ET analysis: China's trade concessions to Bangladesh a 'dual-deficit and debt trap'


NEW DELHI: China’s decision to offer duty free access to Bangladesh is merely a promise on paper as Beijing has very stringent Rules of Origin criteria and lot of concessions remain on paper. This so called “diplomatic victory” by China involving duty free access taking advantage of the pandemic can only push a promising economy into distress and despair.

Chinese trade concessions can push Bangladesh into a ‘dual-deficit and debt trap’. This could force Dhaka to accept terms and conditions fixed by Beijing. Dhaka should learn from Sri Lanka which has been pushed to a debt trap and Colombo has been forced to given Hambantota port to Beijing on a 99-year-lease. When the world attention is focussed in fighting Covid, China is pushing its vested agenda in South Asia including Bangladesh.

Beijing’s moves come as BRI projects get delayed ever since Covid outbreak. “While BRI projects may not be shelved, they will most certainly be plagued by delays. China is already facing requests for debt relief. In South Asia, the Maldives has sought to renegotiate its debt to China while Bangladesh has requested China to consider deferring payments. The coming months are likely to see a falling appetite for new loans, casting uncertainty on planned projects,” writes Deep Pal, a non-resident fellow at the National Bureau of Asian Research, USA and Rahul Bhatia (a research assistant at Carnegie India) in a paper titled ‘The BRI in Post-Coronavirus South Asia’. The paper was published by the India chapter of Carnegie, leading global think tank.

Meanwhile, there is a major push to connectivity initiatives via sea ports, inland water transport, rail and highways that will also enable Bangladesh to connect with not only the Indian market but also Bhutan and Nepal. Both the governments are undertaking various measures to restore the pre-1965 rail links and other connectivity links that existed between India and Bangladesh. In May India and Bangladesh expanded the scope of inland water transport mechanisms that would enable them to boost trade in the region. This initiative will allow export of Bhutanese and North-East cargo to Bangladesh and easy access for the traders to the hinterland of Bangladesh.

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In what marked a new era in sub-regional connectivity a trial run of the trans-shipment of Indian goods through Bangladesh took place in June. In the first trial, India carried goods to Tripura and adjoining states via Akhaura and Bibirbazar land ports of Bangladesh after they arrive at Chittagong port, officials informed. Such an arrangement, once rolled out, will help India ship goods to and from its north-eastern region by waterways and then by road through Bangladesh. Bangladesh is expected to benefit from fees charged on such movements of cargo.

India had offered duty free access to several Bangladeshi products a decade before the Chinese decision and that step helped to reduce trade deficit in Dhaka’s trade with Delhi. India’s terms and conditions from trade concessions to loans are more favourable. Beijing has mulled over years before giving trade concessions to Dhaka and step can push Dhaka towards a debt trap.

Bangladesh is India’s biggest trade partner in South Asia. Bilateral trade between India and Bangladesh has grown steadily over the last decade. India’s exports to Bangladesh in FY 2018-19 stood at $ 9.21 bn and imports from Bangladesh during the same period were $1.04 bn.

In comparison Bangladesh’s trade deficit with China is hugely titled in Beijing’s favour. China exported $13638 million worth goods to Bangladesh in 2018-19 but Bangladesh’s exports stood at miniscule $ 568 million. A fourth of Bangladesh’s total import basket comprises Chinese origin good and the bilateral trade deficit has seen a 16-fold increase over the last two decades.

India has a diametrically opposite approach. It has extended three Lines of Credits (LOC) to Bangladesh in the last 8 years amounting to $ 8 billion for development of infrastructure in various sectors including roads, railways, shipping and ports. Infact Bangladesh is the biggest recipient of India’s concessional Line of Credit. In addition to LOCs, the Government of India has also been providing grant assistance to Bangladesh for various infrastructure projects including construction of Akhaura-Agartala rail link, dredging of inland waterways in Bangladesh and construction of India-Bangladesh Friendship Pipeline.

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Small Development Projects (SDPs) constitute an active pillar of India’s development assistance. The Government of India has funded 55 SDPs including construction of student hostels, academic buildings, cultural centers and orphanages etc in Bangladesh and another 26 SDPs are being implemented.

Human resource development is a key component of India’s development cooperation efforts in Bangladesh through its several ongoing training programs and scholarships. The Government of India has been training 1800 Bangladesh Civil Service officials from 2019 at National Centre for Good Governance (NCGG), Mussoorie. Bangladeshi police officials are also being trained at various premier training institutes in India on various modern policing and new investigative techniques of this information age. Similarly, the Government of India has been extending training for 1500 Bangladeshi judicial officials since 2017 at National Judicial Academy, Bhopal and also at various State Judicial Academies in India.

Bangladesh needs to rethink its trade and investment strategies to prevent complete entrenchment into the Chinese system. Bangladesh needs to tap in markets of South and SE Asia to utilise its full trade potential.





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