Barrister Harun ur Rashid
BANGLADESH Prime Minister Sheikh Hasina flies out on 6th June to China. First she attends the Kunming Business Fair in the Yunnan province and thereafter goes to Beijing invited by her Chinese counterpart Li Keqiang.
The Prime Minister is keen to build infrastructure and development projects in Bangladesh so as to make the country a middle income country by 2021. While the Western nations and the EU have distanced themselves from big investments after the 5th January non-inclusive parliamentary elections, India, China, Russia and Japan have firmly supported the government and expressed keen interest to invest in Bangladesh. ‘Look to the East’ has ushered in a new phase of Bangladesh foreign policy under the current government.
On 29th May the Prime Minister returned after a four day visit to Japan and the trip yielded the “single largest commitment” by a country for Bangladesh’s development, State Minister for Foreign Affairs told a press conference. Replying to a question, he said the visit also proved Japan’s confidence in the present government more than any other time.
Bangladesh now turns toward China and during the last three years, its financial support has surged significantly. The more investment Bangladesh receives from China, its goal of becoming a middle income country by 2021 will be quicker.
China has been recognised as one of the global economic leaders because of the scale of its commerce and exports of consumer goods. Now China is going to the next stage on the global scene as an investor. It means China will be known as the source of capital, rather than goods.
China has a huge reserve of investment funds that cannot be absorbed internally. Total foreign investment financial outflows are over US$70 trillion. China holds significant reserves of currency ($3.2 trillion) and financial instruments, but these have been impacted by an appreciation in its currency RMB and an expansionary financial environment through the recent rounds of quantitative easing.
Another fact is that in developed economies Chinese investors also saw high costs, restrictive labour practices and unclear messages on investment by the state owned Chinese enterprises. It is therefore not surprising that China is attracted to investment in Bangladesh in areas which would generate good returns to China. The two nations have everything to gain from adapting and developing this investment relationship. Trade relationship is not deeply involved with a country while investment is.
In trade, the relationship exists between the buyer and the seller and not between the countries. If a buyer gets a cheaper price or a seller receives higher price, they shift to another buyer or seller. There is no deeper involvement between them while investing in a country, Bangladesh and China are deeply involved. The governments and the people interact closely in the case of investment and the relationship is lasting.
Ordinarily the loan is provided by China for 10 to 13 years with a grace period of 3 years only.
Given the above background, the government of Bangladesh is reportedly seeking Chinese soft loan for 20 years with a grace period of 5 years for 14 infrastructure projects. The important projects include a rail bridge over the Jamuna river and a high-speed “chord” train line between Dhaka and Comilla. Another project envisaged under the loan is the construction of a 4.8km long dual-gauge double-track rail bridge — parallel to the Bangabandhu Jamuna Bridge.
It is reported that government has decided that the Padma Multi-purpose bridge, the country’s largest-ever infrastructure project, is to be built by China Major Bridge Engineering Company (CMBEC). The CMBEC will get the $1.55 billion job against a revised estimated cost of $1.77 billion.
Analysts say that there are some issues that need to be factored in by Bangladesh. First in receiving huge loans for such mega projects from China, Bangladesh needs to comprehensively assess the costs of such funds, including both the explicit costs such as interest and commitment fees and the implicit costs such as conditions on procurement of goods, works and services. Second, while the Indian press is highlighting the possibility of a “robust partnership” between Delhi and Beijing after Chinese Premier Li Keqiang called to congratulate his new Indian counterpart, Narendra Modi reportedly has strong reservations over growing Chinese influence in the neighbouring states for its strategic interests. And this may have impact on India’s policy toward Bangladesh
Furthermore if the deep sea port in Bangladesh is built by the Chinese companies, India’s maritime security in the Indian Ocean may face a threat. This apprehension emanates from Indian perception that China has been gradually encircling India by the so-called “String of Pearls”. The term “pearls” means naval facilities that China has reportedly been developing in Pakistan, Sri Lanka, Myanmar, Thailand and Cambodia. It is therefore desirable that a consortium of foreign companies may build the seaport.
Third, deep engagement with China by maritime nations such as Bangladesh with access to the Indian Ocean may not be to Japan’s when it has been highly critical over the Chinese military’s assertiveness on disputed islands claimed by Vietnam and the Philippines in the South China Sea at the recent Asia Security Summit in Singapore.
Source: The Daily Star