Development of Asia Energy"s Phulbari coal project hangs in the balance following reports the Bangladesh government decision not to allow the mine to proceed and angry crowd protests of up to 20,000 people protesting the development of the mine.

The Long-based Economist Intelligence Unit (EIU) has reported that the Bangladesh government has disallowed the development of Asia Energy's US$1 billion open pit coal mine at Phulbari, some 350km north of the capital Dhaka.

While these reports have not been confirmed and attempts to get a formal reply from the Government of Bangladesh last week have failed, the current protests over the mine development which locals believe will displace some 100,000 people and create severe environmental damage, have created headlines worldwide.

The project is being viewed by foreign investors with some keenness to gauge the level of support Bangladesh gives to foreign investment projects. Already there is growing angst over stability of foreign investment in Bangladesh, following the Tata Grous, an Indian conglomerate, cutting its plans to invest more than US$2.5 billion in developing steel, power and coal projects in Bangladesh.

Resistence to the development of the Phulbari project has brought about a general strike in the country and demonstrations that have resulted in several deaths as demonstrators clash with police and security forces.

Asia Energy has rebuked the concerns that have created hysteria against the project getting the green light to proceed saying that that the environmental impact would be lower than what is being touted and that far fewer residents would be displaced and that those who were displaced, would be resettled and compensated.

Such resettlement has now become common place among mining companies developing new projects and part of a company's corporate responsibility to ensure a safe environment and that no person within the mine's area would be worse off if a new project develops.

The company said in the EIU report: "The irony of the situation is that the mine, if built, could generate revenue for Bangladesh. It would also produce fuel for electricity generation that might help the country to reduce its chronic power shortages. Although Bangladesh has abundant natural gas reserves, electricity generation per head is among the lowest in the world," it said.

An upcoming national election which must be held by January 2007 is also giving protestors extra fuel to have their concerns heard.

The current term of the coalition government led by the Bangladesh Nationalist Party (BNP) ends in October. An election needs to be held within 90 days of the dissolution of parliament. The main opposition party is the Awami League (AL)

Respected economist Hossain Zillur Rahman has been quoted in the press as saying that foreign direct investment will continue to flow to Bangladesh and would not be affected following the Phulbari coal mine incident.

He believes the Bangladesh government should prepare an investment policy that would suit the national interest as well as attract quality investment.

According to sources, Asia Energy has so far spent $20 million to develop the coal mine. It submitted earlier a coal mine development plan to the government which was under review of an expert committee of the government.

The Phulbari resource which is JORC-compliant has been estimated at 572 million tonnes.