In April this year, India's corporate powerhouse, the Tata Group, submitted a proposal to the Bangladeshi government for the commissioning of four projects: a steel plant, a fertiliser factory, a power generation unit, and a coalmine. All told, the investment would amount to roughly USD 3 billion, a figure that sent out regionwide ripples for its significance. The negotiations process had included two rounds of talks between the group and the Dhaka government, as well as the signing of an 'expression of interest' note in September 2004 in the presence of Tata boss Ratan N Tata and Dhaka's Minister for Finance and Planning M Saifur Rahman (see picture). The major hurdles had seemingly been cleared for what would be the largest-ever one-time investment by an Indian multinational – not only in Bangladesh, but in all of Southasia.
For some time, Dhaka's Board of Investment (BoI) had been urging 'rata to invest in Bangladesh under the liberalised 'foreign direct investment' (FDI) programme that it had developed, encouraging the conglomerate to look into areas as diverse as power, IT services, bicycles, ceramics and garments. For Dhaka's energetic business community, Tata's willingness to come across the border was a major show of confidence in the nation's economic prospects, and an obvious departure point that would deliver multiple 'downstream' benefits. Most importantly, the presence in Bangladesh of what many consider to be India's most respected multinational – with 91 companies under its wings and an expanding worldwide presence – might also lead to an opening of the unfairly protected Indian market, which has been hurting Bangladeshi business expansion. For those working in the 'track two' sphere of geopolitical security and economic alliances, the promised investment was an opportunity to prove that trade, FDI and profit-sharing were favoured means to more stable bilateral and regional relationships in Southasia as a whole.
But perhaps such hopes and expectations had been allowed to mature a bit too early. The two parties are currently in the midst of their third round of discussions in Dhaka, with both the Tata Group and the government putting up brave fronts. But difficulties have arisen. Both sides now concede that matters are at a make-or-break phase, requiring significant compromise in order to avert a deadlock. The hope had been that groundbreaking ceremonies would be held this year and that the projects would all be commissioned by December 2009. Now, all bets are off. Observers expect the deal to proceed or collapse by the end of November 2005.
It has not been easy for Tata to get this far. The group, with a USD 17 billion annual turnover and accounting for six percent of India's total exports, first had to overcome the reservations of the Indian Foreign Ministry when it sought to deal directly with Dhaka. Sources now say that it is Dhaka that has suddenly gone into back-gear, declaring that it cannot compromise with existing laws to give Tata what it wants. The multinational also may not have been sufficiently sensitive to the concessions the government can and cannot provide, due to national interest as well as domestic political pressures.