Post-Mujib government: Change only in extent not the direction

M. SYEDUZZAMAN | Published: February 01, 2017 21:06:32 | Updated: October 24, 2017 09:04:42

SYEDUZZAMAN: Yes, President Bangabandhu Sheikh Mujibur Rahman, as you know, was assassinated by a faction of the army.  That was a very sad day for Bangladesh because--well, it's a sad and long story; I don't want to go into that.  
Then the new government came into power, and there was some change in policy but change only in-what should I say--extent not the direction.  For example, public and private investment, which was a low ceiling of only two point five million taka was set by the government in 1972, that was already raised to thirty million taka by the time the government had fallen.  When the new government came into power they raised it to a hundred million taka, [inaudible] taka. That was one.
The other was accelerating the process of disinvestment--not denationalization.  As you remember, after the independence of Bangladesh, government had nationalized the jute sector, the textile sector and the sugar sector. And then a very large number of small and medium-sized industrial units were abandoned by non-local people, mostly Pakistanis, so they had migrated to Pakistan.  Now these industries and units, these were lying here so government had to by force take over those units and they are being run by [inaudible] appointees.  And the government decided that these should be gradually sold out in small units.  So when the new government came in they accelerated that process.  And the government also announced that much better opportunity would be provided to the private sector to participate in economic activities. So the ceiling for private investment was raised, denationalization was accelerated.  Other than that I think the policies remained more or less the same.
At that time the President, President Ziaur Rahman, he had talked of denationalizing the jute mills and the textile mills but he never quite gathered the courage, politically, to really undertake that.
At that time the relationship between the Bank and the government improved significantly because Bank found these policies more acceptable than what the previous government was following.
So this was '75, '76. And then '77--what happened between those, '76 and '77, in our relationship with the Bank?  Well, we had these annual aid group meetings every year.  The system was developed. We had a meeting in '76; we had a meeting in '77; every year.  And until I retired from the government-I left the government in '87-I had the unique honor and privilege of attending all the meetings of the Bangladesh aid group, fourteen or fifteen eventually.  That was unique.  
KAPUR: One aside:  when you were Alternate ED, how does the--on policy issues, when you say [inaudible] the Indian EDs or the Indian representative as the ED for that, Bangladesh is the Alternate, on the matter of policy issue within the Bank has it been ever a case that there has been differences of opinion and, if so, how were they resolved?
SYEDUZZAMAN: No.  There was no difference-you mean between the ED and the Alternate ED?
KAPUR: Yes [inaudible]
SYEDUZZAMAN: No.  There was never any occasion on which the Bangladesh Government and the India Government would have to take different positions. We had Bangladesh, India, Sri Lanka, and later on came Bhutan.  So I don't remember any occasion where Bangladesh had to take a different position than India. I don't remember a single, particularly on the operational side.  In fact, we are competing now for IDA resources, Bangladesh, India, Sri Lanka.  
About Bank's policy issues, I don't remember.  Like, I think-let's see.  Membership of the ICSID [International Center for the Settlement of Investment Disputes]:  Bangladesh became a member of the ICSID; I think at that time India had not yet become a member.  Bangladesh became a member of IFC [International Finance Corporation]; I don't remember whether India had already become a member at that time--I think India had already become a member in IFC.  
The only difference that arose which I remember-but that was when I was no longer ED but was in the government-that was about becoming member of the MIGA [Multilateral Investment Guarantee Agency].  We wanted to become a member of the MIGA; government of India, they decided not to become a member of MIGA.  They had good points, and Bangladesh government also-because Bangladesh government was very keen on attracting foreign investment, and Indian policy at that time was not so active.  So that was one point of departure I remember.
Other than that, on policy issues Indian ED was the most vocal and respected in the Board about representing the point of view of the low-income countries, developing countries.  So there we always had a very fine-I had the pleasure of working with very fine EDs.
I worked with S. R. Sen; I'm sure you know him.  He's coming for a visit next month.  
LEWIS: Is he?
SYEDUZZAMAN: Yeah.  He's in Delhi right now.
LEWIS: Yes, we were just there.  I must admit we didn't see him.  Please give him my regards.
SYEDUZZAMAN: Sure, sure.
Then [M.] Narasimhan, I worked with Narasimhan, whom I sure you know.  He was Governor of the Reserve Bank and the ADB also.
Then I had a gentleman called H. N. Ray, former Secretary to the government of India.  
So I had worked with three EDs.  I had no problem.  I don't remember any official when we had . . .
Well, there was the--I must, of course, mention, you know, these water disputes between India and Pakistan and later on between India and Bangladesh.  I remember once or twice--there was a case, a case of an irrigation project on which-an irrigation project involving a river which originated in India.  And I think India government had a point of view that this project needs to be looked at afresh, what in fact it has done, inter-riparian water flows and so on.  But it never really came to any serious difference of opinion, taking extreme positions.  
And then about the eastern, the Ganges, sharing of Ganges water.  The Bank had offered several times to work out some investment package which would benefit the upper riparian and the lower riparian because of basically what happened to the Ganges water, decreasing supplies and increasing demand on other side.  The Bank had suggested some technical work, to be followed by investment programs.  On that Bangladesh was always open.  Government of India was not very keen to follow that option, I remember.  But then it never gave rise to any bitterness in the office of the ED or in the relationship between the External Resources Division and the DEA [Department of Economic Affairs, Ministry of Finance] in Delhi because that was an ongoing problem between India and Bangladesh being dealt in a separate forum, the joint commission [Indo-Bangladesh Joint Rivers Commission] that was going on from 1974.  So that is it.
LEWIS: The waters, the division of waters you mean was being dealt with in the Joint Commission?
SYEDUZZAMAN: Yes, sharing the Ganges water.  
LEWIS: That's interesting.  I didn't know about that.
SYEDUZZAMAN: Oh, in 1974 when Sheikh Mujibur was still the prime minister, between Bangabandhu and Mrs. [Indira] Gandhi there was an agreement about sharing of waters.
LEWIS: Yes, yes.
SYEDUZZAMAN: Yes.  And that was supposed to be followed up by additional work for augmenting prices and supplies.  And then that agreement was supposed to go up to a certain period.  So when the next government came, the position, the government of General Ziaur Rahman, that agreement was, I think, extended.  And then the technical work continued, but the technical experts on the two sides, on the joint commission-the joint commission was set up between the India government and the Bangladesh government, consisting of experts.  So the technical experts to the Joint Rivers Commission, they did not see eye to eye.  So that dispute continues even today (1991), what is going to happen to the . .
LEWIS: So the Joint Commission was between India and Bangladesh.
SYEDUZZAMAN: No, it's a separate body known as Joint Rivers Commission.  There are some staff members always working on it, and then every six months I think there's a meeting, alternately in Delhi and Dhaka.  They're still (1991) working on this.
LEWIS: The Bank hasn't, as far as you know, pressed very hard on that subject.  They've offered, but that's all.
SYEDUZZAMAN: Yes, that's all. There's no agreement between the countries [until 1991] to go in for this, and Bank would not come in unless the two governments agreed and jointly requested the Bank that, "Yes, here we are.  We are willing to accept your technical support followed by investment program."  In general in this direction, there was reservation on the side of India.  That's it.
LEWIS: This has been a terrific account of the long relationship going to--just a fine time trace of . .
SYEDUZZAMAN: Well recalling, I find it's very--it has been a good experience.  
When I came to the Bank in 1977 that was the-what should I say-mature McNamara period.  The two things that McNamara used to push, one is, in quantitative terms, doubling the Bank's lending program every five years.  The other one, of course, was the follow-up of his famous Nairobi speech that the development strategies of the '50s and the '60s were not taking us anywhere as far as reduction of poverty was concerned so the Bank's new-style projects, attention to the small farmers, rural development projects - those things were on the cards.  
And later on I also had the privilege of watching the early part of [Alden W.] Clausen, who had come in as the new President of the Bank and a different perception. I remember that during Clausen's period what mainly happened-of course, Clausen's arrival at the Bank was more or less just a year before the debt crisis started.  So Clausen brought in a lot of innovations in what we call financial engineering, this ways of raising resources for the Bank, this swap arrangement, perpetual note, then loan A, B loan, guaranteeing the later maturities to the commercial banks, various ways of making resources available from the commercial market and the Bank to the debt-ridden countries.  I remember that was the main thing during Clausen's days.
But McNamara days were really very inspiring.  I recall discussions in the Board, his leadership in the Board.  And it was quite clear that though the Bank's major shareholders were really articulating the aid policies, [inaudible] institutions, even then, but during McNamara's days we could feel that McNamara, because of his personality and because of his contacts, he was in a position to really guide the major donors:  "This is how you should look at aid policy." Though in theory it is the shareholders guiding the Bank president, but in effect we could see that it was McNamara who was guiding the donors.
And I remember one incident during McNamara's days which was very interesting.  You know, when the Bank went into Vietnam with the lending program and I think certain undertaking had to be given to the U.S. government. Clarence Long, he was chairman of the [U.S. House of Representatives] Foreign Operations Committee, and McNamara had given a letter to Clarence Long promising certain things on behalf of the Bank which the Executive Directors did not like.  And that was the first time I remember the Executive Directors--some of the Executive Directors--were furious at McNamara for having done that. I remember particularly a couple of Executive Directors from the ASEAN region because Bank was opening up to Vietnam without fully consulting the Executive Directors and after giving certain undertakings.  I'll try to recollect it, what that undertaking was, that the Bank would not do certain things or . .
LEWIS: He said the Bank wasn't going to loan to Vietnam.  They say now that he wasn't going to anyway, but . .
SYEDUZZAMAN: ". . that even a man like you could sleep." That I remember.  
Then briefly the Clausen period, I said.
Then came the period of Conable, Barber Conable.  I was still a minister in the government, so I had occasion to meet with him at Annual Meetings.  And that period I remember that he came in the Bank and his attitude towards the social sectors, which was very pronounced: population, education, environment, and safe motherhood.  
And then, of course, I remember the period of structural adjustment loan, the genesis of the structural adjustment loan in the Bank in '79-'80.  Mahbub ul-Haq and Ernie [Ernest] Stern, they were working it out after the Belgrade meeting of the Board of Governors.  That was another incident which I remember was really very interesting.
And then the development of the policy framework paper concept for aiding the low-income countries, hand in hand with the Fund, and then bringing in the Structural Adjustment Facility, SAF and ESAF [Enhanced Structural Adjustment Facility].  
So many things.  Well, I could go on speaking for hours.
LEWIS:  I can believe it.  [Concluded]
The interview was taken on November 1991 in Dhaka, Banngladesh.


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