Energy & Power

Debate

No Scope for Canceling International Contact Unilaterally
Abdul Awal Mintoo

Multiplicities of problems are occurring in our country now regarding FDI, particularly FDI in the energy sector. Although the foreign investors have started working within the framework of agreements with the government, still problems arise there in regard to the materialization of the agreements.

Demands have been articulated from different circles to nullify the agreements under the assumption that they are detrimental to the interest of the country.

Explaining the situation noted businessman and ex-President of FBCCI Abdul Awal Mintoo in an interview with the Energy and Power said that implementation of an agreement or contract is essential for functioning of the market economy. Agreements are made for realization. Once you reached an agreement you can not cancel it at your whims. The conditions for nullifying of an agreement are usually written in the agreement itself. There is no room for canceling an agreement unless the reasons are already articulated in the agreement. If one cannot act according to the provisions of an agreement or if the agreement is not materialize appropriately, it can be cancelled on that ground. So far I know and I believe, no government in any civilized society can not even think of nullifying an agreement unilaterally.

Let’s take a look at the history, when internal and international trading began about 500 to 700 years ago, the tradition of agreement emerged through different means. Sometimes those agreements were unwritten. In case there were disagreements they were resolved through court or other forms of conflict resolution. The thing is if agreements are cancelled unilaterally compensation have to be paid according to the provisions of the agreements and there is no alternative to it.

EP: Presently the most widely discussed issue is the role of the Asia Energy Corporation in the Phulbari Coal Mine development. There have also been discussions on the agreement of Niko. The organization of those who do not want these mining developments, such as Phulbari Protection Committee and National Committee for the Protection of Oil, Gas, Port, Electricity and Mineral Resources, have been demanding the nullification of these agreements. At one point of the movement in the Phulbari several people were shot dead by the police on August 26, 2006. After that Asadul Habib Dulu, deputy minister and Rajshahi Mayor Mizanur Rahman Minu reached an agreement with the people in the movement to cancel the agreement with the Asia Energy. How do you like to assess the whole matter?

Mintoo: Look the legitimate government of a sovereign country reached an agreement with a foreign corporation. After that the government cannot cancel that agreement unilaterally at its own will. If the government does cancel the agreement unilaterally the compensation payment, according to the condition of the agreement, will be so huge that the Central Bank of a country like ours will not be able to afford it, when the corporation will demand compensation and when the court will rule in favor and Bangladesh cannot exist within the world community in a civilized way without paying the same.

Now the question is who wants to cancel the Phulbari Coal Mining agreement - the National Committee, which is being guided by and controlled by vested interest. It really has no moral right to demand the cancellation. I cannot help being amazed when the Bangladesh Economic Association raises this demand. I believe they are highly educated people and they understand reasons and economics. How do they raise such unrealistic demand?

Let’s be clear about one thing when you get higher education on economics in any part of the world you need to study its legal aspects, for example commercial law, financial law. A big part of these legal studies is different aspect of an agreement. I am sure economists know these. So why are they behaving this way is beyond my understanding.

Agreements in our country are on the basis of the law of 1872. There are hundreds of rulings from the High Court and the Supreme Court on agreements materialization and related conflicts. We need to remember that its not foreign or international courts, but our High Court and Supreme Court also have many ruling on these and these rulings are quite strict in nature.

The question of materialization of agreements is related to the evolution of civilization. The more civilized and educated a society is, the more strict is the question of materialization of agreement. A sovereign country has no room to stray from that position. I am not only talking about the present agreements between the government and the corporation.

If there are possibilities of violation of agreements between non-governmental organizations, the government has a responsibility to make sure that the agreement is respected.

EP: How do you assess the agreement between the government and the activities of those who were mobilizing to stop the materialization of the Phulbari mining project?

Mintoo: There are several issues involved here. First, the government reached an agreement with Asia Energy in regard to Phulbari Coal Mining. Asia Energy was working step by step within the framework of the agreement but the National Protection Committee raised demands to cancel that agreement. A movement took place. Now the government reached an agreement with the people in the movement to cancel the agreement. I think the government has played the role of a hypocrite’s thief. The government is trying to play both ways. This is an illegitimate act of a legitimate government. Moreover, one has to ask whether the movement has a legal validity. As far as I know this is not a registered organization and the government can not reached an agreement with them. In the final analysis whether they are legitimate or illegitimate, their agreement with the government lacks legitimacy.

EP: Some people are saying that the agreement is not transparent. It is against the interest of the people. What is to be done then?

Mintoo: Let’s also remember that the process of signing the agreement began during the regime of the military ruler Ershad. After a long negotiations involving several government bodies, international experts from UNDP and International advertisements, the Contract for exploration and coal mine development was signed in 1994 during Khaleda Zia Government which was later assigned to Asia Energy as per the contract provisions and with prior government approval. You see the worldwide use of coal began around the year of 1750. Rail engines were run by coal, so were the naval ships. Coal was widely used in the production of electricity, steel mills used to run on coal as well. Event at that time there were coal reserve in this territory, which is now Bangladesh. But since then first the British then the Pakistani ruler did not want development in this region they did not initiate any coal exploration. Although coal reserves in our country were discovered in the 1960s, we have not been able to begin its real use in Bangladesh yet.

It does not matter under which government the agreement for coal development was reached. It is a positive step. If the agreement is really unequal or against the interest of the country then people, who are responsible for signing this agreement should be identified and punished. But there is no scope for canceling this agreement unilaterally.

Under this pretext its need to be mentioned that you cannot protect national resources by misguiding people or organizing movements by providing false information to people. We need to have skilled and educated manpower for this. But unfortunately there is lack of this manpower among our politicians and bureaucrats. This is an age of intellectually competitive economy. Unless we can participate in it through the development of knowledge we would not be able to protect our national resources or interests by organizing movements.

It’s also important to mention here that if any provision of the agreement is unequal we need to explore whether there are scope for its amendment or evaluation in the agreement itself. Instead of doing that it has become an obsession of some vested interest to cancel this agreement. We should not allow this.

We can raise another point here that there were agreements with international corporations to explore oil and gas. The issue of determining the price was also specified. It was decided that the price of gas will be determined on the basis of price of high sulphur fuel oil in the Singapore market. There was a condition that irrespective of the market price the maximum price for each ton for Cairn will be 120 US dollars and for Occidental (presently Chevron) would be 140 US dollars. IOCs says that the present market value for oil per ton is 435 to 525 US dollars. Will there be any scope for amending the agreement?

The answer is no. Once an agreement is signed each clause of it is equally applicable to all party’s concerned. Now if the government in PSC demands that gas been purchased at the previous rate then you cannot get any investment.

What all the experts need to do is to review whether Asia Energy is living up to the agreement and whether the work they are going to do in the future for the development of the mining will be compatible with international standard and with the condition of the agreement. If we can do that, that will serve the country and the people.

EP: Recently a teacher from the law department of the Dhaka University while discussing the agreement on television mentioned that although there is no provision for the cancellation of the agreement the government can unilaterally cancel it if is a bad contract. The international court will also rule in its favor. What do you think of it?

Mintoo: In such a situation instead of wasting time the government should go to the international court to prove that it is a bad contract & hence liable to be canceled. But until then the government has to work to materialize this agreement. The government should also create an environment for the application of the agreement by bringing people who are hindering that process under control.

EP: There are debates about the nature of the mining. Some local experts are saying open-pit mining should not be allowed under any circumstances, how do you assess this point?

Mintoo: I am not an expert. Therefore I don’t want to say on this issue. But I am in favour of any technology that can profitably extract the maximum possible amount of resources. If the government has reservation about the open-pit mining of the Asia Energy then they can consult with international experts. The government can also receive consultants as part of the international cooperation in the energy sector. It will be easier for the government to take the decision based on the advise of these experts & consultants.

EP: I am sure you know that the last 4-party alliance government formed an expert committee to review the Phulbari Mine development plan offered by the Asia Energy and to make appropriate recommendations. The committee has expressed its opinion on number of issues by going beyond the TOR (Terms of Reference). What’s your opinion on that?

Mintoo: I really don’t know what was in the TOR. As far as I understand evaluating the agreement or recommending its cancellation is beyond the scope of these kinds of committees. What they should have done is to evaluate the proposal from a technical point of view. They could have also recommended the inclusion of new, needed clauses. You know that in recent times there has been a tendency in the country to accomplish everything in an arbitrary way. The action of the committee was possibly part of that dynamics.

EP: Former Energy Adviser Mahmudur Rahman, while exchanging ideas with the journalists mentioned that the agreement with Asia Energy was anti-state. The people who are responsible for this should be tried. What’s your opinion to this?

Mintoo: He should not have said that from the position of an energy advisor. I think it was a political statement. I think he presented the issue in an unprofessional way.

EP: You know that the museum that the Asia Energy built in Phulbari based on the sample obtained through its exploration was totally destroyed on August 26 last year. The police know who did it. But because of the agreement between the last government and the anti-Asia Energy movement nothing can be done against the perpetrators, what do you thing about that?

Mintoo: I think it was a national asset. Action should be taken against the people who have destroyed the national asset.

EP: There is yet to be an investigation on actual happening in Phulbari, the reason behind it, or reasons behind the police opening fire. Do you think that the present government should investigate the whole affair?

Mintoo: Certainly. After full investigation the government should take action against those, who are responsible for this incident. After that the government should arrange for the revival of the project.

EP: Let me talk about another issue. Asia Energy proposed to built a 500MW power plant at the mine mouth. What’s your opinion on that?

Mintoo: Look, I believe that immediate step should be taken for the fastest possible extraction of natural resources and ensuring the welfare of the people and the government should take immediate steps to materialize the agreement that were articulated to meet that goal and the Phulbari Coal Mine development project works for that purpose. Then I think we should allow even a 1,000 MW power plant if possible.

Rashed Chowdhury