Featured image:

© bdnews24.com/muhammad mostafigur rahman, PMO, PID

China and India: A delicate balancing act

Bangladesh’s geo-strategic and geo-political importance in Asia has today become the focus of special attention of both global and regional powers. Bangladesh, for the past four and a half decades, has projected itself as a bridge between South Asia and South East Asia, but it is only during recent years with connectivity, trade and investment dominating the agenda of the Asia-Pacific region, that Bangladesh’s strategic location has attracted the attention which it so clearly deserves. Today Bangladesh can be viewed as the one country in the region which enjoys a special relationship with the two fastest growing economic powers in the world, namely, China and India.

The visit of President Xi Jinping to Bangladesh in October 2016, the visit of Prime Minister Modi to Dhaka in June last year and the impending visit of Prime Minister Sheikh Hasina to India, clearly indicate that forging both a strategic and economic partnership with Bangladesh is today high on the priority list of both China and India. This presents a unique opportunity for Bangladesh and can be of critical importance in achieving its target of becoming a middle income country, as outlined in ‘Vision 2021’, and the ambitious goals and targets of ‘Vision 2041’, laid out by Sheikh Hasina.

As Bangladesh develops its own economy it must remain mindful of the kind of dialogue and relationship required to facilitate improved relations with these two Asian giants. Bangladesh has to be extremely sensitive and alive to the concerns of both China and India, the underlining currents and tensions as well as the multiple positive developments in Sino-Indian relations that exist between these two neighbours of Bangladesh. The foremost challenge facing Bangladesh in the next ten years is not only its ability to further strengthen its relations with both China and India but to be able to forge a constructive trilateral partnership based on improved connectivity, trade and investment.

The foremost challenge facing Bangladesh in the next ten years is not only its ability to further strengthen its relations with both China and India, but to be able to forge a constructive trilateral partnership based on improved connectivity, trade and investment.

The Middle East today is in turmoil. The so-called Islamic State or Daesh poses a serious threat not only to countries in the Middle East but to the entire international community, especially to countries in South Asia and to China. It would be imprudent to underestimate the serious threat posed by the Islamic State (IS). Although IS has recently suffered a series of military setbacks in Iraq and Syria, its ideology and its effective use of social media continue to pose a major threat in radicalising youth in different parts of the world, in particular in countries like Bangladesh which has a youth boom combined with unemployment and the absence of a high quality education system geared to skills development, science and technology. If Bangladesh wishes to safeguard its identity as a secular state it needs to adopt a comprehensive strategy to counter radical or extremist groups operating within its borders. Integral to such a strategy will be the need to work closely with all the major powers, India and China in particular.

Bangladesh-China Relations

In 2014, Beijing agreed to support five large-scale infrastructure projects worth around $5 billion. Additionally, the Chinese government agreed to support other projects in Bangladesh, including connectivity, construction of a second railway-cum-road bridge across the Karnaphuli river at Kalurghat point near the existing railway bridge and construction of a new single track dual gauge railway line from Chittagong to Cox’s Bazar.

Chinese President Xi Jinping and Bangladesh President Md Abdul Hamid meet during Xi’s visit to Bangladesh.© PID

China also agreed to increase its imports from Bangladesh to reduce the trade gap. This, in effect, will boost Bangladeshi exports and could potentially lower Bangladesh’s reliance on exports of ready-made-garments. China is also looking to relocate a large number of labour-intensive industries, particularly in the textile and garment sectors, to Bangladesh. In June this year, the two governments signed an MoU for the establishment of Special Economic Zones (SEZs) for Chinese-owned and operated industries. The Chinese Economic and Industrial Zone (CEIZ) will be set up on a 774-acre of land in Anwara Upazila in Chittagong. There are also plans to set up SEZs in Gazaria, Munshiganj. China plans to invest around $4.5 billion in both these SEZs.

China is also investing in Bangladesh’s energy sector. A joint venture project to construct a 1320 MW coal power plant in Patuakhali has been signed. Alongside supporting the growth of Bangladesh’s energy sector, China is also involved in large-scale infrastructure projects in the country such as the tunnel under the Karnaphuli River, a project valued at $705 million, and also in the construction of the Padma Bridge that is now being funded by the Bangladeshi government.

In August 2016, China’s state-owned firm, China Railway Construction Corp Ltd (CRCC), was awarded a contract to build a $4.44-billion 215-km Padma Bridge railway link from Dhaka to Jessore. On Oct 13, China’s Jiangsu Etern Co Ltd signed a deal worth $1.1 billion to strengthen the power grid network in Bangladesh.

However, it was the path breaking visit of President Xi Jinping to Bangladesh which has, by all accounts, elevated the bilateral relationship to its highest level ever. Chinese state-media heralded the visit as a diplomatic ‘milestone’ of ‘historic significance’. It was the first state visit by a Chinese president in thirty years since the visit to Bangladesh by President Li Xiannian in 1986.

The visit led to the signing of 27 agreements worth $24.45 billion. Among these was a Cooperation Agreement on increasing investment and production capacity-building, under which 28 development projects are to receive $21.5 billion in concessionary Chinese co-funding. The funds are to be allocated for some key infrastructure projects, as well as projects in the power and energy sectors. In addition, 13 joint venture agreements valued at $13.6 billion between companies in the private sector in the two countries were signed during the visit. The investment pledges together amount to a staggering $38.05 billion. President Xi was quoted as saying, “We agreed to elevate the relations between China and Bangladesh from a closer comprehensive partnership of cooperation to a strategic partnership of cooperation…so that we continue to move ahead at a higher level.”

Bangladesh-India Relations

In 2015, Prime Minister Modi’s government ratified the Land Border Agreement of 1974 which had been a major irritant in the bilateral relations between the two countries for the past four decades. This was followed by a highly successful visit to Bangladesh by Prime Minister Modi himself. The major achievement of this visit was the establishment of a close personal rapport between Sheikh Hasina and Modi. The two sides also reaffirmed their commitment to continue the excellent cooperation in the fields of security and counter- terrorism. Strengthening energy cooperation and moving forward in the key areas of connectivity, trade and investment, as well as a $2 billion soft loan for infrastructure projects, were the highlights of the visit.

“We agreed to elevate the relations between China and Bangladesh from a closer comprehensive partnership of cooperation to a strategic partnership of cooperation… so that we continue to move ahead at a higher level.”
Xi Jinping

Bangladesh also enjoys commendable levels of FDI from India, especially in the energy sector. Reliance industries will be investing $3 billion in a 3,000 MW power plant in Bangladesh; this will make it the largest FDI project to date in Bangladesh. The Adani group will also invest in the power sector; they will set up a 1,600 MW coal power plant in Maheshkhali worth around $2 billion. Two exclusive economic zones in Mongla and Bheramara are being set up solely for Indian investments, showing the level of commitment the Indian government and its private sector has in Bangladesh.

However, issues which need to be given utmost attention revolve around border management and more specifically, the killing, from time to time, of Bangladeshi nationals by India’s Border Security Force (BSF). Both the countries should work harder to make the border more safe so as to encourage more border trade and people-to-people interaction. At the same time both sides need to also work together to ensure a peaceful and secure border free of criminal activity such as drug and arms smuggling and human trafficking.

Bangladesh already enjoys duty-free access to the Indian market, but trade will improve and become even more sustainable in the long run if some non-tariff barriers are removed by India. Bangladeshi policymakers must make the argument to Indian policymakers, that Bangladesh, both directly and indirectly, contributes $20 billion annually to the Indian economy. This is clearly a sum large enough to rightfully warrant an appropriate response from the Indian government.

Another issue that is also of prime importance is the sharing of the Teesta waters. It is a promising sign that Prime Minister Modi has pledged to find a resolution to this issue. A whole range of issues related to other joint rivers need to be addressed. Bangladesh is also keen to build a barrage on the Ganges so as to overcome the scarcity of water during the dry season in the Ganges. Indian support for this project will be welcomed by Bangladesh.

Indian Prime Minister Narendra Modi and his Bangladesh counterpart Sheikh Hasina meet during Modi’s visit to Bangladesh.
© bdnews24.com/muhammad mostafigur rahman

It is important to mention some MoUs and agreements the two governments have signed in recent times which illustrate the robustness, and potential, of the relationship with India. An MoU was signed between the two coast guards to counter the illegal movement of goods, human trafficking, and fake currency notes, among other issues. Other agreements were signed to improve overall bilateral maritime cooperation in the Bay of Bengal and the Indian Ocean. An agreement was reached between Bangladesh’s BSTI and the Indian BIS on cooperation in the field of standardisation, in effect making it easier for Bangladesh to export consumer goods such as food items to India.

It is thus evident that Bangladesh’s relationship with India holds a lot of potential and should be further developed. There is ample goodwill on both sides to resolve all outstanding issues. The two governments must also work together to address the trust deficit that exists at the people to people level. Trade and investments will further increase once it becomes easier for Bangladeshi citizens to travel freely to India. The current visa application process must be made more efficient and the duration for receiving a visa made shorter. Both countries enjoy multiple ties from our shared history, India’s support during the Liberation War, to our common cultural and linguistic heritage. What is missing is an effective communication strategy which can project the many ties that bind the two countries together; rather than focus attention on issues of divergence, the effort should be to focus on issues of convergence. There is a need for greater public diplomacy and a better understanding at a people- to-people level about the ground realities in the two countries. It is especially important that Bangladesh’s relations with its closest neighbours, West Bengal, as well as the seven states in the Indian north-east, in particular Assam, Meghalaya, Mizoram and Tripura, are further strengthened.

One Belt One Road (OBOR)

There is a need for greater public diplomacy and a better understanding at a people to people level about the ground realities in the two countries. It is especially important that Bangladesh’s relations with its closest neighbours, West Bengal, as well as the seven states in the Indian north-east… are further strengthened.

The idea of the ‘One Belt, One Road’ initiative is regarded as the cornerstone of President Xi’s foreign policy. Its main purpose is to focus on connectivity and to support infrastructure projects that facilitate connectivity. In fact, a number of MOUs signed between Bangladesh and China during President Xi’s visit to Bangladesh can be viewed as a part of  the ‘One Belt, One Road’ initiative. In the joint statement issued at the end of the visit, it is stated that Bangladesh is “appreciative” of the “Silk Road Economic Belt” and the “21st Century Maritime Silk Road” (the Belt and Road Initiative), believing it will bring “important opportunities” for Bangladesh’s goal of becoming a middle-income country by 2021 and a Developed Country by 2041.

China has taken several initiatives within the framework of OBOR. The oldest of these initiatives is BCIM, the Bangladesh, China, India, Myanmar Economic Corridor. Last year China launched a second initiative also directly involving Bangladesh. This was the Trans-Himalayan Development Forum(THDF). Two meetings of this track two initiative have been held so far involving representatives from Think Tanks of countries bordering the Himalayas. Although neither Bangladesh nor Myanmar can be considered ‘Himalayan countries’, they have been included in the THDF, since it appears that the essential purpose of this initiative is to link BCIM to CPEC(the China-Pakistan Economic Corridor). Evidently India has shown very little enthusiasm for OBOR, BCIM,CPEC and THDF.

India: BIMSTEC, BBIN, SAARC

India is much more interested in supporting BIMSTEC (Bay of Bengal Initiative for Multi-Sectoral Technical Cooperation). BIMSTEC encompasses the following countries: India, Sri Lanka, Bangladesh, Thailand, Bhutan, Nepal, and Myanmar. This region is a market of 1.6 billion people, about one fifth of the global population. In 2013, intra-BIMSTEC trade stood at $75 billion, up from $26 billion in 2005. Once the BIMSTEC Free Trade Agreement is put in effect, trade within BIMSTEC could rise $43-59 billion.

At the recent “BIMSTEC Leaders’ Retreat” during the “BRICS-BIMSTEC Outreach Summit” in Goa, India held on Oct 16, BIMSTEC heads agreed to explore the possibility of a motor vehicle agreement similar to the BBIN (Bangladesh, Bhutan, India and Nepal) one. All the leaders agreed that “connectivity in various forms and manifestations is the key to promoting regional integration, we express satisfaction over the continuing efforts and initiatives to advance multi-modal physical connectivity (air, rail, roads and waterways) in the BIMSTEC region.”

World leaders meet during the BRICS-BIMSTEC Outreach Summit in Goa, India. © PMO

India is also strongly committed to BBIN. In fact it was Bangladesh which took the lead to promote the idea of BBIN. Initially India had reservations, but following the visit of the then Indian Prime Minister, Dr Manmohan Singh, to Dhaka in September 2011, a Framework Agreement providing for cooperation between Bangladesh, Bhutan and India was signed. BBIN has made some progress in the area of energy cooperation and it is hoped that the Motor Vehicles Agreement will come into force once Bhutan ratifies the agreement.

It will be recalled that at his oath taking ceremony as prime minister in 2014, Modi invited all the heads of government of the SAARC member states to attend the ceremony. The view at the time was that Modi would provide strong support for SAARC and regional cooperation in South Asia in general. However, the sharp deterioration in Indo-Pak relations has now brought SAARC to a virtual standstill. Therefore, until such time as there is an improvement in Indo-Pak relations, it is evident that India will concentrate on BIMSTEC and BBIN.

The visit of President Xi Jinping to Bangladesh, followed by the delivery in November 2016 of two submarines by China to Bangladesh, has attracted a fair amount of criticism in the Indian media and aroused suspicions. While it is Bangladesh’s desire to maintain very close and friendly relations with both China and India, it is important and necessary for Bangladesh to find ways of addressing India’s concerns, but doing so without compromising the significant progress that has taken place in Sino-Bangladesh relations.

The challenge for Bangladesh will be to maintain its close friendship with both China and India. Both from a security as well as from an economic perspective India has a strong interest in contributing to the economic growth and stability of Bangladesh. India’s two principal concerns in so far as Bangladesh is concerned is the rise of extremist forces in Bangladesh and the alleged flow of illegal immigrants from Bangladesh to India. In both cases it can be argued that the best way to tackle these two problems is through creating more and more jobs, which in turn requires accelerated economic growth, which in turn would require a substantial injection of capital and FDI, particularly in the key areas of power generation and physical infrastructure.

First and foremost Bangladesh needs to convince India at the highest level that it remains a close and trusted friend and that the excellent security cooperation between the two countries will be further strengthened. Secondly, Bangladesh should take a number of initiatives to work closely with both China and India. This could include the convening of a Tripartite Business Summit hosted by the prime minister of Bangladesh in Dhaka attended by the leaders of both India and China. Some joint venture agreements including both Chinese and Indian companies can be signed. Such an idea was mooted in the case of building a deep sea port at Sonadia. It could also include trilateral military, naval and Counter Terrorism exercises as well as joint training programmes for the armed forces of the three countries. Thirdly Bangladesh, China and India could develop a joint strategy to Combat Terrorism and extremist groups in the region. The biggest challenge will be for Bangladesh to play a role which would permit the coordination of initiatives geared to improving connectivity, trade and investment within the framework of BIMSTEC, BBIN and possibly SAARC on the one hand and BCIM, THDF and the Maritime Silk Route, on the other.

If Bangladesh is able to constructively engage both India and China it can, within a short space of time, achieve 10 percent growth and realise its vision of becoming a middle income country by 2021 and a developed country by 2041. It is also important that Bangladesh invests heavily in its diplomacy and in the conduct of its foreign relations. While we may wish to give special attention to our relations with China and India, it is absolutely essential that we continue to develop and expand our relations with the US, the EU and its member states, Japan, Russia, Korea, the member states of ASEAN, our neighbours in SAARC, the OIC member states as well as improve and expand our engagement with countries in Africa. The challenges are quite formidable but Bangladesh is well placed to take full advantage of the opportunities that now exist. The key will be to build a strong partnership with both India and China in the coming years.

Farooq Sobhan
is President of the Bangladesh Enterprise Institute, and a former foreign secretary of Bangladesh