Vol. 5 Num 816 Tue. September 12, 2006  

Mineral resources, Phulbari movement, and lessons from Nigeria

The government's recent decision to cancel the coal mining deal with the Asia Energy Company amidst mass protests under the leadership of National Committee to Protect Oil and Gas has set off an interesting debate over the issue of FDI and the role of MNCs in the economic development of Bangladesh.

Those who are opposing the deal claim that MNC involvement in mining will not contribute to the development of the country's economy and that the state's direct role is pivotal for the development of the sector. And those, who are in favour of the deal, advocate that the investment of MNCs in mining sector is indispensable to harness the underground resources since FDI is the only lifeline for Bangladesh economy and there is no point of keeping the underground resources unused.

Also ideological orientation of the leadership of the National Committee has invited criticism from various quarters. Commentators now argue from an ethno-political standpoint that the national identity of some companies has motivated the leadership of the Committee to launch the agitation. Accordingly, they often go one step ahead to insist that Bangladesh is in the dire need of making a choice between industrial economy and subsistence agricultural economy to become a mid-income country in the world and for doing so, the country has to bear the cost of industrialization in any form.

I do not intend to go into the ideological debate between pro-market and anti-market intellectuals over whether FDI of the MNCs is the only means for harnessing the mineral resources for ensuring economic development of Bangladesh. Rather I would like to point out that the Asia Energy's Phulbari debacle has offered us an opportunity to rethink whether MNCs' investment and their operation in mining sector can ensure economic development of Bangladesh.

In this regard, a brief examination of Nigeria's experience is very relevant. This is because Nigeria's economy has exclusively been oil dependent for the past few decades and also a good number of multinational companies, namely Shell BP, Mobil, Chevron, Alf, Agip, and Texaco are currently in operation there. Shell BP has a monopolistic presence in Nigeria producing over half of the crude oil.

Nigeria's experience
Exploration of oil and gas fields of Nigeria in the 1960s by the MNCs caused a shift in the once agriculture dependent subsistent economy. As a result, the contribution of agriculture to GDP, which was 63 percent in 1960, declined to 29.3 per cent in 2001 due to over-reliance on mining sector and neglect of the agricultural sector in the country.

The shift in economy also experienced Nigeria even becoming a net importer of basic food items by 1975. It was also accompanied by an uneven capital formation in the economy of the country over the years. Gross domestic investment increased to 22.8 per cent of GDP during 1973-80 from 16.3 per cent during 1965-73, while it came down to almost 14 per cent during 1980-88. It continued to decline in the subsequent years as the figure came down to only 8.2 per cent in 1991-98.

Also the current account balances before official transfers remain negative since 1965 as the reliance on oil producing sector did not succeed in bringing any positive shift in the economy of Nigeria. What is most striking is that the country still remains as one of the poorest countries in the world as per capita GNP is very low, although 90% of the foreign exchange earning and around 80% of its revenue financing have been coming from the oil sector for the past three decades. The per capita GNP of Nigeria was only $362 in 2001 and also for the last few years GDP growth has not been able to cross the benchmark of 3%.

The shift of economy from agriculture to industrial sector also witnessed some major environmental degradations emanating from reckless oil production causing deterioration of the economic condition of Nigeria. MNCs, engaged in oil production, are now consistently threatening the livelihood of a vast number of local communities. In this regard, one must take note of the fact that agriculture and fishing industry are the two major sources of subsistence of the rural people of Nigeria. The by-product of gas flaring, oil spillage are persistently destroying the nitrogen cycle of the soil and plants, contaminating water and contributing to the extinction of plankton, fish and other aquatic organisms, resulting in the reduction of income and widening poverty of the rural people. Many vital food crops like cassava, pepper, garri, and cocoyam have recently experienced poor yields and also crops such as yellow yam are in the process of extinction.

Also rural farmland, which traditionally provides a safety net for a great number of rural people depending on the production of crops and various indigenous medicines, now confronts destruction. It is calculated that as many as 10,000 families from each of the six major oil communities have lost their farmlands since 1978 when the Land Use Act was enacted to smoothen the oil exploration of the MNCs. Even legal cases brought against Shell for its oil spills and gas flaring has so far been of no use. In 80 per cent of the legal trials held in 1997, Shell got away with the charges by proving that incidents of oil spills and gas flaring resulted from the act of sabotage.

Lessons for Bangladesh
From the brief examination of Nigeria's experience, one can now argue that the FDI of MNCs for extracting underground resources to boost the national ex-chequer might not be an exclusive element for economic development, if the various costs of such projects are not taken into consideration. If the costs of such industrialization projects overshadow the economic and social benefits of the people concerned, then what is the use of undertaking these projects?

Bangladesh's experience with Kaptai dam project is no different in this context. Development induced displacement of the local communities living in Kaptai dam areas demonstrated how such displacement could eventually emerge as a threat to physical security of the country causing exhaustion of national resources as the state sought military solution to the problem. In fact, the concept of sustainable development is now very much in vogue in any development discourse.

However, in Nigeria's case, there is obviously another set of political and social factors that are contributing to the economic degradation, but one must not deny that the picture of economic development by means of underground resource extraction with MNCs' FDI might not be as rosy as many people think. It is also indeed understandable that MNCs in Nigeria have constructed roads and other transport infrastructure throughout the country for facilitating crude oil transportation, but it had little impact in terms of real value addition to the national economy of Nigeria.

One of the most striking features of mining sector is that it is not labour intensive, but a highly capital intensive sector. Therefore, this sector does not have much capacity to generate significant employment compared to agricultural sector. In Nigeria, according to a Labour Force Statistics of 1980, only 5,000 employers were engaged in the country-wide operation of Shell. Also, being the fourth-largest exporter of non-fuel minerals in Africa and the world's fifth-largest producer of uranium, mining sector of Namibia accounts for only about 3% of employment of the total population while about half of the population depends on subsistence agriculture. Like Nigeria, Namibia also usually imports about 50% of its cereal requirements and in drought years food shortages appears as a major problem in the rural areas.

Again, while drawing a flamboyant picture of FDI in terms of its contribution to development, one must not be very naive. It is not necessarily proper to claim that FDI always does good to the economy of a country. It can often be even opposite. Brazil is a good example in this regard. The increase of inflows of FDI from $3 billion to $17 billion in Brazil was accompanied by the increase in current account deficit from $1.2 billion to $33 billion during 1994-1997. Economists put blame on capital flight for such situation.

Also, insistence on industrialization for economic development misses one important feature of world economy overlooking contribution of the agriculture sector to the economy of even a highly industrialized country. The industrialized USA continues to give huge subsidy to its agricultural sector to protect the livelihood of the farmers. The export price of the agricultural products remained 10-50 per cent below the production cost, keeping the sector competitive in the world market. In fact, the total of all agricultural support in OECD countries went from $271.2 billion in 1986-1988 to $330.6 billion in 1998-2000, despite the fact they have an obligation under WTO agreement to reduce agricultural subsidy. Therefore, one must not forget that the Nigerian geologists also had the same dream like many of us do have now when they discovered first oil field of the country.

The pro-market advocates, in criticizing the role of the National Committee to Protect Oil and Gas in the movement against Asia Energy Company, have in fact admonished the leadership as "romantic" people who aspire to make Bangladesh a rural paradise of "contented farmers." Also they apprehended that such movement against a multinational company would prevent the foreign investors from making any investment in future. In this regard, one must take note of one interesting aspect of political economy of Nigeria. Relentless economic crisis and political instability in Nigeria have never been able to cause any decline in the flow of foreign direct investment as oil exports remain at a constant level.

Even when instability was everyday feature of Bangladesh politics during Ershad regime, Karnafuly Fertilizer Company (KAFCO) made huge investment in the country as the deal was predominately in their favour. Profit is the only guiding principle for the multinational companies when they make investment. Therefore, such criticism is often considered to be an economic reductionist approach merely reflecting the scholarship of much debated modernization process, which predominately claims economic development to be a linear process.

Even the failure of the World Bank's much publicized Structural Adjustment Programs (SAPs) for development has now given birth to the idea of controversial Poverty Reduction Strategy Paper which has even incorporated the elements of ownership and participation of the stakeholders in the development process. Therefore, this kind of economic reductionism is devoid of considering development as an integrated whole as it neglects major issues like environment, distributive benefit of economic development, etc. Nigeria's experience for Bangladesh can be a good lesson in this regard.

Also ethno-political criticism against the Phulbari movement undermines the credit of the local people. One must not forget that this is not easy for some "romantic" leaders, who are not involved in the mainstream politics, to assemble more than 25,000 people. These people were indeed "discontented farmers" who launched the agitation only for the sake of their existence.

This can be a good lesson for our politicians who have lost their credibility to the general masses and, thereby, have to allure their activists with money to take part in the political demonstrations and election campaigns. In this regard, one can raise the question: if either of the mainstream political parties was involved in the Phulbari movement, could it be possible for anyone to make the same criticism that the identity factor of the MNCs was pivotal in launching the movement by some left-leaning leadership against the Asian Energy Company or Tata while they keep mum over the investment of the companies from China, Pakistan, and the Middle East?

In fact, newspaper reports show that many of the local political activists belonging to leading mainstream political parties also got involved in the Phulbari movement against Asia Energy Company. In criticizing the movement, one must not overlook the fact that the media projection in recent days was one of the contributing factors in making local people aware of the potential catastrophe that the Phulbari project held for the area. Therefore, it must be endorsed that the threat to the physical existence motivated the local people to even risk their lives. In this regard, state must take the responsibility of its failure to remove this fear of losing means of livelihood of the people living in Phulbari.

Indeed, not only Phulbari, uprisings of ordinary people in Demra and Kansat in recent times have set instances that, when people's existence confronts crisis, it is in fact people who make someone a leader and do not wait for a leader to come and rescue them. It is also true that the success of Phulbari movement with the participation of ordinary villagers has now offered the policy makers of the country an opportunity to rethink over the issue of how to extract the underground resources for the greater benefit of the country and in this regard, one must learn from the experience of Nigeria or any other developing countries that industrialization is not the only solution to underdevelopment.

In fact, development has a very broad and complex understanding, which demands a balanced approach in relation to the role of market and state as well as role of the agricultural and industrial sectors.

The author is a Lecturer, Department of International Relations, University of Dhaka.