China’s strategic and economic forays in Bangladesh: Implications for India

Think of Bangladesh in terms of global trade, and it conjures up images of the burgeoning garment industry. Currently, Bangladesh is the second largest apparel exporter in the world, right after China. Indeed, the South Asian country has been in the news for less flattering reasons than this, with a number of deadly accidents taking place in the very sector for which it is famed.

Sheikh Hasina’s Vision 2021

Bangladesh Prime Minister Sheikh Hasina has, however, an exalted idea of the legacy of her government. Her government recently outlined its vision for Bangladesh in a long-term programme entitled ‘Vision 2021’. The programme envisages the rise of a middle-income, digitalized Bangladesh, free of hunger and poverty. The key to that, in the Hasina government’s eyes, is economic growth. Bangladesh remains a predominantly agriculture-based economy, but Sheikh Hasina’s government is focused on increasing investment opportunities, both domestic and foreign, in order to create more job opportunities and produce import-substituting goods. With this end in mind, a plan for the creation of ‘Special Economic Zones (SEZs)’ has been announced.

China’s Economic Diplomacy

china-bridgeChina is, among other countries, a fairly natural choice in terms of finding a partner to assist in driving the Bangladeshi economy forward. Bilateral trade between the two countries has been growing significantly, with last year’s figures standing at $6.8 billion. The basket of goods that China imports from Bangladesh includes frozen foods, jute goods, leather and agricultural products and woven garments. But a far more embarrassing fact lies in the considerable trade gap between the two countries, with Bangladesh’s exports to China standing at the rather lowly figure of $401 million. Dhaka is banking on an increased Chinese role to recharge the Bangladeshi economy. Small wonder, then, that Sheikh Hasina has called for massive Chinese investment in different sectors in Bangladesh, especially in textiles, energy and power, pharmaceuticals, communications and infrastructure development.  China has been quick to seize the opportunity.

A slew of collaborative projects between Bangladesh and China has been announced in the last four months. In March, China granted Bangladesh 150 million RMB (USD 23.8 million) in order to meet the latter’s needs for setting up vital economic and technical cooperation projects, in collaboration with China. Additionally, 860 million RMB (USD 133 million) has been provided by China in the form of a soft loan for the setting up of a Bangladeshi project, aimed at bringing all government offices across the country under one network. This project has been titled ‘Development of National ICT Infra-Network for Bangladesh Government Phase-II”. According to a statement released by Bangladesh’s Economic Relations Division (ERD) under the Ministry of Finance, once this project is implemented, it will be possible to bring all government offices at district and sub-district levels under one network. This is also being seen as a stepping stone towards the implementation of Sheikh Hasina’s Vision 2021.

In May, China expressed its interest in investing in Bangladesh’s beleaguered apparel industry – a sign which Dhaka will welcome given the controversies that this industry has so recently been mired in.

In June, Dhaka gave its consent to a Chinese proposal for the construction of a transnational highway, connecting the Indian state of West Bengal and the southwestern Chinese city of Kunming, via Myanmar and Bangladesh. The proposal has not yet been elaborated on, but it is safe to say that this will be a project of no small strategic implications for all the BCIM countries. Most recently, the project that has been grabbing headlines is that of the Padma rail-road bridge, for which the government floated an international tender in June. This is a project that has the potential to be an economic game-changer if it is successfully completed. Not only will it link 21 southern districts of Bangladesh with the interior of the country, but it is also expected to add 1.2 percent to the country’s GDP. However, the project has recently been mired in controversy, with the World Bank (prime candidate for funding the completion of the project) raising allegations of graft against Sheikh Hasina’s government.

Nevertheless, China’s aid in infrastructural projects all over Bangladesh are being seen as a sign and symbol of Beijing’s growing influence in the Bangladeshi economy. The ERD statement says as much, terming China one of Bangladesh’s most important economic development partners. Besides the six Bangladesh-China Friendship Bridges built with Chinese assistance, Beijing is also giving financial support for the implementation of a number of mega-infrastructure projects like the multipurpose Padma rail-road bridge, the Bangobandhu International Conference Centre in Dhaka, the Barakpuria coal mine and coal-based electricity generation, the Shah Jalal fertilizer factory, and upgrading mobile networks for the introduction of 3G technology.

China’s strategic agenda

Bangladesh is a strategic factor on China’s geopolitical agenda. Beijing is always on the lookout for better and more accessible sources of energy, and currently has an eye on the natural gas reserves that Bangladesh has to offer. Its constant packages of development aid and project loans ensure that it remains in the good books of the investment-hungry Bangladesh, and has landed Beijing most welcome rewards, such as exploration rights at the Barakpuria coal mines, as well as naval access to Chittagong port – which is critical to Beijing’s overall grand strategy with regard to the Indian Ocean. These are concerns that need to be met vis-à-vis India.

India galvanizes Bangladesh ties  

india-banglaNew Delhi and Dhaka have seen their share of success in bilateral ties in recent times. Indeed, India-Bangladesh relations have been on an upswing since 2009, in terms of security and economic cooperation. For example, since Sheikh Hasina took office as prime minister in 2009, her government has adopted a policy of zero tolerance with Indian insurgents and has facilitated the arrests of many top United Liberation Front of Assam (ULFA) leaders who have chosen to hide out in Bangladesh. Dhaka and New Delhi signed an extradition treaty earlier this year. Indeed, the modalities of handing top ULFA militant Anup Chetia were discussed in July during home-secretary level talks.

Muddying Teesta Waters

bangla-mamtaAt the end of July, Bangladesh Foreign Minister Dr Dipu Moni visited India during which she met India’s Prime Minister Manmohan Singh, along with senior members of BJP, the country’s chief opposition party. The visit is seen as a signal that both India and Bangladesh would like to sustain the revived momentum in bilateral ties.

Dr Manmohan Singh is understood to have assured Dipu Moni that the UPA-led government is seeking a national consensus on the Teesta water-sharing issue, while maintaining that regular data-sharing is taking place on the same. In addition, the Bangladesh foreign minister was told that India would work towards ratifying the land boundary agreement, which would then be tabled before parliament for its passage. Indeed, India’s Foreign Minister Salman Khurshid is currently lobbying Opposition leaders to put the land-boundary agreement into place before Bangladesh goes to the polls, indicating just how vital the issue is to bilateral ties. These are still touchy issues in bilateral ties between the two countries, besides being key factors in the run-up to the parliamentary elections in Bangladesh.

India’s economic diplomacy

These contentious issues apart, on the economic front India-Bangladesh relations have registered a positive momentum. In Bangladesh, India is widely seen as a viable partner for cooperation in the arena of infrastructural development. Indian companies are availing of tenders for the building of steel bridges in Bangladesh. In addition, Indian companies have also expressed interest in funding the construction costs of a deep-sea port at Sonadia, a project which could turn out to be strategically significant for India once the country is granted transit access.

With regard to energy cooperation, an ambitious 71-km Baharampur-Bheramara transmission link between the electricity grids of the two countries has been planned, with a tentative September deadline. Another joint venture power project – aptly named the Bangladesh-India Friendship Power Co. Ltd – is being set up by the NTPC and the Bangladesh Power Development Board. This project will mark the NTPC’s maiden foreign joint venture, and will entail the setting of a 1320 MW coal plant in Bagerhat in Bangladesh. Bangladesh has also stated its readiness to pick up equity in joint venture hydroelectric projects in India’s northeast, especially in Arunachal Pradesh. Dhaka has furnished a list of viable and jointly implementable hydro-power projects in the region.
New Delhi is also being seen by Dhaka as a financial shoulder to lean on. During Sheikh Hasina’s 2010 landmark visit to New Delhi, India had pledged $1 billion for a host of infrastructure and development projects in Bangladesh – India’s largest one-time aid package to a neighbouring country. In July this year, India completed the third installment of its USD 200 million in grant assistance to Bangladesh. India is also fast-tracking the completion of ongoing projects under the remaining USD 800 million Indian Line of Credit.

Saving India-Bangladesh Ties

india-bangla3Coming back to China’s accelerated foray into Bangladesh, while it is true that Beijing’s strategic and economic footprint is increasing in South Asia, it must also be remembered that China is still a relatively new player in the region.

India has multi-pronged ties, rooted in culture and history, with most countries in South Asia, especially with Bangladesh. India should build on this historical foundation to capitalize on its own strategic and economic ventures in Bangladesh.  This must be put into context given the volatile nature of Bangladeshi politics, and the fact that prickly issues like the stalled Teesta water pact and the land boundary agreement are key factors in the run-up to elections in Bangladesh. A fruitful resolution of both issues has been delayed due to the vagaries of domestic politics in India. It’s time for all political actors in India to rise above parochial agendas to salvage the transformation of India-Bangladesh relations that will have beneficent impact on the entire region.

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