Regional cooperation and new realities
THE Indo-Bangladesh relation is increasingly drawing the attention of various stakeholders across South Asia. The Indo-Bangladesh joint communiqué of 2010 sent strong signals, heralding a new kind of political leadership in the South Asia region.
More than two years back, India announced a supplier’s line of credit worth $1 billion (with an 1.75 per cent interest per annum), for a range of projects, including, amongst others, railway infrastructure, supply of locomotives and passenger coaches, procurement of buses and dredgers, and development of transhipment facility at Ashuganj. Today, in view of the slow progress witnessed in accessing the credit, it can be safely asserted that the vision of regional integration, articulated by the joint communiqué, will take some more time for its realisation.
In the academic world concessional/soft loan is generally conceived as being biased to the lender in terms of procurement conditions and repayment schedule. Notwithstanding the academic view, the fact remains that the Indian line of credit is the largest amount ever offered by India to any country.
There are, nevertheless, conditions attached with the Indian credit in terms of how it is to be spent, i.e. how the goods and services are to be procured (85% source of procurement from India); and a fee at the rate of 0.5 per cent to be levied on any unutilised amount of the disbursed credit.
When comparing the Indian line of credit with other countries in the Asian region, it is evident that soft loans from South Korea are the most special with the lowest interest rate (0.5 per cent) and the longest grace and repayment period (10 and 30 years respectively). Additionally, loans from South Korea tend to be more flexible on how it is to be disbursed in sharp contrast to China and India. The interest rate on Chinese loan is the highest (3 per cent) of the three countries.
Though it offers better interest rate and longer repayment period than China, the line of credit from India comes with many stringent conditions (mentioned above). This should be of no surprise since conditions of concessional loans vary from country to country.
It is now known that loans from China have restricted Bangladeshi procurement of materials from certain companies, and it may even be restricted within a single company where Bangladesh would have no choice. In case of the Indian loan condition, Bangladesh will be compelled to buy materials from India but from manufacturers selected through a country-restricted tender. This makes the Indian tendering process appear fairer than the Chinese one.
There are, however, bureaucratic delays which have inhibited Bangladesh from fully accessing the credit.
Initially, 20 projects ($927 million) were identified by Bangladesh for possible funding. In contrast to the situation in September 2011, when 14 projects ($718 million) were already endorsed by India, so far (until March 2012), only 4 contracts have been signed ($196 million). With regard to the remaining endorsed projects, 10 have already been dropped ($286 million). Bangladesh is yet to receive a response from India on the remaining six non-endorsed projects ($306 million).
The government of Bangladesh, nevertheless, is playing its part to facilitate the realisation of the Indo-Bangladesh joint communiqué. The core committee on transit submitted its final report to the Prime Minister’s Office on January 5, identifying 17 possible transhipment/transit routes (7 roads, 7 railway and 3 inland waterways) for sensible connectivity with its neighbours Bhutan, India and Nepal.
As it stands, however, the identified routes are not in a condition to service the expected large volumes of transit cargo. It has been argued by experts that Bangladesh should first negotiate a sequencing of initiatives to operationalise the connectivity with India. It is suggested that a framework agreement, a modus operandi, should be agreed upon which is to be followed by protocols and standard operating procedures.
However, in the backdrop of the sluggish progress witnessed not only in accessing the credit line but also establishing protocols for the Ashuganj port, the prospect of Indo-Bangladesh cooperation in connecting with each other through exploiting available trade and transport opportunities, appears rather discouraging.
Myanmar is emerging as a key player in regional cooperation given its recent political reforms which has opened up opportunities for economic cooperation. For instance, the ongoing discussion on tri-nation road link connecting Bangladesh, Myanmar and China needs to be given due consideration in particular by Bangladesh in view of India’s reluctance to provide finance for infrastructural projects in Bangladesh.
The Bay of Bengal, believed to be rich with undersea deposits of oil and natural gas, lies at the mouth of the Bengal Delta, which forms 60 per cent of the Bangladesh coastline. The maritime delimitation of the bay forms the subject of a long-running dispute between India, Bangladesh and Myanmar. Given Bangladesh’s victory in the maritime dispute, which has earned the country a strong global image in such negotiations, time will be definitely the key factor in shaping Bangladesh’s decision to shift its focus from India and China, and to its neighbour Myanmar. India will presumably prefer to settle the dispute through bilateral talks but in view of their proven track record in such talks, Bangladesh should not be in a hurry.
For now, it is imperative that in view of the emerging opportunities of investment in Myanmar, businessmen from Bangladesh and Myanmar should come together for harnessing many of the nature resources for mutual benefits, through contract farming, in many critical areas of economic concern, such as agriculture and energy.
For example, the recent discovery of estimated 16 trillion cubit feet of proven gas reserves in Rakhine state is a new opportunity where Bangladesh will have to be quick in setting up joint ventures. It has been suggested by the Bangladesh-Myanmar Chamber of Commerce and Industry that the construction of a gas pipeline from Rakhine to Chittagong be undertaken by a private sector-led consortium of investors from Bangladesh. This is critical in view of the fact that 67 per cent of the total generated power in the country is fuelled by natural gas.
Today, the ball is in our court thanks to the professional approach being taken by the government in managing such negotiations. Bangladesh and Myanmar stand to be natural allies for each other because they are both at the confluence of the two giant economies — China and India. Bangladesh, which has a strong proven track record in global trade negotiations, will have to play an innovative role to connect to Myanmar through trade and investment opportunities, and at the same time, ensure that it does not draw the wrath of the giants.
Hasanuzzaman is a researcher. email@example.com.
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