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OPINION - How huge China investment in Bangladesh affects region

$38 billion Chinese investment in Bangladesh: Changing dynamics in geopolitics of South Asia?

10.11.2016 - Update : 11.11.2016
OPINION - How huge China investment in Bangladesh affects region

By Mohammad Hossain


In a major move of its kind, Bangladesh and China signed a Memorandum of Understanding on strengthening investment and production capacity cooperation in mid-October, with Bangladesh set to receive $24.45 billion in bilateral assistance from China for 34 projects and programs.

Combined with a further $13.6 billion in Chinese investment in the form of 13 joint ventures, the sum of $38.05 billion is the biggest ever assistance pledged to Bangladesh by any single country.

The agreement is part of Chinese President Xi Jinping’s initiative to promote and implement China’s Silk road economic belt under its ambitious Belt and Road Initiative -- a trade and infrastructure network for connecting at least 60 Asian countries with Europe and Africa along the ancient Silk Road routes.

The agreement is highly significant, not just because of the purported economic benefits that it will bring to both Bangladesh and China, but also because of the substantial geopolitical implications that it portends. This becomes all the more important in light of the changing political and economic dynamics within the South Asian region, shaped by the interests of emerging superpowers, such as India, in addition to those of existing heavyweights, such as China and the United States.

Back in March, Bangladesh and India signed a $2 billion agreement to implement socio-economic development projects in Bangladesh and strengthen bilateral relations, in what had been hailed as the “biggest line of credit that India had extended to any country so far”.

At the time, Indian Prime Minister Narendra Modi hailed the move as “clever and unexpected”, and a “checkbook coup” that would bowl the Bangladeshis completely in the face of China’s checkbook diplomacy.

Furthermore, in accordance with the “Make in India” policy of Modi -- whereby under the line of credit a minimum of 75 percent of goods and services needs to be of Indian origin and must be procured from India -- the agreement is expected to create 50,000 jobs in India.

The latest Bangladesh-China agreement, however, dwarfs that, leading to speculation of a "zero-sum game" being played out between India and China over Bangladesh.

Bangladesh Prime Minister Sheikh Hasina, however, dismissed that when asked Oct. 14 in an interview with Indian daily The Hindu whether that investment could jeopardize ties with India.

Hasina said Bangladesh would maintain "good relations with everyone".

"The purchasing power of our people will increase, and who will be the bigger beneficiary of that in our region? India. India is best poised to benefit from the Bangladeshi market."

Despite China’s deep pockets, its interests in Bangladesh are less strategic and more economic and commercial. Unlike India, whose relationship with Bangladesh is strategic-cum-military, and is seen as a mark of its supremacy and ambitions in the South Asian and Indian Ocean regions.

This apparent competition between India and China over Bangladesh is part of a much wider rift between the two countries on the international stage.

In what can only be termed as conflicts of political and economic interests of two rising superpowers, India’s Look East policy, which aims to balance India’s relationship with the West and the East, are at odds with China’s Belt and Road Initiative. Moreover, India is not keen on the idea of joining in on Beijing’s proposed economic corridor linking Bangladesh, Myanmar, China and Northern India as part of the Belt and Road initiative.

The tensions between the two countries were evident in the context of the recently held BRICS (Brazil, Russia, India, China and South Africa) conference in Goa, India, where the issue of Pakistan figured in pivotal terms in defining Sino-India relations.

China’s strong ties with Pakistan via the China Pakistan Economic Corridor, its move towards blocking India’s membership in the Nuclear Suppliers Group and its blocking of India’s attempt to add Masood Azhar (the founder and leader of the terrorist group Jaish-e-Mohammed, active mainly in the Pakistan-administered part of Kashmir) to the UN’s list of terrorists, clearly sets the tone from its side.

India, on the other hand, has had deteriorating ties with Pakistan, most recently over the issue of Kashmir and its refusal to join the South Asian Association for Regional Cooperation (SAARC) summit in Pakistan, and its emphasis towards trying to strengthen strategic ties with the U.S. and Russia, instead of China.

Moreover, the BRICS-BIMSTEC (Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation) Outreach Summit, held after the main BRICS summit Oct. 16, was more than a move towards potential synergizing between the two frameworks -- it was meant to signal the rise of India as the "leader" of BIMSTEC while at the same time downplaying the continued relevance of SAARC in light of the increasingly strained India-Pakistan relations.

It is in this context that the Chinese move to woo Bangladesh, traditionally seen as a strong Indian ally in the subcontinent, through massive investments, will be of concern to India.

India’s growing strategic relations with the United States -- itself historically more of an ally of Pakistan instead of China -- speaks volumes regarding how India perceives its relationship with China.

Incidentally, recent U.S.-Pakistan relations have been relatively weak compared to U.S.-India relations, considering the strategic weight of India vis-a-vis China in the eyes of the U.S.

Former U.S. Ambassador to India Frank Wisner, speaking at a recent Conference on Foreign Relations (CFR) event entitled New Geopolitics of China, India, and Pakistan, said India was “hugely important” in maintaining a balance of power throughout the Asia Pacific for the United States, and that it was a two-way street.

“India sees the United States and its relationship with us as part of its ability to secure itself in the long term and manage its own relations with a rising Chinese power,” Wisner said.

In the meantime, the role of Bangladesh has not been just that of a passive recipient of foreign developmental aid from either India or China.

The government of Sheikh Hasina has actively responded to Modi’s Look East policy, the most recent manifestations of which have been its being part of a coordinated effort at boycotting the now-postponed SAARC summit in Pakistan and its pro-India stance on the issue of unrest in Kashmir.

At the same time, Bangladesh has balanced its act with China through bilateral trade; China is the largest trade partner of Bangladesh, while Bangladesh is the third largest trade partner for China in South Asia.

In this light, a close Bangladesh-China partnership, whether as part of increased BRICS-BIMSTEC economic cooperation or the proper utilization of the recent Chinese funds as planned, will surely ensure continued close, if not greater, Bangladesh-China collaboration in the future.

Bangladesh premier Hasina, now in her seventh consecutive year in power, can be credited with setting up a stable regime in Dhaka, through tight control on socio-economic activities, activities of the political opposition and the media. Stable long-ruling autocratic governments have long been seen as conducive to trade and developmental activities in the Asian region, and recent investment activity alludes to the realization of just that perception.

Another of the wild cards in terms of regional diplomacy is the role that counterterrorism can play in bringing countries closer, and Bangladesh’s recent counterterrorism efforts have resonated with regional and global powers India, China and the U.S., despite being criticized by international human rights organizations such as Human Rights Watch (HRW) and Amnesty International as being sweeping and misdirected at political opponents.

The political opposition in Bangladesh, namely the Bangladesh Nationalist Party (BNP) and the Islamists led by Bangladesh Jamaat-e-Islami, have not been able to effectively counter or circumvent the strict and at times oppressive measures of the government.

Their lack of strong alternative leadership and farsighted planning, coupled with a strong government clampdown on political opposition, has rendered them weak and unable to carve a voice in the rapidly changing dynamics of the country or the region.

Opinions expressed in this piece are the author’s own and do not necessarily reflect Anadolu Agency's editorial policy

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