Slowdown and Discontents in China – Assisted Projects in Bangladesh
Since then, Chinese investment in Nepal has looked up. Between 2018 and 2019, China made significant investments in Bangladesh’s power sector. During Bangladesh Prime Minister Sheikh Hasina’s visit to China in 2019, nine new investments, including two loan deals, were signed between the two countries.
Dhaka: Bangladesh became part of China’s Belt and Road Initiative (BRI) in 2015. According to the China Global Investment tracker, China has been directly involved in construction of projects worth around USD 16 billion which is close to a little more than one-third what China had promised in 2016 during Chinese President Xi Jinping’s visit to Nepal. Eight years hence it is pertinent to evaluate the state of Chinese assisted projects in Bangladesh for two reasons. One is whether Chinese projects have helped Bangladesh towards becoming an upper-middle income country by the end of the decade and second, to gauge whether the progress of China assisted projects has been satisfactory.
Bangladesh bounced back in economic recovery from Covid shock by recording a GDP growth of 7.2% in FY 2021-22 and is further forecast to grow at a rate of 5.3% in FY 2023 and 6.5% in FY 2024-25. It is right on growth trajectory. As far as China assisted projects in Bangladesh is concerned, they are being implemented slowly but steadily, and, therefore, their impact on country’s growth could not be credited beyond a reasonable limit.
China had initially announced Bangladesh, China, India and Myanmar Economic Corridor (BCMI) as an important and vital part of its BRI and Bangladesh which has very vibrant trade relations with India and other countries in the region was attracted towards it. However, the promise of BCIM corridor did not pick up as conceived and subsequently became a strategic ploy for China eventually becoming exclusionary, particularly keeping in mind India’s larger sphere of influence in South Asia. China continued its engagement with Bangladesh through infrastructure projects and Myanmar, but not under BCIM corridor. BCIM no more figures in reference to BRI by China now a days.
Bangladesh was propelled to engage with China for building infrastructure projects by its desire to realize its goal of becoming an upper-middle income country by 2031. China’s proposal of investment was sort of a much needed opportunity for Bangladesh. China offered Bangladesh to join its BRI in 2015, but Dhaka decided to go for agreement with China for investment in infrastructure, rather than joining the initiative officially. Eight years later, much of the initial enthusiasm seems to have vanished as a result of several factors, including the impact of the Covid pandemic, Beijing’s own re-assessment of its ambitions, Russia’s war against Ukraine, and the US government’s push for its influence under the Indo-Pacific strategy.
Bangladesh is one of the fastest emerging economies of Asia and as it has a vision to become an upper-middle income country by 2031. Eight years ago, when Chinese President Xi Jinping visited Bangladesh in October 2016, he wanted to allure Dhaka towards its ambitions BRI by putting forward proposals to invest a total of approximately USD 40 billion in the country – USD 24.45 billion in infrastructure projects as assistance and USD 13.6 billion for joint venture investments. Although, Bangladesh needed investment to graduate to an upper-middle income country, it did not officially join the initiative.
Despite Dhaka’s reservations in officially joining the BRI for not alienating its other development partners who felt strategically threatened by China’s increased engagement with the country, it could not afford to reject Chinese proposal for investment for development of much needed infrastructure and joint ventures.
In 2016, Bangladesh signed agreements with China for eight projects, with a total of more than USD 9.45 billion. These projects included the Padma Bridge – rail link (estimated to cost USD 3.3 billion), the Pyara 320 MW coal-powered Thermal Power Plant (USD 1.56 billion), an investment in the Development of National ICT infra-Network for the Bangladesh government project (USD 1 billion) and power grid network strengthening project (USD 1.32 billion).
Since then, Chinese investment in Nepal has looked up. Between 2018 and 2019, China made significant investments in Bangladesh’s power sector. During Bangladesh Prime Minister Sheikh Hasina’s visit to China in 2019, nine new investments, including two loan deals, were signed between the two countries. China invested a total of USD 7.07 billion from 2018 to 2022 in Bangladesh taking the cumulative investment since 2015 to 16 billion.
Despite seemingly a win-win situation, the China assisted projects in Bangladesh have their own discontents. Dhaka is not comfortable with the Chinese requests to align its strategy with BRI goals as it could be interpreted by its other development partners that the country has drifted as a drift towards their strategic rival, China. Dhaka has also expressed concern about the slow disbursement of funds for key projects that may face challenges such as budgetary constraints and extended timelines.
The debt trap scare which Sri Lanka witnessed and Pakistan is now passing through is another thing that is scaring Bangladesh policy makers. The Finance Minister of Bangladesh voiced his concerns in August 2022, urging developing nations to rethink their decision to take out more loans under China’s BRI. Such loans end up in creating dependency on China and making the debting countries vulnerable. It is estimated that Bangladesh owned China approximately USD 4 billion by 2022, which amounted to 6% of its total foreign debt at that time.
Although, Bangladesh economy is relatively stable and resilient, in recent times it came under pressure. It sounded alarms in 2022 about an impending economic crisis caused by a myriad of factors, including widespread loan defaults crippling the banking sector, depleting foreign currency reserves due to capital flights and more. The country requested a bailout package in July 2022 worth USD 4.5 million as its dwindling foreign exchange reserves made it difficult to import essential raw materials. It was compelled to cancel or postpone several infrastructure projects including highway upgrades and constructing 5G network.
Nevertheless, Bangladesh was able to garner a package from the International Monetary Fund (IMF). The IMF approved USD 4.7 billion support loan package to Dhaka in January 2023 to help it cope with rising energy prices and other essential commodities and fulfill resilience and sustainability requirements.
Another problem that Bangladesh may encounter in future is that the Chinese companies are notoriously known for paying no or scant attention to the social and environmental impact of the projects implemented by them in Afro-Asian developing countries. In close neighbourhood Myanmar, Myitsone Dam project assisted by China was cancelled on the allegations of social and environmental dislocation caused by it.
The most complex dilemma for Bangladesh is how to reconcile its national interest with its development partners who take China as a strategic rival and competitor. So far Bangladesh has successfully balanced its national interest with its engagement with various development partners some of which are strategic rivals. It could be seen from the choices, Bangladesh made in past. China showed keen interest in Bangladesh’s proposed Sonadia Deep Sea Port near Cox’s Bazaar as part of its “string of Pearls strategy” to encircle-India in its maritime neighbourhood, along with investments in Sri Lanka’s Hambantota port and Paksitan’s Gwadar port. But Bangladesh wisely chose not to invest in that port in 2020 saying that it did not align with its national interests.
Today, Bangladesh needs same kind of cautions approach while its other development partners including the US, Japan and India are more than willing to support. A balancing act between the development partners is the need of the hour for Bangladesh.
