Chinese investment in Bangladesh rings India alarm bells
Beijing deepens ties across south Asia with billions in infrastructure loanshttps://www.ft.com/content/1ab2ebe6-85c3-11e8-96dd-fa565ec55929
When it opens this year, a 6km bridge over the Padma river will link the north and south of Bangladesh by road and rail, completing one of the most challenging engineering projects the country has ever built.
The $3.7bn bridge across the Padma, as the Ganges is known in Bangladesh, will also be a physical reminder of China’s growing presence in the country.
Beijing has provided more than $3bn for the project as part of a wider plan to spend $30bn on Bangladeshi infrastructure schemes.
China stepped in after the World Bank cancelled a $1.2bn credit line for the scheme, saying it had found “credible evidence” of corruption involving government officials and certain executives from SNC-Lavalin, the Canadian constructor contracted to build the project.
The scale of Chinese investment in Bangladesh is further evidence of Beijing’s deepening relationships across south Asia, where it has funded similar projects in Pakistan, Sri Lanka, Nepal and the Maldives. It is also ringing alarm bells in India, which surrounds Bangladesh on three sides and considers itself Dhaka’s natural and principal ally.
New Delhi has watched with growing unease in recent years as China has committed billions of dollars’ worth of funding to countries across the subcontinent, helping to fulfil President Xi Jinping’s plans to build a new Silk Road of global trade routes.
“The Padma bridge is a really big and a really important project,” said Amit Bhandari, a fellow at the Mumbai-based Gateway House think-tank. “India should be concerned, given the role China is also playing in other countries which surround it.”
In Pakistan, Beijing is planning to spend $60bn on roads, railways and power plants as part of the China-Pakistan Economic Corridor, which will give China access to the sea via Gwadar port on Pakistan’s south coast.
In the Maldives, it has signed a trade agreement and has been handed a contract to build a new airport that was originally granted to the Indian company GMR Infrastructure.
In Sri Lanka, it has taken control of the southern port of Hambantota after Colombo was unable to repay the money it borrowed from Chinese state-backed lenders to build it.
The plans for Bangladesh, however, have caused even greater disquiet in New Delhi because of the strong historic links between the two countries. India helped create Bangladesh when it joined its eastern neighbour’s fight for independence from Pakistan in 1971.
According to Gateway House, China has committed to $31bn worth of projects in Bangladesh, making it the second-biggest recipient of money in south Asia behind Pakistan. They include roads, railways, coal power plants and water treatment facilities.
Ahsan Mansur, the executive director of the Policy Research Institute of Bangladesh, calculates that once private sector investments are also factored in, the figure rises to $42bn.
New Delhi was particularly aggrieved when the Dhaka Stock Exchange chose to sell a 25 per cent stake to a consortium of the Shanghai and Shenzhen stock exchanges for $119m, rather than to India’s National Stock Exchange, which bid 56 per cent less.
Executives from the NSE travelled to Dhaka in a failed attempt to persuade regulators to block the Chinese deal, arguing that China was using it as a way to gain political power in the region.
Majedur Rahman, managing director at the DSE, said: “We went through a long negotiation and a long period of due diligence, and at the end of it the Chinese bidders won on competence and price.
“We found them to be a good partner, as our capital markets are still very small, and they were offering both new technology and a long-term partnership.”
Meanwhile, Chinese companies are also looking to set up in specially-created economic zones in Bangladesh.
One company, Zhejiang Jindun Pressure Vessel Co Ltd, has offered to invest $5bn in one zone to build up heavy industry near Chittagong, including establishing a 2.6 gigawatt power plant.
Paban Chowdhury, chairman of the Bangladesh Economic Zones Authority, said it was the largest single investment proposal in the history of Bangladesh.
However, there are still signs that India carries enough diplomatic clout to thwart some of Beijing’s plans in Bangladesh — at least if it also has the money to support is stance.
In February 2016, Dhaka cancelled a plan for China to build and operate a deep-sea port at Sonadia, after pressure from New Delhi, which was worried about Chinese interference in the Andaman and Nicobar islands, about 1,000km to the south.
Instead, Bangladesh is allowing investors from several countries, including China, Japan and India, all to invest in a separate port scheme at Payra, further west.
Experts in Bangladesh say the country is happy to accept Chinese money, but does not want China to interfere in anything that India sees as a threat to its national security.
Mr Mansur said: “This is a development opportunity as far as Bangladesh is concerned. We are not interested in security — we want the benefit of the economic relationship.”