C O N F I D E N T I A L SECTION 01 OF 02 DHAKA 001180

SIPDIS

E.O. 12958: DECL: 03/16/2015
TAGS: PGOV PREL BG
SUBJECT: PM TO WORLD: DON'T TREAD ON US

Classified By: P/E Counselor D.C. McCullough, reason para 1.4 d.


1. (C) Summary. PM Zia, speaking in parliament, warned
"foreigners categorically that Bangladesh will not be run by
any diktats or orders of any foreign force." Her
assertiveness reflects the BDG view that the geographical
breadth of Bangladesh's economic and political ties insulates
it from international pressure. The BDG is sensitive to its
image and in particular the optics of its relationship with
the U.S., but such leverage requires deft handling and is
limited to issues that don't directly affect the ruling BNP's
core interest, which is retaining power. End Summary.

Zia Lashes Out
--------------


2. (SBU) On March 15, Prime Minister Begum Khaleda Zia, in
her valedictory address for the closing parliamentary
session, warned multilateral agencies and foreign countries
against interfering in Bangladesh's domestic affairs. "I
want to tell them firmly that we won't put up with such
interference. We don't care for anyone's browbeating and
dictation....We'll build the nation with the help of 28 crore
hands of its 14 crore people." She specifically excluded
unnamed Islamic organizations from this group, denied there
is Islamic extremism in Bangladesh, characterized the recent
arrests of several militants as a law and order matter,
denounced the Awami League (AL) for boycotting her speech,
and accused the AL of conspiring with foreign agencies to
oust her government and project Bangladesh as a failed state.


3. (SBU) Her speech followed last week's criticism by Finance
Minister Saifur Rahman of the World Bank meeting on
Bangladesh in Washington, and allegations that foreign
diplomats here are interfering in domestic affairs.

The BDG Perspective: No Need to Change Direction
-------------- ---


4. (C) The handful of BNP leaders around the PM who make the
big decisions have a narrow but to them logical outlook:

-- Their top priority is retaining power so they can make
more money and keep at bay the opposition who they believe,
with some reason, would punish them if it returned to office.

-- The next election, in early 2007, should be manageable for

the BNP if it can preserve its alliance with Jamaat Islami
and prevent significant defections from other parties to the
AL. Thus, its focus should remain on back-room political
party deal-making, and not on constituency politics as we
understand them. Civil society is strong but is generally
oriented to development, not politics, and it therefore lacks
the energy or the interest to challenge the BNP frontally.

-- The AL and the rest of the opposition have repeatedly
shown their inability to exploit public dissatisfaction with
BDG performance or sympathy for the AL in the wake of
political violence against it. The AL has failed to find an
issue, like military dictatorship in 1990, to rally the
masses.

-- Although Bangladesh is a two-party system, political
allegiance is not necessarily zero sum. The BNP's three
coalition partners are all unhappy with their role in the
coalition but would think at least twice before joining the
AL, which is why Ershad's Jatiya party and the Islamist IOJ
have spurned, at least for now, recent AL feelers.
Threatening Ershad with a return to jail on pending
corruption charges is effective leverage to keep the
opposition divided.


5. (C) Economically, the BNP believes its macro-economic
policies are working and that five percent annual growth is
respectable. Partly because the current system is
dysfunctional, corrupt, and malleable, it works well for
them, and they have no interest in changing it. In addition,
BNP and many Bangladeshi businessmen truly believe that
alarmist foreign press reporting stems from Indian and AL
manipulation. The BNP's indulgence of Islamists is grounded
in their confidence that they can control, and use, them
better inside the coalition than outside.


6. (C) With most bilateral and multilateral aid going to
non-governmental sources in Bangladesh, an aid suspension
would have limited political impact on the BDG. In fact, the
BDG would likely play the nationalist card by asserting that
the suspension was the result of an Indian and AL conspiracy
to hurt Bangladesh.

Friends with Deep Pockets
--------------


7. (C) The BNP believes that the international community
lacks the motivation, the ability, and the will to squeeze
the BDG on governance. The geographical breadth of its
political and economic ties shields Bangladesh from concerted
foreign pressure, provided there is no dramatic rocking of
the boat. The BDG knows that a few countries, like the U.S.
and the UK, might try to press it on governance, but that
Japan, Korea, China, Malaysia. and some EU countries would
demur. China remains an important partner, as we'll see when
the Chinese premier visits here in April, and Japan's
priority is political continuity to ensure sanctity of
contracts.


8. (C) To refute allegations that Bangladesh is on the
precipice, the BDG notes the sharp up-tick since last year in
foreign investor interest in Bangladesh. Major projects
include:

-- In October, Egypt's Orascom bought Sheba telecom for $50
million in cash and $10 million in debt repayment.
BanglaLink, Orascom's wholly-owned subsidiary, launched
mobile service in nine cities on February 14 and is supposed
to go nationwide by the end of the year. BanglaLink is
expected to invest $150 million this year and another
$100-150 million in 2006.

-- Tata's $2 billion steel and gas project, after a hiccup
during the SAARC summit postponement, seems to be back on
track with the target of a December ground-breaking.

-- The UAE's Dhabi Group last week turned in MOU's to the
Board of Investment (BOI) totaling $1 billion, partly in
telecoms.

-- This week, a Saudi group called "High Tech International,
Inc," led by a former Saudi Labor Minister, finished initial
discussions with BOI on building a $2 billion, 200,000 bpd
refinery in Bangladesh.

-- Also this week, Saudi billionaire investor Prince Alwaleed
Abdul Aziz made a high-profile visit to Dhaka, expressing
interest in setting up world-class hotels in Dhaka and
Chittagong. A team of experts is reportedly due next month
to follow up.

-- The U.S. firm CMG is aggressively lobbying the BDG for a
$300 million, 500 MW power project in Megnabhatt.

Potential USG Leverage
--------------

9.(C) Played selectively and deftly, the "shame" card can be
effective as we saw in mobilizing the BDG to fight
trafficking in persons. The recent arrest of several
Islamist militants and local BNP officials charged with Shah
Kibria's assassination also reflects sensitivity to their
international and domestic image. The "shame" card could
probably be used to create more political space in the
upcoming elections.


10. (C) Given the importance of the U.S. to Bangladesh as a
market, an emigration destination, and as potential restraint
on India in times of crisis, all Bangladeshi governments want
good bilateral optics with the U.S. Ending Bangladeshi
peacekeeping opportunities would be a major political
embarrassment for the BDG and a financial blow to the
military as an institution and as individuals. More severe
actions, however, like visa sanctions or a general freeze on
bilateral engagement, would encourage the BDG to expand its
relations with the Middle East, China, and North Korea.
THOMAS