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US investors eye Bangladesh's oil reserves

Aziz Haniffa
India Abroad Correspondent in Washington

The huge potential that the exploration of the vast oil fields in Bangladesh have to offer Americans investors has led them to influence the powers-that-be in Washington and Dhaka to resurrect a dormant US-Bangladesh double taxation avoidance agreement and quickly initial it.

Earlier this month, Zakir Ahmed Khan, chairman of Bangladesh's national board of revenue, and Patricia Brown, deputy international tax counsel for treaty affairs at the US Treasury, initialed the agreement, the draft of which is now under review pending signing, after which it will have to be ratified by the US Senate.

According to the Treasury department, "Initialing indicates recommendations of negotiators that the governments sign the convention as promptly as possible and complete the steps necessary in each country to bring the treaty into force."

In the US this requires that the signed treaty be submitted to the Senate for ratification, while in Bangladesh it can be ratified by executive order.

A senior US administration official explained that "double taxation avoidance treaties are normally designed to promote business involvement in each country because if a company has to pay taxes twice, it going to discourage investment."

"This is going to be one way of promoting US private investment in Bangladesh in the gas fields," the official said.

In 1991, the US and Bangladesh had initialed a similar agreement and sent it to the Senate, where it lay dormant for years because there was not much interest in American companies lobbying for its passage nor was the administration pushing it with vigor either since there was hardly any US investment in Bangladesh.

It was the Bangladeshis who at the time who had been pushing for it so that its exporters of items such as readymade garments and other consumer items would could get a break at this end and not be hit with a double whammy.

But the agreement lay dormant, as the US Senate and also the administration kept seeking clarification after clarification on a plethora of issues from shipping fees to insurance premiums and finally with the changes in the US tax laws it just died.

However, when the potential for exploration in the gas fields in Bangladesh became known a few years ago, the need for a double taxation avoidance treaty that would be a boon to US investors took on new meaning and US Ambassador to Bangladesh May Ann Peters convinced the Bangladeshis to agree to a new treaty and got Dhaka to send a delegation to the US to conclude the negotiations.

Dr Quazi Ahmed, minister, economic affairs, at the Bangladeshi embassy in Washington, acknowledged that it was "the United States that has been pushing for it, and as you know, the American oil and gas companies are flocking to Bangladesh."

He said that while US investors had also expressed interest in some other sectors like import containers and leather goods manufacturing, it was the oil fields that had attracted the most interest and the bulk of the nearly $1 billion investment thus far.

Both Ahmed and Administration officials said that they were confident that the US Senate would ratify the treaty this time around because of the push from potential US investors.

Ahmed said that the US investment in the gas fields was expected to rise dramatically "because we have struck a large amount and there are several companies with whom we have concluded our negotiations very recently."

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