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The IMF and CNG pricing
By indication, the government has surrendered its previous half-hearted stand against the IMF; it has accepted the so-called BOP support at a time when there is no existing or impending crisis in the BOP. To qualify for this fund, one might presume, the government had to agree to raise CNG price by one hundred per cent at a stroke and do many other things that we might know only in time, writes Nitai C Nag
WHENEVER IMF people come, some inauspicious developments occur in the market place – this is how the concerned citizenry here views the International Monetary Fund’s development role, particularly, vis-à-vis the poor countries of the world. Most recently, the government enacted a one hundred per cent increase in the price of compressed natural gas price, as some IMF people were visiting Dhaka and lecturing upon the efficacy of hiking prices of public utilities. Public reaction to the phenomenon as appears in the print and electronic media are but vivid displays of public perils. On one occasion last year, probably for the first time ever in the country’s history, our policy-bosses dared to reject a piece of unsolicited advice from a visiting IMF team. The suggestion was that Bangladesh should seek a second poverty reduction growth facility loan from the IMF as the tenure of the first such programme had expired two years ago. The government’s no to the suggestion was hailed widely throughout the country. Experts both within and outside the government were of the view that it was time to assess how much the first PRGF loan did perform. Some were of the view that the IMF itself was meant for providing the balance of payments assistance and since Bangladesh was not having troubles with the BOP, the IMF should be away. Those who maintain interests might still remember how utterly disappointed the members of the delegation looked as they were returning empty-handed from a place, which, in turn, has a tradition of being but overly obliging to their asking. The head of the team was lamenting, while none were listening, that Bangladesh would come to realise later the importance of what they were saying. After a few months in March 2008 the government informed the people that it was borrowing short-term loans to the tune of $220 million as BOP support from the IMF. In addition, the government also borrowed $300 million as short-term loan from an overseas bank to support the Bangladesh Petroleum Corporation. Total foreign debt accumulation thus increased by over half a billion dollars. Concerned experts were questioning the merit of borrowing on short-term basis on commercial terms despite there being idle foreign exchange reserves. Why does not the government spend from foreign reserves since it can thereby save in terms of interest charges? It may be noted that maintenance of foreign reserves involves high opportunity costs, which include among others, the foregone opportunity of the use of the scarce financial resources, interest foregone, and likely depreciation of values of currencies reserved. A country by holding foreign reserves does, of course, earn interest on its balance on Libor rate, which, in turn, is much less in magnitude than the cost of commercial capital. Considering the rate of growth of Bangladesh’s foreign reserves it may well be presumed that an amount equivalent of the short-term loan could well have been made available from the foreign reserves, which amounted to nearly $6 billion when the loans were received. Anyway, the government will have to draw down reserves to pay up the interest and principal of the commercial loan after about nine months when the debt will mature, since there visibly appears other alternative source from which the financing can be done. Unfortunately, only a few months after the IMF team’s failure to persuade the government about new PRGF loan, and a shake-up in the government that involved the resignation of a number advisers and appointment of a number of new advisors and assistants to the chief adviser, the government informed the people that the it was considering raising of CNG prices. By how much was not mentioned then. After arrival of a new IMF team came the announcement of a nearly one hundred per cent hike. The team leader besides hailing the CNG price hike urged the government to do more, especially, raise public utility tariffs. Rising prices in general is Bangladesh’s gravest problem, he said, and added that to cope with the situation the government should, among others, raise revenue and maintain reserves at high levels. But how much conducive is the CNG price hike to the above? Rising costs of fuel through its repercussion on price level is to further raise inflation. Higher transport costs will add to the already excessively high prices of essentials, particularly food items that are transported from rural to urban areas. Demand for higher wages will follow. Considering the already deplorable real wage situation such demands cannot simply be ignored. There will thus follow a chain reaction of the forces involved. This will leave its likely damaging effect upon competitiveness of the manufacturing sector. Imported items will appear relatively cheaper. Rising import due to this factor alone will strain the balance of payments. The borrowed BOP support thus is to vanish to worsen again IMF people’s headache over level of reserves. Again higher price level will lower demand for goods and services to cause slump in sales. The government’s revenue earning which largely depends upon sales taxes, now known as VAT, will thus decline. Also the additional amount of revenue expected to arise from the sales proceeds of CNG may not be as handsome as is expected. The dampening impact on business activities as implied above is to leave its negative effect upon demand for CNG itself. Those who were planning to buy their own autos, for example, will tally their plan against the new reality. The newly added tensions in the road transport sector as evident from the scuffles between the parties involved ever since the announcement of CNG price hike also will leave its damaging effect on the productivity of society. The government as ever is simply helpless to check transport owners excesses about charging higher fares from commuters in the pretext of enhanced CNG price. Although the government announced that there would be no rise in bus fares, the owners of buses conveniently ignored this order. From experience they expect that they will be winners. That is, the government will ultimately yield to their demands however unreasonable those might sound. The familiar scenario of the commoners being made to pay additional prices unjustly is thus most likely to prevail. By indication, the government has surrendered its previous half-hearted stand against the IMF; it has accepted the so-called BOP support at a time when there is no existing or impending crisis in the BOP. To qualify for this fund, one might presume, the government had to agree to raise CNG price by one hundred per cent at a stroke and do many other things that we might know only in time. It may be emphasised in this context that natural gas is a non-traded good not unlike unskilled labour in this country. Non-traded goods/services tend to sale cheaper in the less developed countries. But their contribution to the overall competitiveness of an economy is worth well appraisal as implied in the discussion above. Unfortunately, in the garb of development partners the infamous organisations, the IMF and the Asian Development Bank (remember the ADB’s preoccupation with energy pricing in Bangladesh) are out to deprive commoners of these countries this benefit. A government is supposed to protect commoners against such unholy designs. Nitai C Nag is an economics professor at Chittagong University
Eastern election can lead to new discontents
One of the most controversial features of the forthcoming elections in the east is that the TMVP continues to retain its weapons despite opposition and civil society protests. This means that, by definition, the elections are seriously flawed at the outset, and cannot be considered to be either free or fair, writes Jehan Perera
Those visiting Trincomalee in the east even for a short time would be impressed by the evidence of developmental work taking place that is changing the landscape. The most obvious work that is being done is the reconstruction of the road network. Large tracts of the highway connecting the town to Colombo are partially closed off on one side, as the road is being widened and resurfaced. This gives rise to clouds of red dust and to slow moving traffic. There are also evident signs of new buildings coming up. The construction of a new market in Trincomalee town will be one of its crowning jewels. Trincomalee would appear to be a success story of the government’s strategy of clearing out the east of the Liberation Tigers of Tamil Eelam, restoring normalcy and unleashing the forces of development that will improve the lives of the people. There was general agreement that the security situation had improved in the past several months. The strengthened presence of the security forces after the declaration of elections has also contributed to the lessening of incidents of violence. The improving conditions of security have also contributed to the possibilities of doing a larger quantum of development work. The remainder of the tsunami reconstruction work, for which there was a massive outpouring of international generosity, is taking place at a faster pace, mostly by non-governmental organisations. In these circumstances there is likely to be a sense of confidence within government that the forthcoming provincial elections will yield victory to the government and to its ally, the TMVP. However, the problems that continue to exist in Trincomalee, and which can go against the government, cannot be underestimated. Despite the flurry of developmental activity, Trincomalee remains a very poor town, which does not befit the capital city of a province. Most of the shops are single storey ones, with a battered appearance. Likewise most of the houses have a rundown appearance. The major investments presently being made on the roads, public buildings and other infrastructure, including massive electrical power generation projects, will only yield their fruits to the people in the years to come, but not immediately. But even more significant than the continuing poverty of the region is the absence of peaceful conditions and prospects for peace in the foreseeable future. In the absence of a peace process between the government and the LTTE, there is a sense that the improvement in the security situation is a reversible one, and that the dip in violence will be temporary. The intensity of the fighting at Muhamalai in the north, and the shifting of the theatre of military confrontation from Madhu in the west of the LTTE-controlled Wanni region to the government-controlled Weli Oya in the east which adjoins the Trincomalee district suggests how rapidly the theatre of war can shift. Strategic area With its internationally strategic harbour and also being the connecting district between the Northern Province and the Eastern Province, Trincomalee is a strategic area. As the northernmost district of the Eastern Province, which borders the LTTE-dominated parts of the Northern Province, the possibility of infiltration by the LTTE is high. This may also explain the lesser visibility of the anti-LTTE and pro-eastern TMVP in Trincomalee. Unlike in the Batticaloa and sections of the Ampara districts of the east which are the strongholds of the Eastern Tamil identity, and where the TMVP presence is marked, in Trincomalee it is the presence of the Sri Lankan military is marked. This suggests that the TMVP will be less well-positioned in Trincomalee to take advantage of their position of being an armed group to intimidate their political rivals. One of the most controversial features of the forthcoming elections in the east is that the TMVP continues to retain its weapons despite opposition and civil society protests. This means that, by definition, the elections are seriously flawed at the outset, and cannot be considered to be either free or fair. The basic requirement for a free and fair election is that all the contesting parties are unarmed and not in a position to intimidate both their political rivals as well as voters who will be fearful to cross the path of the armed party. On the other hand, it is widely accepted that so long as the LTTE is armed, it will seek to destroy any serious Tamil political rival, who, therefore, need to keep their arms, if only for self-defence. Reports from the east, particularly from the Tamil dominated parts of the Batticaloa and Ampara districts indicate that the TMVP has been able to subject their political opponents to a high degree of intimidation. Although TMVP candidates canvass for votes without the open use of guns, the power of the guns they keep behind the scene and are prepared to use is also known to the people and to their political competitors. In parts of the east, in Batticaloa and Amparai, the TMVP’s posters are pasted all over while those of rival political parties are barely to be seen, and when seen have been blacked out. By way of contrast, in the Trincomalee district, the public campaigning on the part of all contesting parties, including the TMVP, appears to be at a low level. As a result, the voters in the district are less likely to be intimidated by the TMVP and will have a relative autonomy in choosing for whom they will vote. Nevertheless the fear psychosis among the Tamil voters in the district is so high that they did not wish to say who their preferred party was, unlike the Muslims and Sinhalese voters who are more forthright in their expressions. Complex decision The decision about which party to vote for is likely to be especially complex for the Tamil voters in the east. The improved security situation, the military upper hand obtained by the government and the proliferation of development projects would weigh the balance in favour of the government. A recent public opinion poll by the Centre for Policy Alternatives has highlighted the fact that the economic difficulties facing the people are the biggest problem for all ethnic communities. At the same time the survey also showed that the issue of a peaceful settlement is especially important to the Tamil people who are the main victims of the war and the human rights violations that result from it. The long stalling on the part of the government to come up with a credible power sharing proposal to the ethnic conflict and restart the peace process with the LTTE, coupled with slow military progress in the north, points to the possibility of the war being extended indefinitely. During the course of the escalated conflict for the past two years, they have been subjected to large scale displacement and other human rights violations, including child recruitment, abduction of women and political assassinations. The motivation for the Tamil voters of the east to cast their votes against the government can be strong. On the other hand, the traditional rivalry between the Tamil and Muslim communities for dominance in the east has also surfaced during the present election campaign. In the absence of a comprehensive population survey of both the Northern and Eastern provinces, there remains a doubt as to the actual population composition of these two provinces. At the last full census that took place in 1981, the Tamils were shown to be the largest community in the Eastern Province, followed by the Muslims. It is now believed that the Muslims are the largest. This means that the post of chief minister of the Eastern Province is within their reach. A flawed electoral process that combines intimidation of voters and rival political parties by the armed cadres of the TMVP with the government misuse of state resources as already reported by election monitors could lead to a high level of Muslim discontent. With the government bringing in Iran to the centre stage of the country’s foreign policy, the potential for the Muslim population to seek solidarity with their co-religionists internationally in the face of unjust deprivation is now higher than ever. Whoever wins the election and leads the Eastern Province will have a major responsibility to heal the wounds of a politically and ethnically decisive election which is being held under abnormal conditions. Jehan Perera is media director of the National Peace Council in Colombo, Sri Lanka. jehanpc@sltnet.lk
The military option
There is no doubt that American interests could have been safeguarded far better by diplomatic means, using the economic clout of the US. That would have saved thousands of American soldiers and ten times as many Iraqi civilians, and trillions of dollars. But the problematic ego of George Bush, who hides his hollowness and insecurity behind a bluster of noisy arrogance, caused him to prefer war. As to his cerebral prowess, a worldwide consensus has been achieved even before the end of his term in office, writes Uri Avnery
WAR with Syria? Peace with Syria? A big military operation against Hamas in the Gaza strip? A cease-fire with Hamas? Our media discuss these questions dispassionately, as if they were equivalent options. Like a person in a showroom making a choice between two cars. This one is good, and so is the other one. So which should one buy? And nobody cries out: War is the height of stupidity! Carl von Clausewitz, the renowned military theorist, famously said that war is nothing but the continuation of politics by other means. Meaning: war is there to serve policy and is useless when it does not. What policies did the wars in the last hundred years serve? Ninety-four years ago, World War I broke out. The immediate cause was the assassination of the Austrian heir apparent by a Serbian student. In Sarajevo they showed me how it happened: after a first attempt on the main street had failed, the assassins had already given up hope when one of them came across the victim again, by sheer accident, and killed him. After this almost accidental killing many millions of human beings lost their lives in the following four years. The assassination served, of course, only as a pretext. Every one of the belligerent nations had political and economic interests that pushed it into the war. But did the war really serve these interests? The results suggest the opposite: three mighty empires – the Russian, German and Austrian – collapsed; France lost its standing as a world power beyond all hope of recovery; the British Empire was mortally wounded. Military experts point to the shocking stupidity of almost all the generals, who threw their poor soldiers again and again into hopeless battles, which achieved nothing but slaughter. Were the statesmen any wiser? Not one of the politicians who started the war imagined that it would last so long and be so horrible. In early August 1914, when the soldiers of all the countries marched into the war with merry enthusiasm, they were promised that they would be home ‘before Christmas’. No political aim was achieved in that war. The peace agreements that were imposed on the vanquished were monuments of unbridled imbecility. It can be argued that the main result of World War I was World War II. The Second World War was, seemingly, more rational. The man who launched it practically single-handed, Adolf Hitler, knew exactly what he wanted. His opponents went to war because they had no choice, if they did not want to be overrun by a monstrous dictator. Most of the generals on both sides were far more intelligent than their predecessors. And in spite of this, it was a stupid war. Hitler was, basically, a primitive person who lived in the past and did not understand the Zeitgeist. He wanted to turn Germany into the leading world power – an aim that was wildly beyond its capabilities. He intended to conquer large parts of Eastern Europe and to empty them of their inhabitants, in order to settle Germans there. That was a hopelessly obsolete concept of power. Like all ideas of establishing settlements as a national instrument, it belonged to centuries past. Hitler did not understand the meaning of the technological revolution that was about to change the face of the world. It can be said: Hitler was not only an evil tyrant and a monumental war criminal, but ultimately also a thoroughly stupid person. The only aim that he almost achieved was the annihilation of the Jewish people. But even this mad endeavor failed in the end: Jews today have a strong influence on the most powerful country in the world, and the Holocaust played an important role in the establishment of the State of Israel. Hitler wanted to destroy the Soviet Union and reach a compromise with the British Empire. He belittled the United States and almost ignored it. The result of the war was that the Soviet Union took over a large part of Europe, America became the main world power and the British Empire disintegrated forever. Indeed, the Nazi dictator proved, more than anybody else, the utter futility of war as a political instrument at this point in time. After the destruction of Hitler’s Reich, Germany did achieve his goal. Germany is now the dominant economic and political power in a united Europe – but this was attained not with tanks and heavy guns, without war and military might, solely by diplomacy and exports. One generation after all the German cities had become heaps of ruins in the Nazi adventure, Germany was already flourishing as never before. The same can be said about Japan, which was even more militaristic than Germany. It achieved by peaceful means what the generals and admirals had failed to achieve by war. From time to time I read enthusiastic reports by American tourists about Vietnam. What a wonderful country! What a friendly people! What good business can be done there! Only a generation ago, a brutal war was running amok there. Masses of people were killed, hundreds of villages burned, forests and harvests destroyed by chemical agents, soldiers fell like flies. Why? Because of dominoes. The theory went like this: if all of Vietnam were to be taken over by the Communists, all the other countries of Southeast Asia would fall. Each one would bring down its neighbour, like a row of dominoes. Reality has shown that this was complete nonsense: the Communists took over all of Vietnam, without affecting the stability of Thailand, Malaysia and Singapore. When the war memories faded, Vietnam indeed followed the path of its northern neighbour, Red China, but in the meantime China has a flourishing capitalist economy. In the Vietnam War, the stupidity of the generals competed with that of the politicians. The champion was Henry Kissinger, a war criminal whose towering ego disguised his basic stupidity. At the height of the war he invaded the neighbouring peaceful Cambodia and broke it into pieces. The result was a gruesome auto-genocide, when the Communists murdered their own people. Yet many still consider Kissinger a political genius. There are those who maintain that for sheer futility, the invasion of Iraq takes the cake even in this fiercely competitive field. It seems that the political leadership in Washington foresaw the dramatic rise of the worldwide demand for oil. They decided, therefore, to strengthen their hold on the oil of the Persian Gulf and the Caspian Sea basin. The war was intended to turn Iraq into an American satellite and to station there, under a friendly regime, a permanent American garrison that would keep the whole area under control. The results, up to now, have been the opposite. Instead of consolidating Iraq as a united country under a stable pro-American regime, a civil war is raging, the state is tottering on the brink of disintegration, the population hates the Americans and considers them a foreign occupier. The output of oil is less than it was before the invasion, the immense costs of the war undermine the American economy, the price of oil is increasing incessantly, America’s once elevated position in world public opinion has reached rock bottom and the American public is demanding that the soldiers be brought home. There is no doubt that American interests could have been safeguarded far better by diplomatic means, using the economic clout of the US. That would have saved thousands of American soldiers and ten times as many Iraqi civilians, and trillions of dollars. But the problematic ego of George Bush, who hides his hollowness and insecurity behind a bluster of noisy arrogance, caused him to prefer war. As to his cerebral prowess, a worldwide consensus has been achieved even before the end of his term in office. In the 60 years of its existence, the State of Israel has fought six major wars and several ‘smaller’ ones (the War of Attrition, the Grapes of Wrath, the two intifadas and more.) The 1948 confrontation was a war of ‘no alternative’, if one justifies the Jewish intrusion into Palestine by the fact that there was no other solution for the problem of their existence. But already the second round, the war of 1956, was an example of incredible short-sightedness. The French, who initiated the war, were in a state of denial: they could not admit to themselves that in Algeria a genuine war of liberation was taking place. Therefore, they convinced themselves that the Egyptian leader, Gamal Abd-al-Nasser, was the root of the problem. David Ben-Gurion and his aides (and particularly Shimon Peres) wanted to remove the ‘Egyptian Tyrant’ (as he was then uniformly called in Israel) because he had raised the banner of Arab Unity, which they considered an existential threat to Israel. Britain, the third partner, was longing for the past glories of Empire. All these aims were totally negated by the war: France was expelled from Algeria, together with more than a million settlers; Britain was pushed to the margins of the Middle East; and the ‘danger’ of Arab Unity proved to be a scarecrow. The price: a whole Arab generation was convinced that Israel was the ally of the nastiest colonial regimes, and the chances of peace were pushed back for many years. The 1967 war was intended at the beginning to break the siege on Israel. But in the course of the fighting, the war of defence became a war of conquest which drove Israel into a vertigo of intoxication from which it has not yet quite recovered. Since then we have been captives in a vicious circle of occupation, resistance, settlements and permanent war. One of the direct results was the 1973 war, which destroyed the myth of our army’s invincibility. Yet without this being the intent of our government, this war had one positive result: three unusual personalities – Anwar Sadat, Menachem Begin and Jimmy Carter – succeeded in translating Egyptian pride over the successful crossing of the Suez Canal into a peace agreement. But the same peace could have been achieved a year earlier, without war and without the thousands of killed, if Golda Meir had not arrogantly rejected Sadat’s proposal. The First Lebanon War was, perhaps, the most hopeless and dim-witted of Israel’s wars, a cocktail of arrogance, ignorance and complete lack of understanding of the opponent. Ariel Sharon intended – as he told me in advance, to – (a) destroy the PLO, (b) cause the Palestinian refugees to flee from Lebanon to Jordan, (c) drive the Syrians out of Lebanon, and (d) turn Lebanon into an Israeli protectorate. The results: (a) Arafat went to Tunis, and later, as the result of the First Intifada, returned to Palestine in triumph, (b) the Palestinian refugees remained in Lebanon, in spite of the Sabra and Shatila massacre that was intended to panic them into fleeing, (c) the Syrians remained in Lebanon for another twenty years, and (d) the Shiites, who had been downtrodden and beholden to Israel, became a powerful force in Lebanon and Israel’s most determined foe. The less said about Lebanon War II the better – its true character was obvious right from the start. Its aims were not frustrated – simply because there were no clear aims at all. Today Hizbullah is where it was, stronger and better armed, shielded from Israeli attacks by the presence of an international force. After the First Intifada, Israel recognised the Palestinian Liberation Organisation and brought Arafat back to the country. After the Second Intifada, Hamas won the Palestinian elections and later took over direct control of a part of the country. Albert Einstein considered it a symptom of madness to repeat again and again doing something that has already failed and to expect a different result every time. Most politicians and generals conform to this formula. Again and again they try to achieve their aims by military means and obtain contrary results. We Israelis occupy an honourable place among these madmen. War is hell, as an American general pronounced. It also rarely achieves its aims. ICH, April 30. Uri Avnery is an Israeli writer and peace activist with Gush Shalom.

London mayoral elections
It was so mature and nice to see the graceful exit of Ken Livingston, the valedictory handshake of two opponents and the speech of Boris Johnson praising Ken for making the office of London Mayor such an important one for the land. Why can’t our politicians be like that? Why is there this insatiable urge for power and money? Engineer Shafi Ahmed London, UK
Go deep
The Myanmar regime kept Aung San Suu Kyi detained. This is just one side of the story. It has got symbolic meaning. But the real truth is that the generals are ruling the nation for decades by depriving the people of that country of their democratic rights. They are living as aliens in their own country, at the mercy of some so-called wise generals. In all Third World nations, the generals assume the same role. But appreciating someone as a saviour, at a bad time, is one thing, and crowing him as your master is another. We see very much similar characteristics or early symptoms of such a development in Bangladesh. From the very beginning, they started pursuing the ‘minus-two’ formula adamantly. They had stumbled on many unexpected resistances and naturally the trained minds retreated as a part of their strategy. But they never let up. They steadily and stubbornly pursue the same policy instead of looking for a political solution. Besides, they are moving ahead with their own agenda by keeping Islamists into their confidence. It is a dangerous game. MK Khan On e-mail
Emergency and polls
It doesn’t need much labour and vast knowledge as well as wisdom to understand the fact that it is not possible to hold a credible election under emergency which normally deprives people of many fundamental rights that are very essential for a democratic society. This, though late, has been realised by many and the new US ambassador to Bangladesh is one of them. Last year when the Pakistan government imposed emergency, the Commonwealth and the international community reacted sharply and the government was compelled to withdraw the emergency. But in the case of Bangladesh, they seem to be indifferent regarding the emergency. So the question arises: are the USA, UK and some other nations the actual planners and nurturers of emergency in Bangladesh? Abul Kalam Azad Barisal, via SMS
Hasina’s retirement
I read Imtiyaz Hussain’s comment with interest. He called for Hasina’s retirement and justified his statement by citing the example of civil servant’s retirement. Unfortunately for him, the justification has made his point rather weak. Just look at our autonomous and semi-autonomous organisations and see how many of them are headed by the ‘retired personnel’. Also look at our caretaker government. How many ministries are now headed by the ‘retired’? As a ‘retired’,’ Hasina could easily become the head of the Awami League. Waheed Nabi England
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Next on Quick Comments
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a. Rioting workers set fire to 2 launches: 50 hurt, 10 launches vandalised as shop owners, boatmen clash with police at Keraniganj (New Age, May 5)
b. Hasina says she must contest general elections (New Age, May 5)
c. Cyclone Nargis kills 351 in Myanmar (New Age, May 5)
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