. Unlike our system, Japan’s parliament that keeps a strict handle on Japanese ODA is very harsh on bureaucrats when something like this happens. 

Somehow this government seems to have an attitude of self-righteousness that is hard to explain, that if a decision is taken by the Prime Minister or at her instruction at the Cabinet; it simply cannot be wrong.  Thus when the Prime Minister decided to go after Dr. Mohammad Yunus and the Grameen Bank, no one in government dared remind her that she was pursuing both on reasons that are not correct and that she was ending up on the wrong side on the most important country, namely the United States, for Bangladesh in pursuing its international goals and goals of economic diplomacy. Powerful development partners in the developed world have also openly expressed their annoyance with the Bangladesh Government on Dr. Yunus and the Grameen Bank. 

Writing for the Wall Street Journal, former US Ambassador to Bangladesh William Milam asked the US Government and the other development partners   to withhold its aid to Bangladesh to impose some sense upon the government to stop it from destroying the Grameen Bank. Sir Richard Branson, the founder of Virgin Airways, in a column in the Times asked the British Government to use its US$ 1.6 billion aid package over the next 3 years to bring some sense upon the Bangladesh government on the GB issue. 

The mindset of self-righteousness that the Prime Minister can do no wrong when dealing with nations and institutions abroad  is what has messed up with the way this government has pursued diplomacy in general and economic diplomacy in particular. It is therefore hardly surprising that the term economic diplomacy that was the heartbeat of the AL government in pursuing its foreign policy goals on issues of economic aid , trade and  foreign investment in its last term is hardly heard or spoken in this term. 

The mindset that the Prime Minister can do no wrong has also made it impossible to build the team work necessary for economic diplomacy to succeed. There is apparently no coordinating mechanism for conducting economic diplomacy.  Ministers and party leaders take upon themselves the responsibility of giving views on issues of economic diplomacy in the media caring little that expressing such views are detrimental to the country’s interests. The way these Ministers and party leaders have gone to the media on PB loan has highlighted this free for all style of conducting the country’s economic diplomacy where the cardinal principle is to guess the Prime Minister’s mind and make every attempt to please her right or wrong caring little for the country's interests. 

As a consequence countries and financial institutions that are important for our economic development are distancing themselves from Bangladesh. Dark clouds are thus gathering over the RMG that contributes 60% of Bangladesh’s export earnings where the country has fallen at odds with powerful labour groups of the US on issues of human rights that the government refuses to acknowledge, let alone address; again because the Prime Minister does not see any merit in the allegations.  Remittance has shown growth but it has been largely as a result of huge amount of black money that was siphoned off from the share market being whitened through the remittance system. New markets have not opened for the country while traditional and huge markets like the one in Saudi Arabia are shrinking, partly on issues of foreign policy where the government again is pursuing this self-defeating policy of self-righteousness. Most recently, UAE, the second largest manpower market, has stopped renewing and issuing new work visas.  

The poor handling of the government over the Padma Bridge loan, a major focus in economic diplomacy for the country, continues. The WB postponed sending two scheduled teams to Dhaka to start negotiations with the Bangladesh Government from 1st of October. When rumours came out in the local media that the postponement has been due to the WB’s annoyance with the irresponsible statements of the leaders of the Bangladesh Government, the local office of the WB issued a statement in which it stated that the two teams will come “within October”. It the statement, the local office underlined that the teams will come only after the WB completes finalizing a 3-5 member team of international experts in corruption that will study the findings of the WB/ACC team on the allegations of corruption and funding for the bridge will start only after the Bank receives a favourable report from this international panel. Poor handling by Bangladesh has thus once again made the much needed loan from the WB uncertain again. 

The AL came to office in its current term with a massive mandate of the people of Bangladesh and support from abroad. It is a tragedy that it wasted great opportunities that came its way and that of the nation on issues that it created for reasons that beg rational explanations. When history reflects upon this AL government , this period will no doubt be described as one when reason and common sense had taken leave of those who ran the government. It is little wonder therefore that economic diplomacy that was so important for the AL in its last term has all but been forgotten in its current term. .  In fact in the totally personalized style of governance based upon the belief that the Prime Minister cannot err that highlights the AL’s current term there is little scope for economic diplomacy or for that matter professional governance. 

The writer is a retired Secretary and former Ambassador to Japan.







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