The Multinational Monitor


T H E    F R O N T

Enron's Abuse of Power

GUHAGAR AND MUMBAI, INDIA -- The raid was well-timed. It was around 5 a.m., June 3, 1997, in Veldur, a tiny fishing hamlet near U.S.-based Enron Corp.'s controversial Dabhol Power Corporation (DPC) project in coastal Maharashtra. The men were out at sea and the women were just beginning their daily chores. Twenty-four year old Sadhana Bhalekar, who is married to vocal anti-Enron critic Baba Bhalekar, was in her bath when she heard the commotion in her house. It was the police.

"I was terrified," recalls Bhalekar, who was three months pregnant at the time.

"Several male police with batons in their hands forcibly entered the house and started beating members of [my] family who were asleep," Bhalekar said in subsequent testimony to a judicial magistrate.

"The policemen forcibly opened the door [of the bathroom] and dragged me out of the house," she said. "The police kept beating me on my back with batons. ... My one-and-a-half year old daughter held on to me but the police kicked her away."

The police also arrested her teenaged sisters-in-law, who had arrived the previous day to visit the family. Two other minor girls were allegedly beaten brutally. In all, the police arrested 39 people, including 26 women and girls and 13 males.

The arrests came on the heels of an anti-Enron demonstration staged the previous evening. Veldur villagers prevented Enron employees from using the village jetty to commute. However, several of those picked up by the police claimed to have had nothing to do with the previous day's protests.

While charges of bribery and corruption in the initial award of a power-generating contract to Enron received international publicity [see "Enron Deal Blows a Fuse," Multinational Monitor, July/August 1995], little attention has been paid to the protests of the villagers whose lands, livelihoods and lifestyles are threatened by the power project and Enron's forcible acquisition of their lands. Their three-year-long campaign has been gaining momentum, and starting January 1997, the ruling party has stepped up efforts to quash the grassroots protests -- even violently.

The events of June 3 are the latest in a long list of little-known incidents exposing an entirely different and sordid aspect of the controversy surrounding the Enron-backed Dabhol Power Project in the Konkan region of coastal Maharashtra.

"What was once a peaceful place has now become charged and volatile," says Bhau Khare, a senior citizen who lives 10 kilometers from the project site and complains about the heavy police presence in the area.

Amnesty International and at least three Mumbai-based citizen group fact-finding teams have issued reports condemning the use of violent tactics by the state to repress peaceful protests by the villagers.

"A battalion of the State Reserve Police, stationed on the site of the power plant, the local police and company security guards have all been implicated in these violations," Amnesty said in a report issued in July. "Such collusion of the police with those supporting the construction of the power plant has increased the vulnerability of protesters to human rights violations."

Critics of the project say the state is one-sidedly defending the interests of the multinational while ignoring the demands of the protesting villagers. The fact-finding team reports allege that the charges that had been filed by the police following the arrests had been done irregularly, illegally and randomly. For instance, three activists, including retired Mumbai High Court judge Justice Kolse Patil, were arrested in February in what was called a "preventive" measure.

"The grounds for the arrest -- namely, propagating against the Enron project and advising people not to vote in local body elections -- are most unusual," says Justice Daud, a retired judge of the Mumbai High Court, who led a fact-finding team to the project-affected villages following certain violent incidents in March 1997. "Neither is an offense under the law."

Villagers say the state and DPC are targeting women and children for harassment as a strategy to intimidate and weaken the resistance. But the repressive tactics seem to have strengthened the anti-Enron sentiment.

"The police may have been purchased by Enron, and the government may have backed down on its promise to thrown Enron out. But we'll defeat them [Enron] at any cost ... even if our blood has to flow," says Ganpat Doppat of the Anjanwel-Ranvi-Veldur People's Rights Committee. The committee represents the people from the three villages most directly affected by the land acquisitions for the Enron project.

Especially notable is that Amnesty International, as well as the local activists, are pinning responsibility for state repression on Enron and its minority partners in the DPC project, GE and Bechtel. Villagers claim that the police act at the behest of the DPC management and security personnel, and their complaints regarding the insults and harassment they suffer at the hands of the DPC employees and security staff tend to be ignored by the police.

"It's the second coming of the East India company. They [DPC] are going about as if they are our rulers ... the police are in their pockets," says an irate Daud.

In a faxed statement to Multinational Monitor, DPC absolved itself of responsibility for the incidents. "There are and will continue to be groups who feel that they can use this project as a platform against foreign investment," wrote DPC in its faxed statement. "The incidents of January 30, May 17 and June 2-3 [when police allegedly assaulted protesters and other villagers] did not occur within our project site. We are aware of no complaints or allegations made against private security personnel employed by our contractors to maintain security within the DPC site. Dabhol Power Company has no authority over the police. DPC and its contractors do not employ, sub-contract or second police officers at the Dabhol site or its vicinity."

DPC dismisses allegations that the police are "on its payroll." "By law we are required to offset the cost to the State of Maharashtra if police are required to post additional officers in the vicinity in the event of potential or actual disturbance of the peace or disruption of public order due to activities of demonstrators. Also according to law, the police officers at all times remain under the authority and control of the police when such incidents arise."

The state government has not issued any statement on the allegations of police misconduct, nor launched an inquiry, despite requests from Amnesty International and Indian human rights groups. The Deputy Chief Minister Gopinath Munde, who is also the minister in charge of law and order, was not reachable.

The stepped up repression against the DPC opponents is ironic, because the members of the ruling coalition -- the nationalist parties Bharatiya Janata Party and Shiv Sena -- were the most vocal opponents of the power project three years ago when they were still in the opposition.

Deputy Chief Minister Gopinath Munde campaigned on the promise that he would "throw the project into the Arabian Sea." Munde has reversed his position and now refuses even to participate in a public debate on the pros and cons of the project with the protesters. The villagers have in turn warned Munde against entering their locale without first engaging them in a debate about the project.

One newspaper report quoted Munde as having said that the debate was a waste of time because the government is committed to the Enron project. "The project is here to stay and the people of Maharashtra will buy the power," he is reported to have said.

The government has not taken stock of the prevailing tense situation and the demands of the villagers, critics say. Instead, in September, it approved yet another project by Enron at the same location for liquification of imported LNG.

Power, it appears, will flow even if it has to go through the barrel of a gun.

-- Nityanand Jayaraman

Mozambique Gains on IMF

(in millions of dollars)


1994 434 358 127
1995 310 319 160
1996 268 298 290
1997 360 353 371
1998 390 379 462

THE INTERNATIONAL MONETARY FUND (IMF) is loosening its grip on Mozambique, thanks to a concerted effort by international aid donors and the World Bank. This year alone, the IMF will allow Mozambique to spend an extra $90 million in donor money, and special funds are being established which will channel money to rural commerce. The two key IMF restraints on growth have been limits on the amount of aid Mozambique can spend -- which means donors offer more money than Mozambique is allowed to use -- and restrictions on credit, which have hurt domestic business, particularly in rural areas.

The IMF limits aid spending by imposing "deficit-before-grant" targets, which function as an effective cap on the amount of aid that the government can spend. The IMF insists that this extra aid simply be kept in the bank to meet extremely high targets for international reserves -- in effect, dollars in the bank. Last year, even the very conservative Jeffrey Sachs, director of the Harvard Institute for International Development, wrote that "there is no clear need for a rapid and substantial build-up of foreign exchange reserves" in Mozambique.

With these policies in place, the amount of aid the government could use fell by $166 million from 1994 to 1996, with international reserves rising by a comparable amount. Capital expenditures dropped $60 milion during the two years -- meaning war-damaged roads, schools and health posts in rural areas were left in disrepair.

London-based experts on the IMF in Africa say that the Fund is being much harder on Mozambique than it is on many other African countries, such as Uganda, where the IMF does not use deficit before grant as an effective cap on aid.

For more than two years, the donor community has been pushing for a more expansionary policy which would allow more money for investment and concentrate less on simply curbing spending [see "Strangling Mozambique," Multinational Monitor, July/August 1996]. The first public step was an unprecedented statement by donors in October 1995 criticizing the IMF. In October 1996, the World Bank's vice-president for Africa, Callisto Madavo, said the Bank would press for a pro-growth policy in negotiating the annual joint IMF-World Bank "Mozambique Policy Framework Paper" (PFP).

The Bank stuck to its word, and when the PFP was issued in May 1997, it allowed a substantial increase in spending. Deficit before grant rises more than $90 million this year. More than $50 million in additional monies will go to capital expenditures, and there will be an unexpected increase in civil service salaries.

Foreign reserves are still required to jump by more than $90 million, however, which means that donors will have to follow through on pledges to increase their grants to Mozambique if the country is to be able to take advantage of the new IMF policies..

The new PFP represents a substantial retreat for the IMF, which has backed down on some of its most strongly held views.

For example, the IMF has always argued that its staff need extremely high salaries to stimulate them to work hard, but that Mozambican civil servants will work harder if they are paid starvation wages. IMF spending curbs have forced the salaries of more than half of all civil servants to below the poverty line. In practice, underpaid nurses and teachers must become corrupt to feed their families, an outrage denounced by Mozambique's Planning and Finance Minister Tomaz Salomco at a donor meeting in Paris this past May. The rise in civil service wages to which the IMF agreed is an indirect admission that wages had been cut too far.

The IMF has also backed off on its most dogmatic free market policies which argued that the market was the only "efficient" way to allocate credit. The Fund is now allowing Mozambique to set up three special funds, announced at the Paris meeting, which will direct money to disadvantaged parts of the private sector. Restrictions both on the volume and direction of credit, and on capital spending for repair of war damage, have prevented the reopening of rural commercial networks.

"The national private business class, which is still nascent and lacking in financial resources, has to an extent been penalized by the restrictive policies that help to slow down inflation, particularly in the decapitalized rural areas," Prime Minister Pascoal Mocumbi told donors at the Paris meeting.

The three funds to help jump start the economy are:

The IMF is also reversing course by allowing Mozambique to spend some of the money which is being saved through debt relief. Fund officials have always argued that debt relief was simply a way of writing off unpayable debts and was never intended to allow new government spending.

Donors objected to this position, and last year Denmark and the Netherlands agreed to pay Mozambique's debts to the IMF itself, if the IMF would allow the government to spend an equivalent amount on health and education. The IMF reluctantly agreed, and a special Foreign Debt Alleviation Fund was established, which will also be used for other debt write-offs.

These important concessions from the IMF were due entirely to donor pressure.

Nevertheless, Mozambique continues to face the two central problems characteristic of adjustment programs all over Africa.

First, in an unrestricted free market, resources normally flow to the most developed areas. Thus the overwhelming emphasis on the market has further concentrated development in Maputo, at the expense of the north and rural areas in general.

Second, adjustment sharply widens income gaps, and this widening has occurred in Mozambique as well. But there is an added twist in Mozambique: many of the poor are demobilized soldiers with guns, which may account for increasing violent crime rates in the country.

In an otherwise upbeat and self-congratulatory speech to donors in Paris, Prime Minister Pascoal Mocumbi issued a harsh and undiplomatic warning that the social divide cannot be permitted to grow larger.

"Existing social inequalities and regional asymmetry could endanger the climate of peace, calm and social harmony that is the basic prerequisite for balanced and self-sustaining socio-economic development," he said.

Addressing these inequalities will require much more significant IMF concessions. Under the IMF-World Bank plan, spending next year will remain below 1994 levels. War damage will remain unrepaired, and the rural economy will be restricted in ways that could be easily avoided.

Freeing the economy from the shackles of IMF fiscal conservativism will require ensuring that money saved from debt relief can be used for social expenditures and that Mozambique be permitted to actually spend the money granted it by donors.

-- Joseph Hanlon

The Global Tobacco Epidemic

BEIJING -- Nearly 2,000 tobacco control advocates set their sights on the global tobacco industry at the tenth World Conference on Tobacco or Health, held here in late August.

The conference focused on the growing epidemic of tobacco use worldwide, especially by women and in developing countries.

Approximately half of the three million people who die from tobacco-related disease annually reside in the developing world. By the 2020s, 10 million are expected to die annually, 70 percent in the developing countries, Richard Peto of Oxford University told the conference.

Half of all of those who take up smoking die from tobacco-related disease, half of them dying before age 70. Those that die before age 70 on average lose 20 to 25 years of life.

Organizers of the conference, which included the Chinese Association on Smoking and Health, the World Health Organization and UNICEF, arranged for it to be held in Beijing in order to highlight the seriousness of tobacco use in China, and to buttress anti-tobacco forces in the country. Approximately three-quarters of middle-aged Chinese men smoke. Seven hundred thousand Chinese are currently dying of tobacco-related disease a year; the number is expected to rocket up to 3 million in the next century.

"China and many other countries in Asia ... must do more if we are to prevent a tidal wave of death and disability from tobacco engulfing us in the next century," said Lu Rushan, conference secretary general, at the opening session of the conference at the Great Hall of the People.

Chinese President Jiang Zemin also addressed the opening session, telling the delegates that China has recently adopted a new set of smoking regulations. Those regulations are routinely violated, though tobacco control advocates say passage of the regulations is the most important first step, with enforcement following later.

The state-run Chinese tobacco company sells most of the cigarettes consumed in China. Officially, foreign companies have only a 4 percent market share; but widespread smuggling means the actual proportion is much higher. The foreign companies are chomping at the bit to grab a bigger piece of the Chinese tobacco market.

Revenues from cigarette sales -- $4.9 billion annually -- provide the Chinese state with a reported 10 percent of total income. These monies deter government anti-smoking initiatives. But tobacco control advocates appear to have been relatively successful in arguing that the costs to the state in lost worktime, medical care and fire total $7.8 billion, far more than cigarette earnings.

The dominant subtext of the conference was the potential harmful effect of the U.S. tobacco deal on the rest of the world. Conference participants overwhelmingly criticized the deal, challenging the propriety of negotiations with the tobacco industry and worrying that the deal would facilitate multinational tobacco companies' international expansion.

"I put the cigarette industry in the same column as mosquitoes, rats and contaminated water," said Mary Assunta of the Consumers Association of Penang, in Malaysia. "Should deals be made with rats?"

The conference was expected to adopt a resolution directly criticizing the deal, but the resolution drafting committee -- reportedly at the prompting of Chinese delegates who felt uncomfortable criticizing "internal" U.S. matters -- instead put forward a resolution establishing broad principles for "settlements" with the tobacco industry. Critics of the deal declared victory nonetheless, pointing out that the U.S. deal violates all four principles in the resolution: that international effects be taken into account, that the rights of non-parties to settlements not be traded away, that documents be disclosed and that the entire cost of harms perpetrated by the tobacco industry be recovered.

In a panel discussion on the proposed deal, Matt Myers of the National Center for Tobacco-Free Kids acknowledged the deal says nothing about international tobacco control, but argued that the U.S. tobacco control program under the deal would be an experiment for the world, with a comprehensive program of counteradvertising, public education, ad limits, health warnings and industry acknowledgement of the dangers of smoking.

But many non-U.S. advocates said they did not want the United States held up as the global standard, since other countries have significantly more advanced tobacco control programs. The deal would give the United States approximately the same program Australia adopted in the late 1980s, noted Simon Chapman of Australia's Action on Smoking and Health. Australia has since moved far beyond its 1980s regulations, and done so without making concessions to the industry on the issue of liability or otherwise.

Myers also argued that, even though the agreement does not allocate money for international tobacco control, the Secretary of Health and Human Services would set aside $75 million for this purpose. He said the deal has focused some attention on international tobacco issues in the United States and said the U.S. government would use the deal as a "stepping stone" to address international concerns.

But advocates from around the world indicated a number of far more pressing concerns than could be offset by these uncertain advantages -- among them the effective exclusion of foreign victims of the U.S. tobacco companies from U.S. courts and the fear that the tobacco companies' subsidiaries would increase sales abroad to pay settlement costs at home. And Fran du Melle of the American Lung Association warned that rather than the deal working as a stepping stone, it would most likely function as a cap on what the United States might support in a World Health Organization Framework Convention on Tobacco Control -- effectively a model law -- which is a high priority for most international tobacco control advocates.

-- Robert Weissman

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