US embassy cable - 05DHAKA330

UNCLAS SECTION 01 OF 03 DHAKA 000330 
 
SIPDIS 
 
SENSITIVE 
 
STATE FOR EB/AMBASSADOR GROSS, DOC FOR A/S GALLAGHER 
 
E.O. 12958: N/A 
TAGS: OVIP, ETTC, PGOV, BG 
SUBJECT: SCENESETTER FOR YOUR VISIT TO BANGLADESH 
 
1. (SBU) We welcome your visit as an excellent opportunity to 
advance our bilateral economic agenda and specifically the 
importance of telecommunications for economic growth, 
modernization, and diversification.  The last senior USG 
economic official to visit Bangladesh was A/USTR Ashley 
Wills, who came in August 2003 to pursue our now pending 
Trade and Investment Framework Agreement and to discuss the 
recently terminated petition to withdraw Bangladesh's GSP 
benefits because of EPZ labor standards (see below).  Science 
and Technology Minister Khan has assured us that he is 
personally committed to making your visit a success. 
 
2. (SBU) You will find your Bangladeshi interlocutors: 
 
-- Eager to convince you that, contrary to a recent article 
in the New York Times, Bangladesh is a moderate, democratic 
country, with a robust economy that is open to foreign 
investment and new technology. 
 
-- Focused on the South Asian Association for Regional 
Cooperation (SAARC) heads of government summit scheduled for 
February 6-7, a massive logistical undertaking for the BDG. 
Official pre-summit meetings begin February 1. 
 
-- Promoting Bangladesh as a cheaper IT alternative to India, 
provided obvious telecommunication bottlenecks are overcome. 
 
Country Overview and Bilateral Backdrop 
--------------------------------------- 
 
3. (SBU) Bangladesh is a predominantly Muslim country of 140 
million people living in an area slightly smaller than Iowa. 
Since independence from Pakistan in 1971, it has made 
significant socio-economic advances, including almost halving 
its mortality and population growth rates and becoming nearly 
self-sufficient in rice production.  The take-off of the 
textile sector in the 1980s employed, and empowered, several 
million women.  Free of major sectarian or ethnic divides, 
Bangladesh has a long, if sometimes frayed, tradition of 
religious and political tolerance. It is the world's leading 
contributor to UN peacekeeping operations, with more than 
8,000 troops deployed to 12 countries. 
 
4. (SBU) Since the return of democracy in 1991, Bangladesh 
has had three relatively free and fair national elections. 
However, the enmity between the leaders of the two major 
political parties, the Awami League (AL) and the ruling 
Bangladesh Nationalist Party (BNP), degrades democratic 
institutions and practices.  Corruption is rampant, law and 
order is poor, governance is weak, due process is unreliable, 
and infrastructure is grossly inadequate. 
 
5. (SBU) U.S.-Bangladeshi relations are traditionally warm, 
with even Islamists noting the leadership role USG aid played 
in rebuilding Bangladesh after its devastating war of 
independence.  However, virtually all Bangladeshis oppose 
U.S. actions in Iraq; many view the war on terror as 
anti-Muslim.  More positively, in 2004, the BDG ended a 
13-year bilateral impasse by passing legislation to extend 
international labor standards to the EPZ's.  It also launched 
a major, continuing effort to combat trafficking in persons, 
earning USG reassessment of its performance from 
sanction-threatening Tier III to Tier II watch list.  USG 
objectives in Bangladesh include boosting Bangladesh's 
counter-terrorism capabilities and performance, promoting 
credible elections in 2007, improving the deteriorating human 
rights situation (including attacks on religious minorities 
and more than 100 extra-judicial killings by police in the 
past seven months), and supporting economic reform and export 
diversification. 
 
6. (SBU) The U.S. is Bangladesh's biggest trading partner, 
taking 35 percent of its garment exports, and, at $1.4 
billion, its biggest foreign investors.  A record 80 
companies are set to participate in the 2005 U.S. Trade Show 
sponsored by the Bangladesh American Chamber of Commerce and 
the Embassy.  Also, in partnership with the U.S. and 
Bangladeshi private sectors and the BDG, the Embassy is 
organizing a Bangladesh road show this spring to Baltimore, 
Houston, and St. Louis to promote bilateral trade and 
investment. 
 
Political Overview 
------------------ 
 
7. (SBU) The BNP ruling coalition includes two Islamist 
parties, one of which is openly extremist and anti-Western. 
BDG decision-making is centralized in the hands of Prime 
Minister Khaleda Zia, her son and heir apparent, Tariq, and a 
handful of confidants.  They are increasingly focused on the 
general election expected in early 2007 and in becoming the 
first government in Bangladesh to win re-election.  The 
opposition Awami League has failed to generate popular 
momentum for its one-point agenda of forcing the BNP, which 
has a huge parliamentary majority, to hold early elections. 
While the Awami League and its leftist partners might try to 
generate demonstrations in the run-up to the SAARC summit to 
embarrass the BDG, a long holiday season ending this week has 
put a damper on political activity. 
 
8. (SBU) In 2004, there were several high-profile incidents 
of security concern, including: the seizure of a huge illicit 
arms shipment at Chittagong port, a grenade attack that 
seriously injured the British High Commissioner in the 
provincial city of Sylhet, and the August 21 grenade assault 
at an Awami League rally that killed 20, injured about two 
hundred, and narrowly missed killing AL President Sheikh 
Hasina.  The BDG's inability or unwillingness to solve such 
incidents fuels speculation that the perpetrators, Islamist 
or otherwise, enjoy political protection. 
 
Economic Trends 
--------------- 
 
9. (SBU) The BDG continues to make steady if gradual 
macro-economic progress. It has met the budget and financial 
reform targets of its IMF structural reform program, and in 
June it received the second tranche of its support fund. 
Privatization, however, remains stalled.  A new 
Anti-Corruption Commission, created last year under donor 
pressure, has gotten off to a shaky start with serious doubts 
about its independence and capabilities. 
 
10. (SBU) Bangladesh remains a poor country with per capita 
annual income under $400.  It is beset by periodic natural 
disasters; last summer's exceptional flooding submerged 
three-quarters of the country.  The export economy is 
over-depedendent on textiles, and economic growth rates in 
recent years -- of 5 to 7 percent -- are respectable but 
insufficient for eroding poverty levels. 
 
11. (SBU) That said, there are bright spots.  Parts of the 
textile industry like knitwear may be well placed to compete 
in the post-MFA era, and several infrastructure-related 
sectors like telecommunications have the potential for strong 
growth, in part because they are starting from such a low 
base.  In numerical terms, there is a large middle class that 
in Dhaka is fueling a boom in affluent shopping centers, 
restaurants, residential properties, and high-end automobile 
dealers. 
 
12. (SBU) The Bangladeshi business community recognizes that 
Bangladesh's telecom constraints are severe and hinder IT 
development, including Bangladeshi aspirations to compete 
with India for call center contracts.  Other handicaps for 
Bangladesh are its generally inferior standards of education 
and English-language skills. 
 
Key Points 
---------- 
 
13. (SBU) BDG officials assert that Bangladesh is open for 
investment, and that concerns about corruption, instability, 
governance, and extremist Islamist influence are misplaced or 
exaggerated by foreign (usually means Indian) media 
reporting.  We stress with Bangladeshis: 
 
-- We want Bangladesh to succeed, economically and 
politically. 
 
-- Corruption is a big tax on growth, impedes investment, and 
undermines confidence in economic decision-making.  The issue 
is not whether Bangladesh is more or less corrupt than 
another country, but how corruption can be visibly and 
effectively reduced. 
 
-- Rule of law, including contract sanctity and the 
reliability of due process, is also important.  In that 
context, human rights, and the behavior of government 
officials like police, are also critical because they shape 
perceptions of a country's potential as a productive partner. 
 
Watch Out For 
------------- 
 
14. (SBU) Bangladeshis are apprehensive about the future of 
their textile industry in a quota-free world.  Many insist 
the USG, for political or humanitarian reasons, should grant 
Bangladeshi garments duty-free access to the U.S. market.  We 
note this is a sensitive political issue in the U.S., and 
that Bangladesh should focus instead on export 
diversification (e.g., the successful shrimp industry). 
Moreover, we suggest, Bangladeshi exporters in general would 
benefit greatly from reduced corruption and high 
infrastructure costs. 
THOMAS