VZCZCXRO5191
PP RUEHCI
DE RUEHKA #1903/01 3401112
ZNR UUUUU ZZH
P 061112Z DEC 07
FM AMEMBASSY DHAKA
TO RUEHC/SECSTATE WASHDC PRIORITY 5744
INFO RUEHLM/AMEMBASSY COLOMBO PRIORITY 8207
RUEHIL/AMEMBASSY ISLAMABAD PRIORITY 1938
RUEHKT/AMEMBASSY KATHMANDU PRIORITY 9415
RUEHNE/AMEMBASSY NEW DELHI PRIORITY 0347
RUEHCI/AMCONSUL KOLKATA PRIORITY 1053
RUEHBK/AMEMBASSY BANGKOK 8309
RUEHRO/AMEMBASSY ROME 0428
RUEKDIA/DIA WASHDC
RUEATRS/DEPT OF TREASURY WASHDC
RUEKJCS/SECDEF WASHDC
RHEHNSC/NSC WASHDC
RUEKDIA/JOINT STAFF WASHDC
RHHMUNA/USCINCPAC HONOLULU HI
RUEHGV/USMISSION GENEVA 0609
RUCNDT/USMISSION USUN NEW YORK 0059

UNCLAS SECTION 01 OF 02 DHAKA 001903 
 
SIPDIS 
 
SIPQIS 
 
DEPT FOR SCA/FO AND SCA/PB 
DCHA/OFDA FOR ROBERT THAYER 
AID/W FOR AA MARK WARD AND ANE ANNE DIX 
TREASURY FOR ELIZABETH WEISS AND SUSAN CHUN 
DCHA/FFP FOR MATTHEW NIMS AND PAUL NOVICK 
ROME FOR FODAG 
BANGKOK FOR RDM/A TOM DOLAN, ROB BARTON 
KATHMANDU FOR USAID/OFDA BILL BERGER AND SUE MCINTYRE 
 
E.O. 12958: N/A 
TAGS: BG EAID ECON EFIN ETRD EAGR PGOV PINR
SUBJECT: BANGLADESH'S POST-CYCLONE ECONOMY: DOWN BUT NOT OUT 
 
REF: A) DHAKA 5871 B) DHAKA 1832 
 
¶1. (SBU) Summary: Cyclone Sidr couldn,t have come at a worse 
time for Bangladesh,s economy. When the storm hit on 
November 15, Bangladesh already was suffering from weak 
export markets, debilitating inflation, meager investment and 
an agriculture industry reeling from severe monsoon flooding. 
Economists, including the Asian Development Bank, believe 
economic growth for the fiscal year that began in July will 
fall below the previous year,s rate. The immediate task for 
the Caretaker Government is to ensure food security in the 
wake of widespread crop damage, to kedp prices from spiraling 
much higher and to help millions of Sidr victims get back on 
their feet. International relief already is focusing on these 
areas and should help the Government maintain political 
stability in the crucial one-year run-up to national 
elections. End Summary. 
 
¶2.   (SBU) Even before Cyclone Sidr hit, Bangladesh,s 
economy was in trouble. Exports fell by 5.4% in the first 
quarter of fiscal year 2008 (July-September) from a year 
earlier because of weakness in the woven garment and knitwear 
markets. Imports during the same period rose by 26% on the 
back of rising oil and food grain prices, darkening the 
balance of payment outlook. Meanwhile, the government,s 
anti-corruption calpaign depressed new investment by making 
businessmen wary of any activity that could draw attention to 
their wealth. And monsoon flooding that ravaged much of the 
northern countryside in the summer wiped out much of the rice 
crop. In a report released November 26, the Asian Development 
Bank (ADB) predicted gross dolestic product growth of less 
than 6 percent this fiscal year, compared with 6.5 percent 
the year before and earlier government expectations of about 
7 percent. 
 
¶3. (SBU) The most politically senwitive economic issue has 
been inflation, which before Cyclone Sidr already was on the 
rise due to expensive imports and the summer flood-related 
agricultural losses. Nationwide anti-government protests in 
August were fueled in part by anger over inflation, which by 
September had reached 10 percent year-on-year. Local media 
has reported that prices for basic food have gone up even 
more since, with some items spiking yet further immediately 
after the cyclone pummeled Bangladesh,s southern cropland. 
Abdur Rob, a wispy-bearded vegetable seller seated behind 
moderately wized mounds of produce in a central Dhaka market, 
held up a cucumber and said its price has climbed about 50 
percent in the nearly two weeks since the cyclone. Pumpkins 
weren,t available at all, he added. &Qeople are angry.8 
Although the qdded inflapionary pressure from the cyclone may 
be short-lived, one leading Bangladeshi economist, Mustafizur 
Rahman, said he doesn,t see any respite for the overall 
price picture. 
 
¶4. (SBU) One big worry is grain: Will supply meet demand in 
the coming months? Last year was disaster free, yet 
Bangladesh still imported about 2.4 million metric tons of 
rice and wheat, according to economists at the respected 
Bangladesh think-tank Centre for Policy Dialogue (CPD). They 
say this year,s flood and cyclone rice losses could exceed 2 
million metric tons ) the Agriculture Ministry on December 1 
put the loss at 1.4 million metric tons -- meaning a 
potential need of 4 million tons or more of grain. 
Bangladeshis hope a bumper &boro8 winter rice crop will 
help meet the shortfall. But Uttam Kumar Deb, a senior 
research fellow at CPD, believes the upcoming harvest won,t 
be able to offset much more than 500,000 metric tons of the 
loss. There,s simply not enough land, and production may lag 
 
DHAKA 00001903  002 OF 002 
 
 
if fertilizer isn,t readily available and diesel fuel prices 
maje the cost of irrigation prohibitive. Availability and 
high prices also will be issues on the international grain 
markets. 
 
¶5. (SBU) Rahman, who is the executive director of CPD, says 
that Bangladesh,s foreign exchange reserves of $5.4 billion 
) up nearly 50% from a year earlier ) are a &saving 
grace8 for buying grain on the international market. He says 
the government also has about 700,000 metric tons of grain in 
storage. Concerned about food security in the coming months, 
the Caretaker Government on November 27 appealed to 
international donors to provide 500,000 tons of grain. During 
a visit to Dhaka on Duc. 1, the Indian foreign minister 
promised to ease rice export restrictions to make precisely 
that amount available for purchase by Bangladesh. Other 
countries also h`vu promised to provide food assistance; the 
United States, for!example, already has pledged $15 million. 
 
¶6. (SBU) There are other glimmers of positive economic news. 
The ADB reported that from July through October workers, 
remittances grew by 28.4% from a year earlier, which should 
help improve the balance of payments outlook. So`too should a 
perkier export market for ready-made garments (RMG). Although 
RMG exports fell 7.4 percent in July-September from a year 
earlier to $2.42 billion, Rahman said sales picked up in 
September, and October and November order books looked good. 
Neither Banglatesh,s garment factories nor its major 
seaports were damaged by the cyclone. The government also is 
showing a greater sensitivity to business concerns; most 
recently it established the Bangladesh Better Businessmen 
Forum for dialogue between government and executives to boost 
confidence. 
 
¶7. (SBU) Perhaps the most daunting task for the Caretaker 
Government will be putting the economy of the cyclone-hit 
areas back together again. Millions of people face losses of 
homes, cropr and livestock; many had their livelihoods 
destroyed. CPD is urging an expanded works program whereby 
cyclone victims can help repair roads, bridges and other 
infrastructure for food. Although much of the Caretaker 
Government,s focus so far has been on providing emergency 
relief ) it announced a. initial assistance package of 
nearly $13 million, including about $5 million for rebuilding 
destroyed houses -- The Chief Adviser on December 3 asked 
donors for $1 billion for reconstruction. The money would be 
used for roads, cyclone shelters embankments, reforestation 
and schools. 
 
¶8. (SBU) Comment: Relief and recovery from Cyclone Sidr will 
be a major test for the Caretaker Government, which already 
has its hands full instituting electorah reforms and 
preparing for a national election ry the end of next year. 
Helping the Caretaker Government ensure food security and 
rebuild cyclone-devastated areas ) both already high 
priorities for the U.S. Agency for International Development 
-- will go along way toward maintaining the social stability 
needed for a successful transition to an elected government 
next year. 
Pasi