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Wednesday, February 06, 2013

Spending in Bangladesh: The most bucks for the biggest bang

Buddy, can you spare a dime? A very, very large one?
THERE is no lack of world-beating records in Bangladesh. It starts as the world’s most densely populated country (not counting city-states and the like). Its capital, Dhaka, merely an undistinguished district headquarters at time of partition from India in 1947, can now be counted as the fastest-growing city in the world. Female leaders have ruled the country for longer than have men—which is to say, longer than women have anywhere else. No country at peace with its neighbours has more citizens shot dead by the security forces of one of its neighbours. The world’s biggest NGO, also apparently the best, BRAC (formerly the Bangladesh Rural Advancement Committee), bears the name of its home country. Despite astounding progress, 53m Bangladeshis, fully one-third of the population, still live below the poverty line.

Until the end of January, Bangladesh was also the location of South Asia’s biggest infrastructure project to funded by donors. The Padma bridge, a proposed river crossing that was to cost $3 billion to build, would also have been the world’s longest, at a length of about 10km. But its fate has become forlorn, since the Bangladesh government withdrew its request to the Word Bank for financing, on January 31st. The decision to turn down $1.2 billion in cheap loans—the biggest pile of cash the World Bank has ever offered to a single country—came a day after the bank’s president, Jim Yong Kim, forcefully stated his commitment to not allow crony capitalism to persist under his watch. (Mr Kim went on to use the Padma bridge as an example of the bank’s stance in the face of “insufficient response by the authorities to the evidence of corruption”.)

Thanks, but no thanks, seemed to be Bangladesh’s reply. With the refusal of the World Bank’s conditions went the loans that had under negotiation with the Asian Development Bank and the Japan International Co-operation Agency: altogether nearly $3 billion. Since Bangladesh cannot borrow from international markets, the net result of the government’s apparent intransigence is that 30m people, who are cut off from Dhaka by the vast Padma and the Jamuna (known to India as the Ganges and the Brahmaputra, respectively), and cut off from the rest of the country as well, will have to be patient.

But forget the bridge for a moment. It appears that the government has developed a taste for other symbols of power, of the kind that were till recently in the preserve of regional-powers-with-adversaries. No longer. Last year Bangladesh ordered its first satellite. Only last week it announced plans to buy its first submarines. Finally, Bangladesh intends to spend the single-largest amount of cash it has ever seen devoted to a single project—and start building nuclear power plants.

More than 50 years after politicians in what was then East Pakistan conceived the idea, the government has found a donor in Vladimir Putin, the president of Russia. Mr Putin’s conditions, compared with those of Bangladesh’s other international partners, are financially inferior but politically irresistible.

This is a country, after all, where as recently as 2007 the army stepped in to lock up the political class, including the two heads of dynasty, and installed its own military-backed administration. One must be prepared for exigencies, and it helps when the men in green see things the same way. Russia made a $1 billion loan to Bangladesh, to buy Russian-made arms, last month, which might well punch a hole in those recent statistical estimateswhich showed that Bangladesh might be at especially high risk of suffering a coup d’etat in 2013.

The arms sale however will be small in comparison. The price tag for the country’s first nuclear plants is believed to be somewhere between $2 billion and $4 billion; the Russians have agreed to lend $500m to kick-start the project. The idea is for Rosatom, the Russian state’s nuclear company, to build and operate two plants in Rooppur, in western Bangladesh. If all goes well Bangladesh may soon be the seventh Asian country with an operational nuclear power plant (the others being China, India, Japan, South Korea, Taiwan and Pakistan).

So how bad an idea is it?
The first thing to say is that Bangladesh has an energy problem the scale of which tends to be, like the country as a whole, hugely underreported. According to the World Bank, there is no country where businesses find it more difficult to get electricity than Bangladesh. In its latest “Doing Business Survey”, the bank ranks Bangladesh an unflattering 185th out of 185 countries in this category. More than 60% of people do not have access to electricity.

So if the size of the problem were to suggest the size of the solution, a chunky 2,000MW more from two nuclear power stations might be a good start. The Russian plants would generate enough power to fill the current supply gap and would be a big step towards meeting the government’s goal of producing 20,000MW by 2020. The country’s current electricity-generation capacity stands at a mere 5,000-6,000MW. Domestic reserves of gas, the main source of energy, are not plentiful. The government’s short-term strategy, to fix the power crisis by installing oil-based power plants, is both unaffordable and environmentally precarious. Coal deposits exist, but too many people live on top of them. Any politician who dares touch the coal is likely to get a hostile reaction similar to the one experienced last week by foreigners who offered to help in digging it up.

The obvious solutions to Bangladesh’s long-term energy future would be a mix of coal and gas imports from Myanmar or the Middle East. But they don’t sound nearly as impressive as indigenous nukes, do they? Bangladesh’s political parties cannot agree on much, but they both like the idea of nuclear power.

There are a few problems with trying to produce 5,000MW of nuclear power (ie a fifth of the total projected generating capacity) by 2030 in what is essentially one big hot river delta. The lack of an alternative source of power, in case cooling systems collapse, and annual flooding, which, in a bad year, can cover up to two-thirds of the delta, come to mind. An earthquake once shifted the course of the mighty Brahmaputra, which used to flow east of Dhaka, to its current riverbed, 150km west of the capital. Experts may find that the plants’ proposed site on the bank of the Padma river is safe. Yet public protests, like the one in Kundankulam in the Indian state of Tamil Nadu, over the same type of Russian reactor, are to be expected nonetheless. 

Bangladesh is not set to enrich its own uranium in any case; Russia would provide the radioactive fuel rods. But both the Bangladeshi public and neighbouring India, whose border with Bangladesh is only 25km from the proposed site, are likely to demand guarantees concerning the safe transport of nuclear material. The rods would have to travel from the port of Chittagong on roads that are among the world’s deadliest.

And if the transport of nuclear material is to circumambulate the urban sprawl of Dhaka, then they will have to cross the Padma. So unless the government puts the Chinese, say, in charge of constructing that bridge quite swiftly, the nation’s first nuclear-fuel cask will have to take a boat.

First appeared in The Economist, February 6th 2013

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