Tata byebye?

A Tata Group investment project in Bangladesh has got terribly trapped in the politics of gas and nationalism

Pranay Sharma Dhaka

In October 2004 Ratan Tata ignored the advice given by the Ministry of External Affairs (MEA), went ahead and signed an ‘Expression of Interest’ with the Bangladesh government for one of the largest foreign direct investments in the country. Two years later many in South Block believe that, indeed, Tata had jumped the gun.

Despite prolonged and hectic negotiations with Bangladesh’s leaders and officials, the Tata Group has not managed to get the crucial nod from Dhaka. Hence, the Tata Group was forced to announce recently, "We have no option but to suspend further work on these projects."

The Tata Group has plans to set up steel and fertiliser plants, engage in open cast mining of coal and power generation in Bangladesh with an investment of over  $3 billion. But signals from Dhaka clearly suggest that no decision on the Tata Group's investment plans would be taken before the end of the national elections, due in January next.

The Tatas are aware of this. They were quick to make it clear that suspension of the investment plan does not necessarily mean a withdrawal from the proposed projects. "We are firm believers in the economic development of Bangladesh and will continue to monitor opportunities in the country closely," said S Manzer Hussain, resident director of the Tata Group in Dhaka.

Irrespective of whether the group is  able to find the right balance in the economic development of Bangladesh and investment opportunities, the episode has highlighted the Bangladesh political leadership’s inability to take a stand on bilateral relations with India. And the reluctance that the Indian foreign ministry had shown in encouraging the Tata Group to invest in Bangladesh stemmed from the status of New Delhi's relations with Dhaka.

India's relations with Bangladesh has gone through several highs and lows in the past three-and-half decades. The strains in the ties have been more visible whenever the Bangladesh National Party (BNP) or a non-Awami League (AL) regime has ruled Dhaka. When the BNP came to power in 2002, India made it clear that it was willing to seriously engage with Bangladesh to strengthen bilateral ties. But the Khaleda Zia government did not show much interest in the Indian offer. The systematic targeting of the Opposition in Bangladesh, the total indifference to the presence of Northeast insurgents on its soil, the reported patronage to ISI-trained terrorists by sections of the ruling establishment and the frequent use of the anti-India plank to ward off any criticism directed towards her government, has hardened New Delhi's stand vis-à-vis Dhaka. With fresh strains appearing in the bilateral relations, Indian policymakers felt that the Tata Group’s investment plans in Bangladesh would dilute India's ability to turn on the heat on the recalcitrant neighbour.

To say that the BNP government was under tremendous international pressure after month-long political violence and the threat from Islamic fundamentalist forces to rip apart the country's fabric, would perhaps be an understatement. But despite the turmoil, Bangladesh’s economic growth continued at a steady pace of 6 to 6.5 per cent a year. Though much of this came from Bangladesh's textile industry, the fact remains that despite pulls and pressure from different quarters, it did not turn into a basket case as many had predicted.