Wednesday 27 May 2020 ,
Wednesday 27 May 2020 ,
Latest News
  • COVID-19: Bangladesh reports 21 new deaths, 1,166 cases in 24hrs
  • Global coronavirus pandemic: Japan includes Bangladesh in widened entry ban
  • Coronavirus Bangladesh: Total cases rise to 36,751; death toll jumps to 522
  • Educationist Niloufer Manzur dies from covid-19
  • Maritime ports asked to hoist warning signal 3
  • WHO suspends hydroxychloroquine trials as coronavirus treatment
  • Coronavirus Hotline Numbers: 01944333222, 16263, 333; website:
3 July, 2019 11:16:50 AM

China’s BRI, debt trap diplomacy and Bangladesh

While the BRI is gradually turning into a massive force that might re-shape the world economy, a country like Bangladesh must consider many aspects before taking a step forward
Arif Mahmud
China’s BRI, debt trap diplomacy and Bangladesh

On December 9, 2017, the Sri Lankan government, unable to make debt repayments, handed over its Hambantota port to China on a 99-year lease. China’s official news agency tweeted triumphantly, “Another milestone along path of #BeltandRoad.” While the handover caused concern among neighbours, the final lease agreement forbids any Chinese military activity at the port without the host country’s invitation. Many consider the Hambantota case a vivid example of China’s ambitious use of loans and aid to gain influence, coining the term ‘Debt Trap Diplomacy’, and Beijing’s willingness to play hardball to collect. China’s ambitious global investment and lending programme – the Belt and Road Initiative or BRI, also called the new Silk Road, came under harsh criticism after the Hambantota deal. Many analysts continue to claim that the BRI is being used to lure vulnerable cash-strapped countries, fueling corruption and autocratic behavior in struggling democracies.
However, the BRI, initially called the One Belt and One Road Initiative (OBOR), is also frequently cited by many as the ‘project of the century’, which impacts almost 70 countries and more than 4.8 billion people. It covers economies worth a combined $21 trillion, accounting for 62 percent of the world's GDP. HSBC estimates that Belt and Road development projects will cost up to $6 trillion in the next 15 years, while PricewaterhouseCoopers estimates the cost to be $5 trillion.

When criticising BRI over the Hambantota deal, one must inspect the scenario closely. Right from the beginning, Sri Lankan officials had questioned the feasibility of a second major port, in the home district of former president Mahinda Rajapaksa, in a country a quarter the size of Britain and with a population of 22 million. Feasibility studies commissioned by the government had starkly concluded that a port at Hambantota was not economically viable. The economic rationale for Hambantota port was weak. Despite having full knowledge of these pitfalls, driven by local political interests, Sri Lanka went ahead with the project to spend a billion dollars that it could not repay. Bloomberg called the port a ‘$1 billion white elephant’. The project was doomed to fail right from the start and a Chinese-handover bailout became the only viable option. If anybody got Sri Lanka into a debt trap, it was its own government.

Meanwhile in Piraeus, a burgeoning port in Greece, a completely different story is being written. In 2008, China’s COSCO Shipping invested in the port to upgrade its infrastructure. The Greek government decided to privatise the port's operations and COSCO got a 35-year contract. Within just a few years, the port saw its handling volumes shoot up about seven-fold, making it the world’s 38th-busiest container port, from 93rd back in 2010. Flourishing trade volumes also created about 2,000 local jobs in less than a decade, transforming Piraeus into the Mediterranean's busiest port.

Piraeus’ success gives a snapshot of the immense business potential possible through growing trade and connectivity between China and other countries, highlighted by the BRI, says proponents of the new Silk Road.  

Back in Asia, a $5.2 billion stretch of BRI rail line that goes through Thailand is already seeding growth. Airports and seaports are being built, homes are appearing, a major theme park is being developed and social institutions such as hospitals and schools are being constructed along the right-of-way of the impending track, an HSBC report details.

The Asian Development Bank (ADB) has estimated that developing countries in Asia will need $1.7 trillion per year if the region is to “maintain its growth momentum, eradicate poverty and respond to climate change”. And the BRI is well placed to this need with estimates between four and eight trillion dollars going into building the Silk Road Economic Belt and the 21st century Maritime Silk Road that plans to connect Asia, Europe and Africa with ports, railways, bridges and a plethora of projects funded and built by China and its partner countries in what some have suggested could be a ‘WTO 2.0’.

The private sector is increasingly getting involved in the BRI. HSBC has already financed nearly 100 projects in BRI countries. Standard Chartered has funded more than 50 BRI deals in 2017 alone, and in last December it committed another $20 billion to BRI projects by 2020.

But the ‘great’ Chinese initiative doesn’t come without criticism. Under the BRI, Beijing’s government is lending out billions of dollars to countries, being repaid at a premium to hire Chinese companies and thousands of Chinese workers, say officials across the region.

The high number of BRI infrastructure contracts won by Chinese companies so far has also made some non-Chinese companies wonder if the bidding is fair. “Our companies feel that China should take a lead to share BRI project information online, and in English language,” said Carlo d'Andrea, vice-president at the European Union Chamber of Commerce in China, a non-profit business association with 1,600 member companies.

Bogdan Goralczyk, director of the Centre for Europe at the University of Warsaw, agrees, explaining that making more information publicly available will help to convince European companies that Belt and Road contracts are awarded fairly, instead of favouring the Chinese.

Some Chinese officials have also become concerned about the nearly institutional graft surrounding many BRI projects, which represents a liability for China and raises the bar needed for profitability.

At the Belt and Road summit in Beijing in April this year, Chinese President Xi Jinping also addressed the criticisms by promising transparency and ‘fiscal sustainability’ of all BRI projects. Xi said the aim of the infrastructure programme was ‘to enhance connectivity and practical cooperation’. “Everything should be done in a transparent way and we should have zero tolerance for corruption,” the Chinese president announced.

China is currently the biggest trading partner of Bangladesh. The Sino-Bangla relations have been deepening in recent years, with relationship elevated to ‘strategic partnership of cooperation’ as Chinese President Xi Jinping’s visited Dhaka in October, 2016. While not a full-fledged member of the BRI, Bangladesh is set to receive Chinese investments of over $40 billion under bilateral partnership and the Bangladesh-China-India-Myanmar (BCIM) corridor deals. Prime Minister Sheikh Hasina, at the invitation of her Chinese counterpart, is currently visiting Beijing and it is almost certain that trade, investment and the BRI issues will come up in her talks with Xi Jinping.

While the BRI is gradually turning into a massive force that might re-shape the world economy, a country like Bangladesh must consider many aspects before taking a step forward. When considering BRI projects, countries should link infrastructure projects to broader development strategies that assess projects within larger networks and monitor overall debt levels, according to analysis by Washington-based think tank Center for Strategic and International Studies (CSIS).

Projects should be assessed as part of an overall development strategy as their long-term success depends on being part of a wider network, whether transportation, energy, information, or other systems, it says.

Debt sustainability should be given priority and unviable projects like Hambantota should be strongly discouraged. The responsibility to ensure these falls to government officials, and in democracies, the citizens who elect them, says the CSIS analysis. BRI partner governments must consider if a development is right for them or not and suggest something more suitable, if necessary, argues Sholto Byrnes, senior fellow of Institute of Strategic and International Studies Malaysia. Similarly, it is for the partner countries to be vocal about terms and conditions that ensure a large percentage of the workforce, contractors, caterers and other camp followers are all local, he says.

At the 2nd BRI summit in Beijing, President Xi had stressed the importance of ensuring the commercial and fiscal sustainability of all BRI projects so that they will achieve the intended goals as planned. He said the programme was about jointly ‘delivering win-win outcomes and common development’.

Earlier, in March, Italy became the first G7 country and major European economy to join China's new Silk Road initiative. Deals were signed over energy, finance, and agricultural produce, and large Italian gas and energy, and engineering firms were given entry into the Chinese market. China also gained access to the port of Trieste to enable links to Central and Eastern Europe and were taken onboard to develop the port of Genoa. One of world’s top 10 economies and a major Western power joining the BRI highlights how the Chinese-led initiative has transformed from a regional to a global move towards greater connectivity and economic cooperation.

Bangladesh, an emerging Asian economic power, has maintained a steady economic growth for the last few years. The country has now set an ambitious 8.2 percent GDP growth target for the next fiscal. PM Sheikh Hasina is determined to uplift the country’s economy and reach a developed nation status by 2041. Infrastructure and connectivity – both local and regional - would the key to achieving that goal.

China’s signature foreign policy project, which is expected to involve more than $1 trillion in investments, has already funded trains, roads, and ports in many countries, triggering a development spree across the region. If completed, BRI transport projects could reduce travel times along economic corridors by 12 percent, increase trade between 2.7 and 9.7 percent, increase income by up to 3.4 percent and lift 7.6 million people from extreme poverty, says the World Bank. Bangladesh must tread its steps carefully to maintain the delicate regional geo-political balance. But the ‘future Asian giant’ should also not be among those left behind.

The writer is a journalist working for The Independent in Bangladesh


More Opinion Stories
Musing on nature during global lockdown Every morning, city people generally used to wake up to a lot of traffic noise and loud honking. Now, our days start with sweet chirping of birds and blowing of cleaner breeze. Even from balcony, now we behold greener canopy and dancing…

Copyright © All right reserved.

Editor : M. Shamsur Rahman

Published by the Editor on behalf of Independent Publications Limited at Media Printers, 446/H, Tejgaon I/A, Dhaka-1215.
Editorial, News & Commercial Offices : Beximco Media Complex, 149-150 Tejgaon I/A, Dhaka-1208, Bangladesh. GPO Box No. 934, Dhaka-1000.

Editor : M. Shamsur Rahman
Published by the Editor on behalf of Independent Publications Limited at Media Printers, 446/H, Tejgaon I/A, Dhaka-1215.
Editorial, News & Commercial Offices : Beximco Media Complex, 149-150 Tejgaon I/A, Dhaka-1208, Bangladesh. GPO Box No. 934, Dhaka-1000.

Disclaimer & Privacy Policy
About Us
Contact Us

Powered by : Frog Hosting