Response to Farewell to FDI?

Kallol Mustafa
The op-ed piece (Farewell to FDI?, the daily star, Jan 13, 2015) by Syed Mansur Hashim
is based on some misleading, distorted & partial information regarding Asia Energys
(GCM) Phulbari Coal Project and the peoples protest against it. Therefore some points
are needed to be clarified urgently. Mr. Hashim termed the peoples protest against Asia
Energy Chiefs visit to Phulbari as vandalism but did not mention how for a long time
Asia Energy has been trying to bribe the local youth, provide them with drugs and
destabilize the local situation. He blamed the government & local administration for not
taking action against the protesters and warned that this might harm foreign
investment without even mentioning the responsibility of the government to implement
the Phulbari agreement signed with the local people and honor expert opinions against
open pit mining in different occasions.
Mr. Hashim declared the Government officials denial of existence of mining contract
with Asia Energy as erroneous, as he completely relied on Asia Energy propaganda
published in Energy & Power, but failed to present the correct picture based on original
documents and experts opinion already submitted to the GOB. He also failed to mention
that the company does not have any experience on mining, since its inception it could
not find any other mining contract anywhere in the world, still today it has been using the
name of Phulbari coal mine for making money in share business.
Based on the article 'Records Need making Straight', published in Energy & Power,
widely known as lobbyist of Asia Energy, Syed Mansur Hashim states that Asia Energy
has valid contract for mining with the Government of Bangladesh and it obtained
'mining lease' in April 2004. But the April 2004 letter, which the Energy & Power article
referred as an evidence of Asia Energys mining contract, was indeed issued in the
interest of preparing feasibility report and submitting to the government and in no way
can be used as a valid contract for mining operation. Although the letter contains the
phrase granting of mining lease, actually this letter did not give Asia Energy any
permission of mining. It was very clear in its following statement:
(c) On receipt of the Feasibility Study Report, the technical aspects of the project will be
examined and evaluated by experts and on the basis of this government will take final
decision regarding real mining operation.
(d) Within this time, the lessee will not conduct any commercial activities of the mine.
(Emphasis added)
Interestingly when Asia Energy and Energy and Power referred to this letter, both
conveniently forgot to mention the last condition that prohibited any commercial
activities of the mine. Mr. Syed Mansur Hashim also failed to mention this important
condition of the so called mining lease in his article.

He also missed the evaluation & recommendation of the expert committee (formed by the
Government and headed by Prof Nurul Islam) on the development plan submitted by Asia
Energy. These are very important because the government was supposed to give final
decision regarding real mining operation based on the evaluation of this committee. The
expert committee in its report rejected the development plan of Asia Energy on many
counts. Those include the legal aspects of the contract with Asia Energy.
The Report of the Expert Committee says:

According to the Mines and Minerals Rules prepared in 1968 under East Pakistan
Mines & Minerals act 1967 (Regulation & Development) and amended in 1987 &
1989, royalty rate was fixed at 20% of the price of produced coal at the mine
mouth. Accordingly, the Bureau of Mineral Development (BMD) signed an
agreement for Boropukuria coalmine on 10/07/1994 at 20% royalty rate. Yet, on
20/08/1994, only a month and ten days after having signed this agreement, the
BMD signed another agreement with BHP for coal mining in Dinajpur & Rangpur
areas at only 6% royalty rate. This agreement with BHP is illegal as per the then
existing mining law. In this situation, this illegal contract may be declared invalid
and steps should be taken against concerned persons according to the article 5 of
Mines and Mineral Act 1992.

According to the article 32 of Mines and Mineral rules 1968, which was in effect
during the signing of the contract, as 3 years had already passed after first
issuance of the license, the authorities did not have any right to extend the license
period beyond 15/01/1998. For that reason the license renewal order on 26/01/98
for Area B was illegal. During handover of the license for Area B under the
Assignment Contract [the transfer of contract from BHP to Asia Energy], BHP
did not have any valid license to transfer as the license was already expired.
Thats why all actions taken by the Asia Energy in that block is illegal. BHP lost
permission for all kind of activities in Block B on 15/01/98 in consequence of
which Asia Energy did not have any valid permission to work in that block. So
Asia Energy never had any right to apply for mining lease.

For the above two reasons, the Assignment contract signed with Asia Energy on
11/02/1998 has no legal basis. Alternatively, if it is considered that the
application for the mining lease will be operated under Mining Rules amended in
1995, still the Government cannot consider the Mining Lease Application.
Because 3% of the estimated cost of the scheme has not been deposited with the
application as Bank Guaranty as required by the Rules. It is to be noted that 3% of
the total estimated cost- 12,460 million dollar (Capital cost 2090 million dollar +
Operating cost 10,370 dollar) is 373.8 million dollar i.e 2, 616 crore taka.
( Source: Article 5.2, Report of the Expert Committee (REC) to Evaluate
Feasibility Study Report and Scheme of Development of the Phulbari Coal

Project, submitted by Messieurs Asia Energy Corporation, (Bangladesh) Pvt. Ltd.

(AEC), 20 September 2006 [Authors translation])
In brief, according to the expert committee, the contract and exploration license which
Asia Energy received from BHP has no legal basis and the so called mining lease
(without permission of mining!) granted to Asia Energy under this contract is also legally
invalid. Thats why there is nothing wrong or erroneous when Energy and Mineral
Resources Division Secretary Abu Bakar Siddique said- Asia Energy has no valid
licenses to develop Phulbari coal mine (Daily Sun, 8 Dec 2014).
Therefore the Government of Bangladesh (GOB) has no legally binding obligation to
allow Asia Energy to do open pit mining and mining related activities in Phulbari, and
there is no question of damage payment to Asia Energy for scrapping the Phulbari project
as feared by Mr. Syed Mansur Hashim. Rather the GOB can easily reject its Feasibility
Study and Mine Development Scheme for open pit mining following the
recommendations of the expert committee. Moreover, the GOB can also take legal action
against Asia Energy for carrying out commercial activities like raising capital from
London Stock exchange showing Phulbari Open Pit mine where as the fact of the matter
is that it has no mining contract to build open pit mine and also for carrying out illegal
subversive activities in the Phulbari region in favor of open pit mining provoking mass
outrage. In fact, the GOB has legal and moral obligation to scrap Phulbari coal project
and oust Asia Energy from Bangladesh according to the agreement signed between the
government of Bangladesh and the people (National Committee to Protect Oil Gas
Mineral Resources Port and Power represented the people) on August 30 2006. The
agreement was fully supported by the then opposition leader and current Prime Minister
Sheikh Hasina. The main points of the agreement were:
1. Phulbari coal project will be scrapped and Asia energy will be ousted from the
country.
2. No open pit mining will be allowed anywhere in the country.
3. Mining method and other steps for coal development and utilization will be taken
after proper consultation with the people, keeping national interest in tact.
Peoples verdict is already declared against the Phulbari Coal project and endorsed by
two major political alliances of the country. Independent experts from home and abroad
have repeatedly rejected this project as technically unfeasible, environmentally
catastrophic and socially and economically disastrous. It is now the duty of the GOB to
implement its legal & moral obligation to the people by ousting the Company from
Bangladesh.