The prime minister’s back-to-back state-visits to Japan in May, and China in June, has prompted a great deal of discussion among economists and political analysts about the prospects for Bangladesh’s relations with the region’s largest economies. The fact that this has occurred at a time of heightened tensions between Tokyo and Beijing over the South China Sea territorial issues makes her latest economic diplomacy initiatives all the more interesting.
Adding to the geopolitical mix has been the recent election of India’s new PM Narendra Modi, and uncertainty about India-Bangladesh relations in light of the Awami League’s perceived bias towards the Indian National Congress as well as Narendra Modi’s pre-election rhetoric on sending Bangladeshi immigrants home.
We are already seeing significant economic results for Bangladesh. Following PM Hasina’s visit, Japanese prime minister, Shinzo Abe, committed 600bn yen ($5.9bn) in economic assistance to Bangladesh over the next four to five years. The joint communiqué has emphasised that the funds, mainly in low-cost loans, will be used to build infrastructure projects in Bangladesh.
Also exciting is Prime Minister Abe’s statement that “Bangladesh has great economic potential. In order to realise its potential and expedite further growth, Japan has come up with the concept of the Bay of Bengal industrial growth belt …” or what he termed “The BIG-B.”
Beyond that, it was reported that Hasina asked her counterpart to consider a range of specific projects like a Ganges barrage, building multi-modal tunnels under the Jamuna River, a railway bridge over the Jamuna River, a multi-modal Dhaka eastern bypass, and the ecological restoration of four rivers around Dhaka.
Similar progress was seen in Hasina’s subsequent six-day state-visit to China in June. Significant economic agreements reached with China included a joint venture to establish a 1,320MW coal-fired power plant in Pataukhali; Chinese assistance for the construction of a multi-lane road tunnel under the Karnaphuli river; an economic and technical cooperation agreement, and commitments on disaster rescue equipment and on a flood prevention and management study. The two countries signed a memorandum of understanding on the creation of a Chinese economic and investment zone in Chittagong.
Although there was a failure to reach an agreement on Chinese construction of a deep-sea port at Sonadia, Chinese President Xi Jinping described Bangladesh as an important country along the “Maritime Silk Road” (MSR) project that he has been championing, which envisages deepening connectivity, building ports, free trade zones, and boosting trade with littoral countries in the Indian Ocean region and in Southeast Asia.
What is really noteworthy is how much the Chinese president’s comments echo those of Japanese PM Abe’s talk of Bangladesh being part of the “Big B” or Bay of Bengal growth zone.
Among many conversations I have had in the past month on this subject, two really stick in my mind. Firstly, at a dinner party in Dhaka, one ambassador of an important economic trading partner argued strongly that Hasina’s state-visit to Japan was a mistake on two fronts: both in terms of antagonising China given the regional tensions mentioned above, while at the same time offending the Indian premier with PM Hasina the only South Asian leader to not attend his inauguration.
In another discussion in Singapore, the head of an EM hedge fund, while appreciating the potential economic benefits for Bangladesh from greater engagement with Japan, also warned of the risks for the country by failing to engage with a newly resurgent Indian economy under the new BJP government. The debate on the merits of Modi-mania and the prospects for India’s economy are complex, and deserve a separate, more detailed discussion. But where I disagree with both the ambassador and the hedge fund manager, is the presumption that India’s geographic proximity necessitate it being Bangladesh’s most important economic relationship.
Bangladesh’s economic-structural transformation will come from a new “look East” policy of engagement with China, Japan, Korea, and Taiwan among others. Bangladesh should not have to choose between alignment with Japan as opposed to China, but establish strong economic ties with both countries and others in the region based on mutually beneficial economic ties, not political favours.
The first notable “look East” policy was adopted by Malaysia in 1983 and championed by it’s then premier, Mahathir Mohamad. It primarily focused on attracting foreign direct investment and technical assistance from Japan that transformed Malaysia into a manufacturing, export-driven economy. India itself most famously adopted it’s own “Look East” policy in 1992 under former prime minister PV Narasimha Rao, as part of a strategy to deepen economic ties with the new Asian Tiger economies such as South Korea, Taiwan, Singapore among others.
Coming back to the development of Bangladesh’s own “look East” policy, while Sheikh Hasina’s two state-visits to Japan and China are an important start, we must be wary of the perennial problem in Bangladeshi economic diplomacy – lack of follow up.
Hence, I would recommend that the Government of Bangladesh works with the embassies of some of the key Asian economic partners, starting with China, Japan, and Korea, along with development partners such as ADB, and formulate a policy roadmap to capitalise on the “look East” initiative in the following four key areas:
Investment
What is the best strategy to catalyse “look East” FDI? Bangladesh should offer a number of country specific economic zones or allocate a reserved proportion of future economic zones to key Asian partner countries.
We should also engage in thorough research to do a sector mapping for each country to see which are the most likely sectors and indeed joint venture partners for FDI. For example, this can be on the basis of Japanese or Korean investments in countries such as Vietnam as well as close collaboration and feedback with Jetro, Kotra and the equivalent Chinese commercial development agencies.
Effective engagement with the private sector can also be helped by working with associations such as the Japan Bangladesh Chamber of Commerce and Industry (JBCCI) and their equivalents in other countries. We should also consider what regulatory changes or fiscal incentives have worked effectively in other countries to catalyse FDI into economic zones.
Trade
For each of our key Asian trading partners, an assessment should be made on our import and export mix. Do we produce the range/mix of products that for example are in demand in China, Japan or Korea? What is the tariff structure for import of their products?
Perhaps reduced tariffs or duties on their imports can facilitate greater market access for our products. Of course greater FDI from those countries as part of their China relocation strategy or taking advantage of Bangladesh’s low labour costs will also help this process. But we need a broad and holistic assessment of reforms needed to our trade strategy.
Regional Connectivity
As mentioned earlier in this article, a common focal point for China and Japan is the importance of Bangladesh’s geographic position. Chittagong port is around 700km from Kunming, the capital of China’s westernmost province Hunnan. The equivalent journey to the nearest Chinese deep sea port is Guangzou, more than twice as far away. In addition, domestic trade of India’s northeastern states with rest of India, and its trade with outside world, is contingent on movement of goods through the chicken neck (a distance of about 1200-1600 km).
The primary institutional mechanism to realise this has been the BCIM (Bangladesh, China, India, Myanmar) economic corridor strategy that originated in the Kunming Initiative back in 1999, in part motivated by research by Professor Rehman Sobhan, Chairman of Bangladesh’s Center for Policy Dialogue (CPD). India’s vice president, Hamid Ansar, who, on a five-day state-visit to China, stated on June 29: “BCIM is a good and positive initiative, we will be supportive of it.”
Although he hedged his comments by also asking for more details from Beijing about its plans for a Maritime Silk Route (MSR). What Bangladesh needs to do is to target five key development projects that will fast track the BCIM initiative so we can move on from just the ongoing dialogues that have taken place every year since 1999. This can be the terms for the deep sea port at Sonadia, road and rail connectivity, or even gas pipelines from Burma crossing Bangladesh to India.
Infrastructure
While closely linked to regional connectivity, we must also focus on the scope for China, Japan and Korea to facilitate the development of Bangladesh’s infrastructure. We are already seeing some encouraging signs of this from Hasina’s Japan and China visits. But we need to ensure that bureaucratic bottlenecks or inertia does not slow down these and other new initiatives on infrastructure. All three countries have impressive construction and engineering companies. China and Japan also have massive forex reserves and the resources to help with financing. These facillities are critical given that it has been estimated by the World Bank that Bangladesh needs $9bn of investment per year to close the infrastructure deficit.
As I hinted above, a critical component in Bangladesh successfully capitalising on it’s geographic location, and hence the pivotal element in any “look East” policy is a strong and collaborative alliance with Myanmar. In that context, the recent tensions over the shooting of a Bangladeshi border guard by the Myanma needs to be resolved as does an agreement on the Rohingya refugees. Bangladesh’s foreign ministry needs to appreciate the economic consequences of any rift with Burma given the massive China and Japan investments in that country. And it’s surplus of natural resources can also be a key element in Bangladesh’s economic development in terms of power generation.
Let me finish with a discussion on how to balance a new Bangladesh “look East” policy with engagement with India. Even though I expressed some disappointment earlier in this article about India’s failure to deliver on expectations in it’s relationship with Bangladesh, the reality is Bangladesh needs to have a healthy and constructive engagement with it’s adjacent regional superpower (with which it has a 4000km border) that is set to become the third largest economy in the world by 2050.
India is clearly sensitive about Bangladesh’s proactive attempts to “look East.” In a June 11 article, the Hindu stated that “While Ms Hasina has pledged to boost ties with India … her reported reference to being an ‘active partner’ in a ‘China-led’ century in her meeting with Premier Li is likely to be noticed in New Delhi.”
I would argue that Bangladesh’s “look East” policy can be positive for it’s relationship with India and is by no means mutually exclusive. D Suba Chandan, writing in Eurasia on June 27, stated: “A regaining of momentum (in India Bangladesh relations) could be done by engaging Dhaka in a constructive roadmap and making it a gateway for India’s look East policy (LEP). Geographically and strategically, Dhaka should be the gateway for India’s LEP.
Land and maritime access and trade and travel routes have to criss-cross eastern India comprising West Bengal and the Northeast and Bangladesh before entering Myanmar and progressing further east.” He goes on to note that “Like India, Bangladesh also has a serious stake in looking east … Dhaka has to look east for it makes much economic sense in terms of trade. This provides an opportunity for India and Bangladesh to work together; in fact, New Delhi and Dhaka could Look East together.”
In conclusion, now is the time to build on Sheikh Hasina’s visits to Japan and China with a well-thought out roadmap for economic engagement at both a government-to-government, as well as private-sector level. The proposed visit to Bangladesh in September by Shinzo Abe, the first by a Japanese premier since 2000, will be another important catalyst in deepening economic relations.
Let us focus on making sure this is the turning point in economic relations and not another missed opportunity. Now is the time for Bangladesh to look East as the key driver of future economic growth.