The recent pullout of the Tata group from Dhaka is bound to have serious ramifications for Bangladesh?s infrastructure sector and will clearly deter its image before the international investors community.

Firstly, Dhaka does not have much of foreign investment and the recent withdrawal by the Tata Group from its proposed $3 billion investment plan?to bring about projects in the power, steel and fertiliser sectors?is bound to have a negative impact on similar investments plans by other foreign players. This investment was the single largest foreign investment in Dhaka so far.

The trade and industry leaders have already signaled a slow down in future foreign investments in Dhaka as a fall out of Tata?s exit. Ratan Tata had visited Dhaka in 2004, when made these huge commitments to invest in gas-based industries in Bangladesh.

A MoU was signed with Bangladesh in 2004 on a $2.5 billion investment, which later grew to $3 billion. It was actually in April this year that the Tata?s had offered to increase its planned investment in power, steel, fertiliser and coal projects in Dhaka from an earlier $2.5 billion. The Tata group?s investment plans included a steel plant with an annual production capacity of 2.4 million tonne, a urea factory with a one million tonne capacity, a 500 mw coal-fired power station and a 1,000 mw gas-fired power plant.

The Tata group had even assured that it would set aside a 10% stake in local business for the Bangladesh government and list the concerns on the Dhaka stock exchange. If implemented, the projects would have been the largest single foreign investment ever made in Bangladesh and would equal the total the country has received since 1972. A final agreement was to be signed by July, but given the pace of progress and lack of a firm commitment by Dhaka to supply adequate gas for these projects, the Tatas virtually decided to call it quits.

Another point of view that exists is that Tatas should have taken this decision much before, considering the fate of many multinational oil and gas companies?who have been engaged in gas exploration in Bangladesh. Short supply of gas had resulted in many domestic industries and power plants lying idle for want of supplies.

Bangladesh has around seven trillion cubic feet of proven gas reserves. The US-based Unocal has done its best to convince Dhaka to export gas to India, which was a ready market. The issue, however, acquired political overtones and Bangladesh has refused to export gas.

The exit of the Tatas from Bangladesh will also impact on the bilateral relations between the two sides. The slow pace of decision-making in Dhaka and its lack of commitment to take the trade process forward had even on earlier counts disrupted talks between India and Bangladesh over the proposed natural gas pipeline from Myanmar to India via Dhaka.

The conditions put forth by Bangladesh to allow the pipeline traverse its territory had forced New Delhi to look at the costlier option of laying the deep-sea pipeline through the Bay of Bengal, completely by passing Bangladesh.

It may be noted here that the conditions put forth by Dhaka to allow the pipeline traverse its territory came much after the joint statement was issued at the meeting of the energy ministers from India, Bangladesh and Myanmar in Yangon.

An agreement was reached in this meeting to construct a 900-kilometre gas pipeline from Myanmar?s offshore Shwe field to Kolkata via Bangladesh. As part of the deal, Bangladesh was also to get access to the gas as well as $125 million in transit fees.

Setting conditions to agree to this arrangement, Bangladesh decided to push for a trade and transport corridor linking Nepal and Bangladesh through Indian territory as well as access to hydroelectric power generated in Bhutan and Bangladesh using India?s power grid.

While India?s relations with Myanmar are improving considerably, its ties with Dhaka whether political or economic have remained strained. India?s stand to withdraw from 13th Saarc summit was also criticised by Bangladesh. Even China is giving a lot of weightage to its energy ties with Myanmar.