DHAKA – A number of Chinese-backed projects in Bangladesh have been performing below par, and have raised concerns among experts, in wake of the situation in Sri Lanka and Pakistan, whose economies have crippled under the burden on Beijing’s debt, Bangladesh-based Daily Asian Age reported.
The China-Bangladesh bilateral ties have been in heated discussions for last several years for reasons of China’s augmenting interest in engaging Bangladesh more profoundly in the Belt and Road Initiative (BRI). China is also working with Bangladesh in a number of development projects. Notably, the reactions to China’s involvement in Bangladesh’s development program have remain mixed. From a global perspective, it has been observed that Chinese financial deals have jeopardized the economy of many countries including Sri Lanka, Pakistan, Zimbabwe, Angola, Nigeria, Sudan, Serbia etcetera, Daily Asian Age reported.
Chinese investments in Bangladesh are also facing grim challenges. The Payra Power Plant, which was constructed through joint initiatives of China and Bangladesh, has met a stumbling block in repayment of Chinese loans. The situation has become even more aggravated with dollar crisis and shortage of raw materials. As per the Bangladesh-based daily, if these drawbacks are not overcome immediately, the Payra Power Plant may come to a closure within a few months.
According to the annual report of the Bangladesh Bank, China invested 465.17 million USD (13.5 per cent of total foreign direct investment in Bangladesh) and Hong Kong invested 179.22 million USD (5.2 per cent) in the July-June period of FY22, taking the total Chinese investment to 644.30 million USD. The US was the top investor with 661.12 million USD in investment in FY2022, which was 19.2 per cent of the total foreign direct investment, , Daily Asian Age reported citing the central bank report.
A 100 per cent export-oriented Chinese company called the South China Bleaching and Dyeing Limited has also invested 150 million USD in the Dhaka Export Processing Zone (EPZ) with an employment of 10,000 workers and employees. As a rapidly growing multinational organization in Bangladesh, South China Limited has earned a solid reputation both locally and globally in the textile and clothing sectors over the years. With its state-of-the-art technology and a highly competent management team, the company has successfully etched its brand name worldwide as a reliable manufacturer of textile products. Laying emphasis on people-to-people contact, Calvin Ngan, who is also the managing director of South China Ltd, said, “In China, Chinese New Year also means Spring celebration, it is a moment for gathering, for expressing our thanks and to give blessing to our friends and family.”
“The Overseas Chinese Association in Bangladesh is home to all Chinese in Bangladesh. Our mission is to foster a relationship between two nations and two cultures. During the past two years, our organization has worked with authorities concerned to distribute vaccines and donate PPEs to people,” Daily Asian Age quoted Calvin. “The past three years of the pandemic have been a stormy winter for many of us. Fears and worries loom over our heads. We faced and overcame challenges that were not seen in our generation,” he added. He further said that with the more opening up of border, the experts are seeing more Chinese coming to Bangladesh and more Bangladeshi going to China “2023 is a very special year. It is the year of the rabbit.
The pandemic winter has ended, and spring has come. We see our motherland opening up the border, no more quarantine. Flights between Bangladesh and China are increasing. Economic and cultural activities begin to pick up. We are seeing more Chinese coming to Bangladesh and more Bangladeshi going to China,” Daily Asian Age quoted Calvin as saying. “We are here to seek a win-win relationship between Bangladesh and China. Together we must maintain peace and prosperity for both countries to build a better future for our generations,” he added. Meanwhile, Shah Mohammad Mahboob, director general of International Investment Promotion of the Bangladesh Investment Development Authority (BIDA), said while addressing the event, the business environment in Bangladesh has marked a gradual improvement in recent years as the country has become a hub of investment in the South Asian region. He also said the BIDA, in cooperation with the stakeholders concerned, is ensuring One-Stop services to entrepreneurs and businesses to invest in different sectors.
Director of Hong Kong Economic and Trade Office in Bangkok Sheung-yuen Lee, in his speech, said Hong Kong has become one of the leading investors in Bangladesh, pouring 1.8 billion USD to date mainly in the textile and energy sectors. Bilateral trade has already reached over 1 billion USD, as per the Bangladesh-based daily. The government is set to provide an additional 170 million Euors or 183 million USD to the Payra Port Authority from the Bangladesh Infrastructure Development Fund (BIDF). This will bring the total amount released to the port authority to 247 million Euro or 266.38 million USD.
The Bangladesh Bank would provide the amount to Sonali Bank to pay the bill of the Belgium-based Jundunul NV, the contractor of the Capital and Maintenance Dredging of the Ramnabad Channel of the Payra Port project, Daily Asian Age quoted a central bank official, who requested not to be named. The BIDF was established in March 2021 to finance development projects in Bangladesh using foreign reserves. So far, the Payra Port project is the only project funded by the BIDF, with 77 million Euros already disbursed in four phases. Under a tripartite agreement, the Payra Port Authority will receive a loan of 524 million Euros (564.88 million USD) from the government through Sonali Bank over the next three years, to be repaid in seven years with a 2 per cent interest rate. Half of the interest will go to the BIDF and the other half to Sonali Bank.
Despite concerns that the release of funds will further decrease the foreign currency reserve, the central bank is expected to release the funds as per agreement, as per Daily Asian Age. As of February 8, the country’s foreign exchange reserve was 32,639 million USD, according to the central bank data. The International Monetary Fund (IMF) has also recently stated in its loan terms to Bangladesh that the country should exclude funds such as the BIDF when calculating its foreign reserve. The director of the project, Rajiv Tripura, declined to comment on the fund release when contacted. Sonali Bank officials confirmed that the Payra Port Authority had applied for the funds and that the process of releasing the funds from the central bank is underway.
An official of Bangladesh Bank on condition of anonymity said the fund will be released amid the ongoing foreign reserve crisis in the country because there is an agreement on this. However, he said a decision has been taken not to fund any more projects under the BIDF for the time being, according to Daily Asian Age. Meanwhile, the Capital and Maintenance Dredging of the Ramnabad Channel project, which has a cost of 4,950 crore Bangladeshi Taka, will create a 75 km channel with a depth of 10.5 meters, allowing ships with a capacity of 40,000 tons to use the Payra Port. Former adviser to caretaker government Dr Wahid Uddin Mahmud said, “Bangladesh has to work very cautiously on Chinese financial schemes.
Sri Lanka and Pakistan paid a big price not being able to pay back Chinese loans”. Dr. Zahid Hussain, former World Bank lead economist, Dhaka office said, “Bangladesh should reduce its dependence on external debts. Challenges like dollar crisis and anomalies in the banking system have made things rather uncertain. So, the authorities concerned have to take every step very carefully”, Daily Asian Age reported.