The Telegraph
Since 1st March, 1999
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Tatas put Bangla investment on hold

Dhaka/Mumbai, July 10: The Tatas have suspended work on their $3-billion investment plan in Bangladesh because of Dhaka’s prolonged delay in approving the projects, Alan Rosling, executive director of Tata Sons, said today.

“We are extremely disappointed and frustrated' we thought that the projects were good for the country’s economy, for the people and the balance of payment of Bangladesh,” Rosling said after a series of meetings with Bangladeshi government officials, including finance minister M. Saifur Rahman and Board of Investment chief Mahmudur Rahman in Dhaka over the past two days.

“We are suspending the proposed $3-billion investment plan in Bangladesh,” Rosling said. “If the government does not take a decision, we can’t wait. We have been waiting for 10 weeks.”

Tata’s investment plan for Bangladesh included a 2.4-million-tonne steel plant, two power plants, a coal mine and a fertiliser plant that would create thousands of new jobs.

Bangladeshi officials said the deal was being delayed because of the general elections in the country in January 2007, when the ruling BNP fears that the issue may figure in the campaign.

Rahman has said a national consensus was needed before the government approved the Tata proposal. He hoped the next government would pick up the incomplete negotiations for signing a deal.

The question, however, is whether the Tatas will wait until the elections. Its officials are already indicating that they will look for new destinations.

The Tatas had been pursuing the Bangladesh investment plan for close to two years. The expression of interest (EoI) was signed in October 2004 in the presence of group chairman Ratan Tata in Dhaka. The Tatas had been hoping to secure permission to exploit the rich natural resources in the country.

After several rounds of negotiations with the state-run Board of Investment of Bangladesh, the Tatas had to modify their proposal a number of times. The group also faced other difficulties in the form of pressure from Bangladeshi business lobbies even as there were differences with the government over the pricing of natural gas, a critical feedstock for these projects.

But the Tatas clung on hoping that the government would finally see merit in a proposal that would generate jobs in the country. As Bangladesh continued to hem and haw over the plan, the Tatas set a timeline of June 30 by when they wanted an affirmation from Bangladesh.

The final nail in the coffin came when on Sunday, Bangladesh industries minister Motiur Rahman Nizami said with a parliamentary election due in January 2007, it was difficult to accept the Tata investment at this point, even though the deal would be good for the country. Rosling, who has been Tata’s pointman in implementing the investment plan, said, “We are disappointed as we spent huge money, time and effort.”

When asked if this means the Tata group is withdrawing its proposal, Rosling said, “We are firm believers in the economic development of Bangladesh and will continue to monitor opportunities in the country closely. However, if indeed we are facing such a delay from the government, we have no option but to suspend work on these projects.”

Rosling didn’t hold out the promise that the Tatas would pursue the plans in January after the new government comes to power. “While we are keen to invest in these projects, their revival after a considerable delay must depend on circumstances at that point,” he added.

The Tata Group had submitted its revised offer on April 30 after some nine months of detailed negotiation.

The sudden development opens up two interesting possibilities. With L.N. Mittal keen to pump huge sums of money into the steel business in India, the Tatas will now be able to concentrate on ramping up its steelmaking capacities here to successfully face the onslaught of the world’s largest steel maker.

It is also possible that the Tatas could look at other potential international locations for expansion.

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