US embassy cable - 05DHAKA1150

C O N F I D E N T I A L SECTION 01 OF 02 DHAKA 001150 
 
SIPDIS 
 
E.O. 12958: DECL: 03/14/2015 
TAGS: ETRD, EPET, PGOV, BG 
SUBJECT: BOI UPBEAT ON POSSIBLE MEGA-FOREIGN INVESTMENTS 
 
Classified By: P/E Counselor D.C. McCullough, reason para 1.4 d. 
 
1. (C) Summary: BOI's Rahman expressed understanding of the 
postponement of the Bangladesh Road Show and reiterated his 
support for the event.  In reviewing several major foreign 
investment proposals, Rahman noted that Bangladesh's 
diversifying FDI portfolio, especially with Middle Eastern 
investors, gives it new commercial and political options in 
dealing with China and, for that matter, the U.S. and the EU. 
 End Summary. 
 
2 (SBU) On March 14, EconOff met with Board of Investment 
(BOI) Executive Chairman Mahmadur Rahman to inform him that 
we have reluctantly decided to postpone until September the 
Bangladesh Road Show, a three-city trade promotion event in 
the U.S. originally scheduled for May.  After some initial 
disappointment, Rahman expressed understanding and emphasized 
the need for making the show a success.  Delay was a price 
worth paying, he said, to ensure proper planning and 
execution.  U.S. corporate buy-in and involvement is 
necessary to make the event a success, he observed. 
 
3. (C) Rahman reviewed several investment projects being 
pursued by the BOI.  According to Rahman: 
 
-- The Dhabi Group from UAE recently visited Bangladesh to 
initiate discussions for a potential $1 billion investment. 
It left with positive impressions and presented proposals for 
investment in telecommunications and hospitality.  According 
to letters sent to BOI after the meeting, the Dhabi Group is 
waiting for concrete proposals from BOI to make final 
decisions.  Rahman is optimistic about this deal and 
suggested that this could lead to further deals from the 
Middle East. 
 
-- A Saudi business group is interested in investing $2 
billion in the oil industry.  Headed by a former Deputy 
Minister of Labor, it is looking an building a 200,000 bpd 
oil refinery.  The Saudi group has offered 10% equity rights 
in the refinery to the BDG in exchange for land rights and 
associated incidentals.  Rahman stressed that this 
information is not releasable due to its premature status. 
 
-- India's Tata Group is in the feasibility study stage of 
its proposed $2 billion steel and gas project.  At issue is 
whether there are sufficient gas reserves to power the 
project for the 20-year life cycle of the investment.  Tata 
wants guaranteed supplies for  20 years, while the BDG says 
its proven reserves can only guarantee 15 years. although it 
has 50 years of potential reserves.  BDG will undertake 
further exploration to find enough gas to meet Tata's 
requirement.  (Comment: The BDG already has 15-year gas 
supply commitments to the French cement company LeFarge and 
the two UK-owned AES power plants.) 
Tata is expected to present its issues paper to BOI by the 
end of April and begin negotiation of terms by May. Tata has 
named a Country Manager for the Tata Bangladesh project and 
has set-up offices in Dhaka.  Group President Ratan Tata has 
publicly stated that he wants to break ground on the project 
by December 2005. 
 
4. (C) Looking ahead to the April 7 visit by the Chinese 
Premier, Rahman expressed skepticism that it would lead to 
major new Chinese investment.  The Chinese, he said, are 
interested in supplier credit deals that BDG no longer needs. 
 Given Bangladesh's expanding and diversifying FDI portfolio, 
the BDG has much more leverage to negotiate on their own 
terms.  (Note: During the previous Awami League (AL) 
government, the Chinese negotiated two supplier credit deals 
with the BDG that the BNP government, as part of their 
broader suspension of AL-era contracts, did not honor.  The 
Chinese do not want to negotiate any further deals unless 
those two deals are revived.)  Rahman stated that the 
primary's motive to negotiate with China is political and not 
commercial since some Bangladeshis see China as a buffer 
against Indian pressure. 
 
5. (C) Comment: Mahmadur Rahman stands out as unabashedly 
pro-private sector and pro-FDI.  Although his optimism 
sometimes gets the better of reality -- he claims BOI is 
negotiating for projects worth more than $8 billion dollars 
-- he is straightforward about many of the obstacles faced by 
investors, particularly corruption.  In his view, the BNP 
government's single greatest failure is corruption.  He 
accurately characterizes the new Anti-Corruption Commission 
as a joke.  He is right to note that the diversification of 
Bangladesh's growing FDI portfolio, especially with Middle 
Eastern investors, gives Bangladesh new commercial and 
political options in dealing with China and, for that matter, 
the U.S. and the EU. 
THOMAS