Corporate capitalism and theft

The bankruptcy of Enron seemed to be the iceberg that rocked the Titanic of US-driven capitalism, but it turned out to be its tip. WorldCom, Xerox, AOL-Time Warner, Anderson, Citibank, J P Morgan -- hallowed names of the US-based transnational -- either could not cook their books any longer and had to declare bankruptcy, or else came under scrutiny from the moth-eaten US government regulators for various types of fraud. Things got so bad that on 9 July 2002, US President George W. Bush went to Wall Street and chided the bankers for their unethical behaviour.

Around the world, the story is different, it is alleged that coward and greedy politicians went into alliance with Enron to rehabilitate enterprises, mainly in the energy and water sector. Abandoning the sensible policy of keeping within the public sector such crucial components of socio-economic life as power and water in particular, countries like India, the Philippines and Argentina went in for privatisation. Argentina has already proved the worst of privatisation in the world. It has become the proverbial gobble-dy-gook!

Tap here to add The Daily Star as a trusted source

Dabhol Power Corporation in Maharastra (India) and the many pipelines that crisscross South America, were overcapitalised and enticed to run at a loss for some time to come. In fact, Enron garnered public money, whether from the US government, from commercial banks, or from central banks in the developing countries. These funds were used to build unnecessary expensive physical assets for the generation of power or water. They insisted and won guaranteed returns on an investment that it did not make, and has now collapsed with the assets on the ground of no buyers and with bleak future.

We, in Bangladesh, were about to enter into a Power Purchase Agreement (PPA) with Enron in 1998 under the Barge Mounted Power Project (BMPP) programme. That was the first negotiation by Bangladesh Power Development Board (BPDB) team under my stewardship as Chairman of the Board. Our inexperience allured us to move into the booby trap. Thanks to the Almighty Allah for saving us from a disaster. On the hindsight, the lesson we learned helped us to draw unbelievably low power tariff deal (for Bangladesh) with Messrs AES of USA in our negotiations on Haripur 360 Megawatt (US$ 0,273 per kilowatt hour) and Meghnaghat 450 megawatt (US$ 0,279 per kwh). Everything one said about Enron has now come to a pass, but it is a bitter experience that we went through. Luckily, today we consider that as a sigh of relief (from Enron). At that time Enron insisted on the PPA to guarantee it profits, a one hundred per cent captive market for their products (electricity) in a franchise area they identified. We (in the Board) didn't agree, although there was tremendous pressure to do so. In recent months, the government has conveniently allowed AES to sell out, violating the contractual provision!

For us, the Enron case is important as it was the first of the fast track power projects in Bangladesh and received special attention. It was also responsible for validifying the Private Power Policy enunciated by the government in October 1996. Indeed, we were lucky that the influence peddling, for which Enron is famous, could be avoided during the PPA negotiation in 1997-98. Nevertheless, it also proved that the argument for inviting foreign capital in the power sector was that it provided much-needed resources in building critical infrastructure. Unfortunately, the State Minister for Power Mr. Iqbal Hassan Mahmud perhaps had an unknown fear about IPP participation in the generation of electricity. Story goes that he has recently overcome the mental block and is now seriously planning, after a lapse of about twenty-six months, to encourage private power generation. But doubts are high in public about the proposed 450-megawatt plant in Sirajganj. Already about 300 MW generation capacity exist in the same area. Therefore, as a part of decentralisation policy, new capacity creation should instead be in Bogra and Rajshahi. I only hope that new generating plants come into steam in time because almost three years have passed without generating a single megawatt. Nevertheless, adequate care should be taken on this sensitive issue because any new effort on IPP can be jeopardised if a contract is reached through fraud. Friends of the Energy Ministry, however, would rather not discuss such unpleasant issues now.

We must remember that Enron collapsed because it took its own greed too seriously. In fact the corporate fat cat made demands upon the plant that the people would not accede to without a fight and it failed to take the kind of cover from the US army as its cousin, Halliburton, did. However, when the inside story of Enron is read with our country's disinvestment efforts, people would be able to draw the line against the artificial calculations, and call privatisation what it really is : the theft of commons by corporate capitalism.

It is ironic that Enron should fall prey to the same 'sacrosanct' market forces that it espoused with such zeal in many countries. In 1991, India initiated a policy of neo-liberal economic reforms. This policy was extended to the power sector as well. Contrary to the claims of those who initiated and guided the reforms, their new policy has been unable to address the problem of supply shortage in various parts of the country. Nor has it provided power to the people at affordable rates. The lessons for the Indian government came out crystal clear. The wisdom of the High Court panel that responded to the CITU (with Abohay Mehta) case against Enron is worth repetition:

"Multinationals who want to invest in developing countries should not indulge in tall talks about educating the people of those countries. The decision of multinationals to invest in that country is based on the security of its investments and lucrative returns on the same. It is not activated by the desire to help resource-starved nations. They do no charity. They move out of their country for greener pastures or better returns. They should, therefore, act and behave like an investor or an industrial house and not a government."

Nuruddin Mahmud Kamal is a retired government official.