Abstract
The purpose of this article is to examine the prospect of the Belt and Road Initiative (BRI) from the perspective of Bangladesh. The article investigates fundamental aspects of China’s economic involvement in Bangladesh to understand the geo-economic basis of the initiative. In this respect, the objective and motivation behind Chinese involvement in Bangladesh’s economy are studied, and the political and economic challenges emanating from the participation of the latter country in the initiative are outlined. Methodologically, this research adopts a qualitative approach and relies on primary sources to collect data. It concludes with an observation that Chinese investments through BRI could, in the long term, be advantageous for Bangladesh’s economy as long as the regional and economic issues associated with the initiative are appropriately dealt with. Besides, it suggests that the success of the initiative in South Asia, as well as in Bangladesh, requires a collaborative effort from all the states of the region on functional issue areas such as trade and connectivity.
Keywords
INTRODUCTION
Belt and Road Initiative (BRI) is a Chinese scheme to economically connect the wider Eurasian region to revive the ancient Silk Road. Beijing has two financial objectives in pursuing the project: first, to introduce Renminbi as a currency of international transaction; and second, to reduce its economic dependence on the United States by strategically channelling its substantial foreign exchange reserves to fund infrastructure development in Asian states (Habova 2015). The intended goals of One Belt One Road (OBOR) are policy coordination, unimpeded trade, facilities connectivity, financial integration, and people-to-people contact (Winter 2016). Globally, the initiative has been seen from two different perspectives. Some regard the initiative as a Functionalist connectivity project seeking to promote economic integration among the Eurasian countries. Alternatively, it has been perceived as a geo-strategic element within China’s grand strategic vision in Eurasia. Several scholarly studies have been conducted on the geopolitical, economic, and institutional implications of the BRI. It has been seen as a ‘Geo-Functional-institutionalist’ initiative seeking to create new and parallel institutions (Kaplan 2017). Some scholars have argued that the initiative is a contemporary expression of ‘New regionalism’ and ‘multipolar world order’ (Callens and Cherfi 2015), while other studies associate the initiative with China’s ‘Grand design’ to re-emerge as the world’s primary great power (Fallon 2015).
The initiative has become a source of interest and scrutiny in the academia and policymaking circles in South Asia. China has proposed two major corridors under BRI in the region: the China–Pakistan Economic Corridor (CPEC), which would connect Western China with the Pakistani port city of Gwadar, and the Bangladesh–China–India–Myanmar Economic Corridor (BCIM-EC), which seeks to integrate the economies of Bangladesh, China, India, and Myanmar through regional connectivity. Though BCIM-EC is still at the conceptual phase, China is rushing to make CPEC functional within 2020. In this regard, Beijing has committed to invest US$46 billion in Pakistan’s infrastructures under the CPEC initiative (Abid and Ashfaq 2015).
Similarly, the initiative has generated a wide range of debates among the experts in Bangladesh, as Beijing has pledged to invest in the critical sectors of Bangladesh’s economy. In general, the government and experts regard the initiative as an opportunity to attract investments to develop Bangladesh’s poor infrastructures. However, some scholars have cautioned against China’s alleged ‘Debt trap diplomacy’ by drawing the example of the Chinese takeover of Sri Lanka’s Hambantota port (Rafee 2019).
The purpose of this article is to examine the prospect of the BRI from the perspective of Bangladesh. The article investigates fundamental aspects of China’s economic involvement in the country to understand the geo-economic basis of the BRI. In this respect, the objective and motivation behind Chinese involvement in Bangladesh’s economy are studied, and the political and economic challenges emanating from the participation of the latter country in the initiative are outlined.
Methodologically, the article adopts a qualitative approach and relies on primary sources to collect data. A set of previous studies on the relevant subject matter has been reviewed to formulate the basic arguments of the paper. Other sources, such as newspaper articles, op-eds, and reports, are also examined to supplement the discussions.
The paper concludes with two observations. First, the Chinese investments through the BRI could, in the long term, be beneficial for Bangladesh’s economy if the economic and regional issues associated with the initiative are appropriately dealt with. Besides, it suggests that the success of the initiative in South Asia, as well as in Bangladesh, requires a collaborative effort from all states in the region to resolve the existing regional problems.
GEO-STRATEGY OF THE BELT AND ROAD INITIATIVE IN SOUTH ASIA
South Asia is a geo-strategically significant region for Chinese policymakers due to its geographic location and economic potential. The region has long-standing political, economic, and cultural ties with mainland China. However, the ties between Beijing and New Delhi have jeopardised the prospect of the initiative in South Asia. The mutual distrust between the two countries is exacerbated by the territorial disputes over the Aksai Chin region and Arunachal province and Beijing’s continuous military and political support to India’s regional rival, Pakistan. In the post–Cold War era, Sino-Indian relations can be defined by the perceived security dilemma on both sides. In Beijing’s perspective, the BRI could boost China’s relations with the South Asian and littoral states of the Indian Ocean Region (IOR) while serving as a strategic instrument to alleviate Beijing’s security concerns in the region. However, the initiative has created a renewed fear of Chinese expansion into India’s traditional ‘sphere of influence’. Indian strategists view the BRI-driven Chinese investments and outreach activities in South Asia and IOR as deliberate efforts to ‘strategically encircle’ the country from all sides.
New Delhi is particularly concerned about the Maritime Silk Road initiative. Indian strategists view the initiative as a geo-strategic project to expand Chinese presence in the IOR and gradually displace India as the ‘potential net security provider’ in the region (Upadhyaya 2017). Unlike many other countries in the region, India views the BRI solely from the ‘security perspective’. According to India, the initiative could offer China the means to exert influence in the remote north-eastern states, especially in Arunachal Pradesh, which has been a source of dispute between the two countries (Hu 2017). Moreover, New Delhi has reservations regarding the CPEC that passes through the disputed Gilgit-Baltistan region. Apart from political issues, there are some economic concerns regarding the BRI initiative. India has a very high trade deficit with China. Some scholars have speculated that the proposed BCIM corridor could bolster Chinese economic domination in the Indian market by flooding it with ‘cheap’ finished products (Sajjanhar 2016).
China, however, has shown reluctance to link BRI with geopolitical or security considerations. The Chinese officials prefer to use the term ‘initiative’ rather than ‘strategy’ to define the objectives of the BRI (Flint and Zhu 2019). Yet, the BRI, indeed, has a geostrategic dimension in South Asia. First, the BRI-related projects in South Asian countries would allow China to navigate an alternative gateway to access the energy resources in the Middle East. Chinese policymakers have always been concerned about significant US naval presence in the strategic chokepoints, such as the Malacca strait and Strait of Hormuz, which could threaten China’s access to the world’s major maritime routes and energy resources. Hu Jintao, the former president of China, even coined the term ‘Malacca Dilemma’ to note China’s security challenge over its reliance on the ‘Malacca strait’ for most of its energy imports (Zhang 2011). The Chinese megaprojects such as the CPEC would shorten the current 12,900 km distance to the Persian Gulf and enable China to directly import energy through pipelines and land corridors, circumventing the Malacca strait. Second, South Asia constitutes an essential component of China’s vision of future global order. The region is home to one-fourth of the world’s total population, and hence is a significant market for Chinese manufacturing products. Besides, Chinese investments could resolve China’s ‘overproduction’ problem by exporting Beijing’s industrial overcapacity to labour-intensive economies like Bangladesh, India, and Pakistan.
Compared to India, other South Asian states have taken a more relaxed approach to Chinese investments. New Delhi’s primary rival, Pakistan, is the most significant example of Chinese influence in South Asia. The strategic ties between the two countries have been described frequently as ‘higher than the Himalayas and deeper than the deepest sea in the world, and sweeter than honey’ (Pant 2020). Such a flattering description of bilateral relations shows the overwhelmingly positive perception Beijing enjoys in Pakistan. For the Pakistani establishment, the so-called ‘all-weather friendship’ is tested by the steady Chinese support in realising Pakistan’s military, political, and nuclear ambitions. Besides, the Pakistani army and the strategic community in Islamabad view the Sino-Pakistan strategic partnership as an essential pillar of Pakistan’s deterrence against India and a bargaining chip vis-à-vis the United States. Hence, the CPEC, from the Pakistani point of view, is a ‘new phase’ of the ever-growing strategic ties between the two countries. Apart from a speculative boost to Pakistan’s fragile economy, the CPEC serves several strategic interests of Islamabad. The construction of the corridor through Gilgit-Baltistan is strategically significant for Pakistan as it affirms Chinese support to Islamabad’s territorial claims over the entire disputed Kashmir region.
Moreover, the Pakistani establishment is getting nervous about the geopolitical developments of South Asia, which had been manifested in the Modi government’s assertive foreign policy of isolating Pakistan regionally and internationally. Hence, the ‘China card’ is becoming more important than ever before. In Islamabad’s perspective, the CPEC is going to create Chinese economic stakes in Pakistan, guaranteeing Beijing’s intervention in case of an Indian military adventure.
Nepal is another destination for Chinese investments and economic assistance. Historically, Kathmandu has been a close ally of New Delhi. As a landlocked country, Nepal is dependent heavily on Indian ports for international exports and imports. Keeping India’s security interests in consideration, Nepal’s leadership has been careful about building substantial economic ties with China. However, the unofficial Indian blockade of 2015 on Nepal changed Kathmandu’s stance on Beijing. The blockade aimed at supporting the minority Madheshi community took an enormous toll on Nepal’s economy. Due to the blockade, Nepal’s GDP went down by 3 per cent. Poverty and inflation increased by 8 per cent and 12 per cent, respectively. The events of 2015 have hastened Nepal’s efforts to reduce dependence on India by building alternative connectivity infrastructures centred on China. After officially signing up for the BRI in 2017, Nepal and China have agreed to cooperate on realising the Trans-Himalayan Multi-Dimensional Connectivity Network with an emphasis on rail connectivity. Both sides are eager to construct the ambitious US$2.75 billion Kerung–Kathmandu railway track with a clear intent to curtail New Delhi’s geopolitical leverage over Nepal (Budhathoki 2020).
Chinese investments in Sri Lanka is perhaps the most controversial aspect of the BRI in South Asia. The lease of the Hambantota port to China in exchange for a US$1.12 billion debt relief made headlines across the world as a classic example of Chinese ‘debt-trap diplomacy’ (Moramudali 2019). In fact, the decision affected the 2015 presidential election, which brought Maithripala Sirisena into power. Many reports indicated that the Indian intelligence apparatus perhaps played a significant role in consolidating the opposition block against the government of Mahinda Rajapaksa (Chalmers and Miglani 2020). The Sirisena government took a broadly pro-Indian foreign policy position by suspending the flagship ‘Colombo port city project’ (Tiezzi 2020). It tried to counter Chinese economic influence by seeking new sources of loans and investments from the United States, India, and Japan. However, the presidential election of 2019 had signalled a dynamic change in Colombo’s foreign policy. The new President Gotabaya Rajapaksa has pledged to maintain an ‘equidistant’ foreign policy by keeping Sri Lanka away from ‘Great power competitions’ (Attanayake and Atmakuri 2020). Yet, he appointed his brother, former president Mahinda Rajapaksa, as his prime minister, who is widely regarded as a ‘China-friendly’ figure. The appointment indicates the Rajapaksa government’s intention to restore robust economic relations with China while accommodating Indian security interests.
However, many analysts in South Asia have framed the BRI as a ‘neo-colonial’ venture. In Pakistan, there are concerns regarding the Chinese intentions behind the CPEC. Pakistan handed over the newly built Gwadar port to China Overseas Port Holding Company in 2017 for 40 years. Several reports also suggested a possible Chinese military deployment in the Balochistan province where the Gwadar port is located (Caroll 2020). Furthermore, Beijing is also planning to build a ‘port city’ in Gwadar, which would accommodate 500,000 Chinese professionals. It has been reported that at the current pace, the local Baloch people in Balochistan could be outnumbered by the Chinese ex-pat community by 2048 (Pauley and Shad 2020). In the future, these issues, if not appropriately addressed, could spoil Beijing’s efforts to present the BRI as a model of ‘Win-win cooperation’.
THE EVOLUTION OF SINO-BANGLADESH TIES SINCE 1971
The historical ties between China and Bengal predate the modern state-centric global order. Several historical accounts suggest close commercial, cultural, and religious links between China and ancient Bengali Buddhist dynasties. Some Chinese chronicles have recorded the visits of Chinese travellers like Ma Huan, Fa Xian, and Zheng He to ancient Bengal (Uddin and Bhuiyan 2008). However, the modern Sino-Bangladesh ties were only established after the independence of Bangladesh in 1971. China, being a key ally of Pakistan, was hostile to the idea of an independent Bangladesh. It strongly backed Pakistan’s military actions to crush the independence movement in present-day Bangladesh. Even after the military defeat of the Pakistani forces, China kept opposing the international recognition of Bangladesh by vetoing the latter’s inclusion into the United Nations. Beijing was particularly hostile to the government of Sheikh Mujibur Rahman, which, according to China, was an ‘instrument of Indo-Soviet manipulation of subcontinental unrest as well as an impediment to the normalisation of relations between Dhaka and Islamabad’. Consequently, it only chose to recognise Bangladesh after the assassination and deposition of Mujib in 1975 (Chakrabarti 1994).
In the post-Mujib era, Beijing and successive military regimes in Bangladesh found a common cause to strengthen the bilateral ties to curtail the Indian influence in the country. The state visit of President Zia-Ur-Rahman in 1977 marked a new era of bilateral relations between the two countries. His successor, President Hussain Muhammad Ershad, continued the policy of goodwill towards China by visiting the country five times in his 8 years of presidency. Even after the return of democracy in the 1990s, the two large parties of the country, Bangladesh Nationalist Party (BNP) and Awami League, maintained cordial relations with China (Singh 2010). The current Prime Minister Sheikh Hasina, after a state visit to China in 2014, downplayed China’s role in 1971 and insisted that China’s opposition to Bangladesh’s independence should be contextualised within the ‘perspective of world politics at that time’ (Yasmin 2016).
At present, Bangladesh maintains a strategically important bilateral partnership with China. Beijing and Dhaka collaborate on several aspects, ranging from trade to defence. In 2005, China became the largest exporter of goods to Bangladesh. It is also the principal supplier of armaments to Bangladesh’s military. Dhaka is the second-largest purchaser of Chinese defence equipment after Pakistan (Yesmin 2018). The BRI is the latest arena of Sino-Bangladesh cooperation. Bangladesh officially joined the initiative in October 2016 as two parties issued a joint statement emphasising the ‘alignment of the development strategies of the two countries’ and pledged to ‘work on “the Belt and the Road Initiative” to realize sustainable development and shared prosperity of the two countries’ (Das 2017).
BELT AND ROAD INITIATIVE IN THE CONTEXT OF BANGLADESH
Essentially, Beijing has two geo-economic motives to include Bangladesh in the BRI fold. First, Bangladesh’s strategic position between South Asia and South East Asia could give China access to large South Asian markets as well as to the Bay of Bengal. Second, Bangladesh’s growing economy and abundant labour force could offer China an opportunity to export its industrial overcapacity to support Bangladesh’s much-needed infrastructure development.
China’s future economic success requires continuous access to markets and resources overseas. Therefore, Beijing simply cannot ignore the importance of maritime trading routes and commercial passages. The Bay of Bengal is rapidly emerging as an essential commercial gateway within the IOR. The region has become a significant arena of geo-strategic competition between the major powers (Kabir and Ahmad 2015). China’s immediate challenge of operating in the Bay of Bengal region comes from India, as New Delhi views the IOR region as its own ‘sphere of interest’. Moreover, under the re-balancing strategy, the United States is closely aligning itself with the regional powers of the Indo-Pacific, such as India and Japan, to contain China’s ambitions. According to C. Raja Mohan, the China factor ‘is a structural reason for New Delhi to favour greater security co-operation with Washington’ in the IOR (Mohan 2006).
In such a competitive security setting, China has sought to build strong partnerships with the littoral states of the Bay of Bengal such as Bangladesh and Myanmar to strengthen its position in the region. But with the gradual liberalisation of the economy and steady democratisation, Chinese influence in Myanmar is on the decline. Furthermore, China-backed infrastructure projects have become a source of popular discontent in the country (Jaishankar 2015). So China’s growing relations with Bangladesh are a strategy to diversify its engagements in the region. Besides, Bangladesh is also a key partner country of the BCIM-EC, which intends to connect China’s underdeveloped southern part with the Bay of Bengal.
Moreover, Bangladesh’s growing economy is also an essential motivation for Chinese investments in the country. Bangladesh’s economy is projected to increase by 7.4 per cent in 2019, which makes the country the third-fastest-growing economy in the world (Ahasan 2019). Besides, Bangladesh has a comparative advantage over its developing counterparts due to the lower cost of labour (Hussain 2013). However, Bangladesh needs critical infrastructures to sustain economic growth. According to the World Bank, the country requires a US$320 billion investment in support to maintain 6–8 per cent annual growth (Islam 2018). The demand for infrastructures in developing economies like Bangladesh is a significant opportunity for Chinese state-owned and private companies to expand into foreign markets. As China is transitioning from an investment-driven economy to a consumption-driven one, partaking in overseas projects could help Chinese enterprises to become internationally competitive and would accelerate the ‘internationalization’ of the economy (Ferdinand 2016).
Additionally, the BRI advances Beijing’s ‘soft power’ objectives. Beyond roads and belts, the BRI is also about exporting China’s development model abroad. By implementing the initiative, Beijing seeks to demonstrate that economic development can be pursued outside a ‘Democratic’ and ‘free market’ setting. Unlike Western-oriented financial institutions, China can provide loans without any political or macroeconomic preconditions, which is politically more preferable for developing countries like Bangladesh. By providing economic incentives and loans, Beijing seeks to bring Bangladesh within its institutional and economic orbit while securing long-term access to strategic infrastructures and markets.
However, Bangladesh might face several problems in dealing with BRI-related projects internally. First of all, Bangladesh does not have a ‘well-functioning financial system’ to absorb the large-scale loans provided by Beijing (Sarker 2019). Second, Bangladesh is one of the most challenging countries to invest in due to bureaucratic barriers. In the 2020 ‘Ease of doing business ranking’, Bangladesh ranked 168th out of 190 countries (The Daily Star 2020). A report pointed out that a foreign investor in Bangladesh has to move through 42 steps before starting a business. The same report suggests that obtaining a ‘construction permit’ takes 269 days in Bangladesh, while registering a property takes 244 days. All these factors have made Bangladesh less attractive to foreign investors. Moreover, widespread public sector corruption is also a significant hindrance to getting large-scale foreign investments. Bangladesh ranked as the 14th most corrupted country according to the Corruption Perceptions Index of 2019 (Foyez 2020).
The BRI-linked projects in Bangladesh are designed to build world-class infrastructures for the smooth transportation of goods and people. But these infrastructures could only pay dividends if Bangladesh can secure more overseas investment in the export-oriented manufacturing sector. The BRI-related investments could potentially avoid the bureaucratic and political hurdles, as most of the Chinese loans are provided on a government-to-government basis. However, Bangladesh still needs to attract private sector investments to build a strong manufacturing base. Currently, ready-made garments (RMG) accounts for 84 per cent of Bangladesh’s exports (The Daily Star 2020). The country must diversify its export products and destination to boost international trade. To accomplish these goals, there is no other way than to bring significant reforms in the administration and regulatory system of the country to eliminate the bureaucratic barriers.
THE KEY FEATURES OF SINO-BANGLADESH ECONOMIC COOPERATION
Bangladesh and China maintain multifaceted economic relationships. But the economic partnership between two countries reached a new level when Beijing pledged to provide US$22.5 billion of the loan in 27 projects after the visit of President Xi Jinping to Bangladesh in 2016 (Chakma 2019). Technically, these projects are outside the purview of the BRI, as officials of both countries have refrained from linking them to the initiative. But most of these projects are focused on infrastructural development by financing railways, roads, energy cooperation, and port construction. Thus, the scope of these projects closely aligns with the objectives of the BRI.
Bangladesh has been very careful towards the Chinese investments in the country. But Dhaka has gradually moved out of its BRI dilemma. Gowher Rizvi, the international affairs adviser to Bangladesh’s prime minister, affirmed Bangladesh’s participation in the BRI and insisted that the initiative ‘fits into Bangladesh’s national priorities’ (Bdnews24 2019). Bangladesh’s open embrace of the BRI shows the importance of Chinese investments in the country’s infrastructure development. Furthermore, the flexibility of the BRI has cemented Bangladesh’s commitment to the initiative. China has maintained that BRI is neither a free-trade regime nor a treaty-based system (Banerjee 2016). Hence, Bangladesh has the scope to negotiate the terms of each project bilaterally without any prior obligations. Such flexibility would also allow Dhaka to engage with other actors like India, Japan, and the United States without plunging deep into the Chinese economic orbit. Certain key aspects are essential to understand the Sino-Bangladesh economic cooperation in the context of BRI:
INVESTMENT IN STRATEGIC INFRASTRUCTURES
Bangladesh has a very favourable geographical position. Geographically, Bangladesh can function as a transit corridor for landlocked neighbours such as Nepal and Bhutan, as well as the north-eastern Indian states. But it is necessary to develop a regional connectivity framework to facilitate such a process. The lack of functional trade corridor, regional value chains and free-trade zones is holding off regional trade integration in South Asia (Ahmed, Suleri and Javed 2015). According to the World Bank, the rural areas of Bangladesh and other South Asian countries have failed to be integrated into the outsized economy due to an underdeveloped transportation network (World Bank 2006). The ‘less integrated’ transportation infrastructure is considered one of the significant barriers of intra-regional trade in South Asia (Rahmatullah 2009).
Moreover, critical infrastructure is necessary to develop internal connectivity within Bangladesh. The industrial core of the country is located in the greater Dhaka region which includes Gazipur and Savar. Therefore, better communication and transportation infrastructures are necessary to connect the industrial Dhaka region with the rest of the impoverished peripheral areas. Transportation infrastructures are also essential to consolidate the authority of the state in the peripheral areas to ensure bureaucratic services. For example, Chinese infrastructure development in Nepal and Laos has paved the way for the effective integration of these countries into the global market by consolidating state control over peripheral regions (Yeh 2016).
Table 1 shows that 9 out of 27 projects expected to be financed by China are focused on enhancing road and rail connectivity across the country. But there has been a considerable delay in realising all the projects. So far, only five projects worth US$4.5 billion have been signed, while the remaining projects are in different stages of ‘planning, preparation, negotiation and approval’ (Chakma 2019). Such delays have raised questions about the viability of the Chinese-funded projects in Bangladesh.
List of Proposed China-Financed Projects in Bangladesh
For China, investments in critical infrastructures serve a more vital and long-term strategic objective of inter-regional connectivity within the framework of the BCIM economic corridor. Beijing has been undertaking similar infrastructure projects in Myanmar under the China Myanmar Economic Corridor (CMEC). The Y-shaped passage seeks to connect Kunming and Mandalay to Yangon and Kyaukpyu (Yhome 2019). Given India’s opposition to the BRI, China may seek to include Bangladesh in the CMEC by stretching it to the Bangladesh–Myanmar border. Any such economic corridor would be a boon for the peripheral economy of Bangladesh. The small and medium cities along the passage would be integrated into the global trade network and could attract foreign investments in many sectors. There are also prospects for Bangladesh in the Chinese market. Bangladesh, being a least developed country (LDC), enjoys quota advantage in markets around the world under the rules of the World Trade Organization (WTO). Bangladesh gets duty-free access to almost 97 per cent of products in the Chinese market (Shahriar and Qian 2017). Therefore, a direct China–Bangladesh corridor might significantly increase Bangladesh’s trade opportunities with China. However, the prospect of such a tri-national corridor between Myanmar, China, and Bangladesh seems bleak because of the ongoing tensions in the Rakhine state due to the Rohingya crisis and the armed conflict between the Myanmar military and ethnic Rakhine separatists (The New York Times 2020).
ENERGY COOPERATION
Enhancing energy cooperation between the partner countries is a crucial pillar of the BRI. The initiative is expected to promote energy efficiency convergence through trade integration and regional cooperation. The BRI-affiliated energy projects, such as pipelines and power plants, are expected to ensure the energy security of China and the partner countries (Han et al. 2018).
So far, Bangladesh has been able to secure a small portion of Chinese investment in the energy sector. But the scale of investments is expected to increase in upcoming years. Chinese companies are especially interested in investing in Bangladesh’s electricity sector (refer to Table 1). China has already committed US$1.9 billion on coal plant expansion and another US$5.1 billion in developing a 14 GW coal-fired capacity (Siddique 2019). Recently, GCM resources and PowerChina signed a US$4 billion deal to build a 2000 MW coal-fired power plant in Dinajpur using ultra-supercritical technology (Dhaka Tribune 2019). Furthermore, China-led Asian Infrastructure and Investment Bank (AIIB) has granted Bangladesh US$120 million to upgrade and expand the power transmission system in the Chittagong region (AIIB 2019).
China has also shown interest in Bangladesh’s nuclear energy sector. Bangladesh’s government is planning to build a second nuclear plant in the country after the completion of the Rooppur nuclear plant. Two Chinese companies—Dongfang Electric Corporation and China State Construction Engineering Corporation—have reportedly lobbied to win the deal to construct the proposed power plant (Hossain 2019).
DEVELOPMENT OF DEEP SEAPORTS
Port building is a significant aspect of the BRI. China has already financed the construction of several ports across Asia and Africa. Some scholars have tried to explain China’s port development initiatives within the context of ‘The string of pearls strategy’. The strategy seeks to create a China-controlled sea lane of communication to ensure the seamless flow of maritime trade and access to energy and raw materials. Bangladesh, due to its proximity to Southern China and the Malacca strait, is strategically vital for China’s maritime security.
The Chittagong port has handled 2.346 million twenty-foot equivalent units (TEUs) of containers and more than 50 million tons of cargo in 2016. The figure is projected to rise to three times in the next 15 years. By 2020, the traffic is expected to climb around 2.7 million TEUs, and up to 5.4 million TEUs within 2040. The rapid growth in international trade requires the construction of a deep seaport in a suitable location at the Bay of Bengal (Rahman 2010). Bangladesh and China have agreed to increase the capacity of the Mongla port. Besides, Chinese companies are building 2 out of the total 19 components of the Pyra deep seaport, which is expected to be operationalised by 2023 (Mamun 2016). The port would be connected to the national transportation network upon the completion of the Padma Bridge project. The project could help Bangladesh to become an important trade hub in the South Asian region. Bangladesh could use its spare capacity to provide port facilities to Nepal and Bhutan, as both landlocked countries are heavily dependent on the Kolkata port for International trade.
CHALLENGES FOR BANGLADESH IN THE CONTEXT OF THE BRI
There are several challenges in the way of achieving the intended goals of BRI-related initiatives in Bangladesh. The challenges could potentially obstruct the objectives of the BRI. These challenges are elaborated below:
ROHINGYA CRISIS
The Rohingya refugee crisis is currently one of the worst humanitarian crises in the world. The UN has accused the Myanmar military of committing a ‘textbook example of ethnic cleansing’ against the Rohingya minority by forcing more than 700,000 refugees into Bangladesh (Safi 2017; UNOCHA 2019). Despite worldwide condemnation, Myanmar has secured the support of its two giant neighbours, namely India and China.
The underlying factors behind the complacent policy of China and India have a profound geopolitical and geo-economic basis. Myanmar is strategically significant for both countries. India needs Myanmar to access the markets of South East Asia. It has invested US$500 million in the Kaladan multi-modal transport transhipment project, which would connect India’s North-East with the Sittwe port in the Bay of Bengal. Moreover, the project also serves as an alternative if, in the future, Bangladesh refuses to grant transit access to India (Chowdhury 2017).
China is also constructing the strategically important ‘KyaukPhyu’ deep seaport. Beijing is keen on building infrastructures to bypass the sea lanes’ communication heavily militarised by the United States. The port would allow China to circumvent the Malacca strait and transport energy and goods directly to the mainland through Myanmar. But there is local resentment towards Chinese involvement in the port projects. There is a rise in ‘Resource nationalism’ in different parts of Myanmar (Bhaumik 2018). Beijing is concerned that any Chinese sympathy towards the Rohingya minorities could hamper its economic and political interests in the country. Thus, China has pledged its proactive support to the Myanmar government without severely hampering its ties with Bangladesh. But the Rohingya issue has complicated the Bangladesh–Myanmar relations. The crisis, if not resolved peacefully, could jeopardise the BRI-backed connectivity initiatives in the region.
CONCERNS REGARDING THE DEBT-TRAP DIPLOMACY
There are some concerns behind the large-scale Chinese investments in mainly the developing countries in Asia and Africa. A survey report produced by the United Nations Economic and Social Commission for the Asia Pacific (UN-ESCAP) pointed out that large-scale loan grants to developing countries could potentially harm the macroeconomic stability in these countries due to the underdeveloped nature of the market and insufficient debt management capacity (Akhtar, Hahm and Malik 2017). The accusations of ‘Debt trap diplomacy’ became louder after Sri Lanka leased the Hambantota port to Chinese companies for 99 years to repay some of its debt to China. Many experts have claimed that China is using loans as a means to secure concessions from poor, developing countries. Noted Indian strategist Brahma Chellaney called the ‘debt-trap diplomacy’ a part of China’s broader ‘geostrategic vision’ (Akpaninyie 2019). But many scholars have challenged the notion of ‘debt-trap diplomacy’. A study by the Rhodium group has argued that China generally agrees to renegotiate debt and rarely seizes assets under the pretext of debt settlement (Kratz, Feng and Wright 2019).
However, the threat of ‘Asset seizure’ is a serious concern for a resource-poor country like Bangladesh, especially since China is seeking to convert US$20 billion of the loan previously granted to Bangladesh into commercial credits. Converting the loans into commercial credits could lead to a long-term debt crisis in Bangladesh (Awasthi 2017). But there are cases of a successful renegotiation of infeasible economic deals with China. Myanmar, for example, has successfully scaled down the China-funded Kyaukpyu port project to almost 80 per cent to avoid falling into a debt trap. On the other hand, Malaysia has renegotiated a deal to reduce the proposed East Coast Rail Link (ECRL) to two-thirds of the original cost (Jaipragas 2019).
Nevertheless, the government of Bangladesh is confident that the massive Chinese development loans would not affect the financial stability of the country. The external debt of Bangladesh was US$33.52 billion as of 2018, which is 14.3 per cent of the GDP, lower than that of the neighbouring countries. Furthermore, the average interest rate of these loans is 1.23 per cent, and the country could repay the loan within 31 years, with an average grace period of 8 years. Besides, due to Dhaka’s cautious borrowing policy, Bangladesh may avoid a Sri Lanka–like ‘Debt-trap situation’ in the future (Ahmed 2020; Ramachandran 2020).
THE INDIA FACTOR
As India views the BRI initiative as a direct threat to its regional and global interests, New Delhi has sought to counter Chinese influence in South Asia and the IOR at two levels: at the regional level, New Delhi has offered regional integration schemes such as the Bangladesh–Bhutan–India–Nepal (BBIN) initiative to counter the BRI (Jacob 2017), while internationally, it has taken measures to build closer strategic ties with another Asian giant, Japan. The Indo–Japanese Asia–Africa Growth Corridor (AAGC) has been portrayed as an alternative initiative with a similar scope to that of the BRI. The AAGC aims to establish a ‘special and strategic global partnership’ between India and Japan to create a ‘peaceful, open, equitable, stable and rule-based order’ in the Indo-Pacific region (Panda 2017). The Indo-Pacific strategy is another crucial initiative that New Delhi is pursuing jointly with the United States, Japan, and Australia. The initiative seeks to balance Beijing’s influence in the Indo-Pacific by engaging littoral states with a strong Chinese economic and strategic presence (Rajagopalan 2020).
In the regional setting, Bangladesh holds a key position in New Delhi’s balancing effort. So far, Dhaka has defended its position on the BRI despite Indian concerns. Bangladesh has insisted that the idea of sovereignty needs to be re-conceptualised and has emphasised the necessity of ‘economic integration and connectivity’ (Dhaka Tribune 2017). Nonetheless, India holds a significant influence in South Asia, and New Delhi has the capability to delay and disrupt the progress of the BRI in its neighbourhood (Ye 2017). The Awami League government, which has historically maintained a pro-Indian orientation, has shown sensitivity to Indian security interests by declining Chinese-proposed projects with significant strategic implications. In 2016, Dhaka cancelled the Chinese-funded Sonadia deep seaport in favour of a similar Japanese-funded port project in Matarbari to allay Indian concerns regarding a potential Chinese naval base in Bangladesh (Chakma 2019). Perhaps, the Bangladeshi leadership understands New Delhi’s clout in regional affairs in South Asia and the necessity to maintain a cordial partnership with India. Thus, Dhaka has opted for a balanced approach to gain India’s tacit approvals for the BRI-related projects in Bangladesh. The strategy of balancing seems to be working so far, as Bangladesh’s economic and strategic ties with India are growing stronger despite heavy Chinese involvement in the economy.
CONCLUSION
Bangladesh has a substantial stake in the BRI initiative. Due to the lack of economic incentives, Bangladesh has never been a prime destination for foreign investment. The BRI could significantly increase the flow of foreign investments, which is critical for the country. Bangladesh could gain significant benefits from the initiative in three aspects.
First, BRI-related investments could accelerate infrastructure development in Bangladesh. Roads and railways proposed to be built under Chinese economic assistance would enhance connectivity within the country. Besides, Chinese investment in the energy sector is vital to fulfilling Bangladesh’s growing energy demands. Chinese investment initiatives would help Bangladesh to attain the economic goals pursued under the ‘Vision 2021’ framework.
Second, the initiative would integrate Bangladesh within the ‘Global supply chain’. The inter-regional connectivity initiative proposed under the BRI would provide increasing trade opportunities with China and the Association of Southeast Asian Nations (ASEAN).
Third, China is rapidly transforming from a production-driven economy to a consumption-driven one. This transformation would allow Bangladesh to attract investment into its nascent manufacturing sector. The initiative could potentially facilitate the relocation of China-based manufacturing industries to Bangladesh due to its low cost of labour.
However, Bangladesh has to face several external and internal challenges before any benefits materialise from the BRI. The issues of agreement delays and debt settlements need to be adequately addressed to build trust between both parties. At the same time, the prospect of the initiative would depend upon effective collaboration between China and countries of the region.
Historically, South Asia is one of the least-integrated regions of the world in terms of trade, connectivity, and people-to-people contact. The BRI has the potential to promote economic integration among the South Asian countries and with the surrounding regions. But the South Asian countries are facing similar challenges and dilemmas over the BRI initiative. The Sino-Indian geopolitical tension is one of the issues that could derail the prospects of the BRI in South Asia. India is not only the largest country geographically but also the largest economy in the region. No regional integration initiative can deliver success without creating a trans-boundary transportation infrastructure and integrated trade network. India’s participation is critical in realising such a network in South Asia. However, based on the current geopolitical scenario, any future cooperation between India and China, especially on the issue of regional integration, is a far-fetched idea. Hence, the trajectory of geopolitical competition between New Delhi and Beijing would be a determining factor that needs to be taken into account while evaluating whether the BRI would succeed in Bangladesh as well as in the broader South Asia.
Footnotes
Declaration of conflicting interests
The author declared no potential conflicts of interest with respect to the research, authorship and/or publication of this article.
Funding
The author disclosed receipt of the following financial support for the research, authorship and/or publication of this article: This research received no specific grant from any funding agency in the public, commercial, or not-for-profit sectors.