China remains silent on Bangladesh's financial request

(MENAFN-NewsIn) By K/Counterpoint

Colombo, July 11: Ahead of Bangladesh Prime Minister Sheikh Hasina leaving for China on a state visit, Foreign Minister Dr Hassan Mahmud said the prime minister would seek a soft loan of $5 billion from China to tackle the country’s debilitating financial crisis.

But at the end of the state visit on Wednesday, China’s official Xinhua news agency said only that President Xi Jinping and Sheikh Hasina “agreed to elevate bilateral relations to a comprehensive strategic cooperative partnership.”

No information has been released about what happened between the two leaders.

Earlier, after a meeting between Sheikh Hasina and Chinese Premier Li Qiang, Dr Mahmud said Li Qiang had promised economic assistance of $1 billion. This assistance will be provided in four forms: grants, interest-free loans, concessional loans and commercial loans, he added.

Mahmud added that technical committees of both countries would meet to decide how these four types of financial assistance would be provided to Bangladesh.

But the Chinese premier’s office has not provided any information confirming or denying Mahmud’s statements.

However, after Hasina and Xi’s meeting on Wednesday, Bangladesh and China signed 21 instruments covering cooperation in economic and banking sectors, trade and investment, digital economy, infrastructure development, disaster management assistance, construction of the sixth and ninth Bangladesh-China Friendship Bridges and export of agricultural products from Bangladesh.

Teesta controversial development project

There is no indication that Hasina discussed the controversial Teesta River Basin Development Project, in which there is fierce competition between China and India.

With the Teesta water-sharing deal with India having collapsed, a frustrated Bangladesh turned to China in 2019 for help in managing the limited amount of water it had.

In 2020, Beijing presented a $1 billion comprehensive Teesta River management and restoration project. But the proposal raised alarm in New Delhi because of the project’s proximity to the Indian border. During Hasina’s visit to New Delhi in June this year, India offered to implement the project.

Hasina was expected to convince Xi Jinping to withdraw from the project during her visit to Beijing. But it is not clear whether the issue was discussed with Xi Jinping and whether he responded accordingly.

“Bangladesh will try to compensate in other ways if China is not satisfied with our position on Teesta,” Foreign Minister Mahmud said.

Perhaps as compensation, Bangladesh has opened the door wide for Chinese companies to invest heavily in the country.

Memorandum of Understanding on Massive Investments

On June 9, Bangladeshi and Chinese companies signed 16 agreements at a China-Bangladesh summit on trade, business and investment opportunities.

Under the agreements, Chinese companies will invest in textile, electric vehicles, solar energy, fintech and technology sectors in Bangladesh.

The MoUs are as follows: Agreement between Nagad and Huawei Technologies (Bangladesh) Ltd., with an investment of US$ 50 million. An investment of US$ 20 million for the “Bangladesh Capital Market Digital Transformation Project” signed between Dex Bangladesh Tech Ltd and Huawei Technologies (Bangladesh).

An investment of US$ 400 million will come from China under a Memorandum of Understanding signed between Deshbondhu Group, Chemtex and China Chemical CNCC. The two sides will establish the largest PSF, PET bottle and textile products plant in the Mongla Economic Zone.

China Road and Bridge Corporation (CRBC) and Ningbo Cixing Company Limited have signed a Memorandum of Understanding on the Investment Framework Agreement in China Economic and Industrial Zone in Bangladesh.

Billion10 Communications Ltd and CHTC (HengYang) Intelligent EV Company Ltd have signed a Memorandum of Understanding (MoU) for the manufacturing of electric vehicles. Billion10 Communications Ltd and Ningbo Sun East Solar Co Ltd have signed a MoU for the establishment of a solar park in Sylhet.

Billion10 Communications Ltd and HeSheng (Hoshine) Silicon Industry Co Ltd have signed a Memorandum of Understanding to invest in the renewable energy sector. Billion10 Communications Ltd and Zhongke Guorui (Zhuhai) New Material Technology Co Ltd have signed a Memorandum of Understanding to invest in the used lubricating oil recovery and refining sector in Bangladesh.

EB Solution Ltd and Hongji Intelligent Transport Co Ltd have signed a Memorandum of Understanding (MoU) to invest in the Dhaka City Mobile project. EB Solution Ltd and Ningbo Shering New Energy Technology Ltd have signed a MoU to invest in the smart cold chain logistics solutions sector in Bangladesh.

An investment of US$ 20 million will be provided to Bangladesh for CNG transportation by river and road under a Memorandum of Understanding (MoU) on technical and financial investment collaboration. The MoU was signed between Intraco Refueling Station PLC and Shijiazhuang Enric Gas Equipment Co Ltd.

Zibo Jinhuateng Paper Machinery Co Ltd will invest in the paper machinery sector in Bangladesh in collaboration with Nitol Niloy Group. The two parties have signed a memorandum of understanding in this regard.

Zhengzhou Dongfeng Mid-South Enterprise to invest in TBR tire projects in Bangladesh in collaboration with Nitol Niloy Group. Shandong Sunite Machinery and Nitol Niloy Group signed a memorandum of understanding to invest in Bangladesh’s autoclaved aerated concrete (AAC) block.

Daliam Huahan Rubber & Plastic Machinery to invest in Bangladesh rubber machinery with Nitol Niloy Group.

China’s growing influence

China’s influence in Bangladesh is growing. In 2015, China displaced India as Bangladesh’s largest trading partner, a position India had held for four decades. Bangladesh still imports more goods from China than from India.

Bangladesh’s economy has also become dependent on Chinese money, Ahmede Hussain says in The Diplomat, October 16, 2023.

Bangladesh has a total debt of $17.5 billion to China, which has been mostly invested in insignificant infrastructure projects which, coupled with declining remittances, could lead to an economic crisis in the country, Hussain warned.

“To get out of this situation, Bangladesh took an IMF loan program worth $4.7 billion. But the country failed to meet two of the six targets set by the IMF, one of which was mandatory for the bailout. If Bangladesh failed to get the IMF loan, how will it be able to meet its debts to China?”

According to Hussain, unlike the IMF or the World Bank, China gives its borrowers a short period to repay their loans. Interest rates are also higher.

“During the last financial year, Bangladesh’s loan repayment amounted to US$ 1.2 billion.
“The total amount of public investment expenditure will amount to $2.74 billion, an increase of 37% compared to the previous year, and in this fiscal year (2023) it will reach $3.28 billion,” the article says.

Indian investments stagnate

India has also pumped a lot of money into Bangladesh and supported Sheikh Hasina’s government to the hilt to keep her in power and to keep the Chinese out. But the Chinese are there and they are settling in.

In an article in Money Control in October 2023, Pratim Ranjan Bose said that Prime Minister Narendra Modi had taken India’s commitments to an “astronomical level”.

Between 2015 and 2017, India provided an additional $7 billion in concessional credits and grants ($500 million) for nearly 30 projects in energy, infrastructure, health, education, etc.

An additional US$ 1.6 billion financing was provided to Bangladesh-India Friendship Power Company (BIFPC) for 2X 660 MW at Rampal and US$ 2 billion financing for 2X 800 MW was provided to Adani Power Plant in Jharkhand for dedicated supply to Bangladesh. Both the projects have been completed.

Dhaka responded positively till 2017. But things have changed. He quoted Dhaka daily Prothom Alo as saying, “Bangladesh has lost interest in Indian projects.” Dhaka has abandoned 12 projects worth over $2 billion in the last five years. Barely a quarter of the Indian line of credit has been used, he adds.

Bose blames China’s easy money for stalling Indian projects. Bangladeshis complain about India’s insistence on sourcing up to 75% from India. But the Chinese insist on sourcing 95% from China. Chinese loans come with higher interest and, above all, there is no transparency.

According to Bose, the reasons for Bangladeshi authorities to accept Chinese funding are ease of disbursement, price inflation and lack of transparency. Bangladeshi officials thus reap huge profits.

“According to the World Bank (which had pulled out of the Padma Bridge project due to irregularities), the unit cost of infrastructure construction in Bangladesh is the highest in the world. From metros to bridges to highways, the cost per kilometre is often four to five times higher than in India,” Bose points out.

Moreover, Bangladesh has tried to deter India by shutting down the Rampal power plant five times between December 2022 and July 2023, citing fuel shortages. As a result, repayments due under the “below-market” loan have suffered.

The Indian-funded Ashuganj river terminal in Bangladesh and the 50-km road to Agartala in Tripura were not a reality in October
2023. At the Sabroom border in Tripura, India has planned a rail and road link to the Chattogram port in Bangladesh. But no bricks had been laid on the Bangladeshi side before Bose wrote the article.

Two years ago, India completed the construction of a road bridge (over the Feni River) connecting Sabroom to Ramgarh in Bangladesh. But the connecting highway on the Bangladeshi side has not been built.

Is India losing to China despite its unwavering support for Sheikh Hasina in these difficult times?

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