Bangladesh- Japan deal may disrupt Chinese BRI

The Japan International Co-operation Agency (JICA) and Bangladesh government signed a loan agreement recently to provide official development assistance (ODA) loans of up to 178.225 billion yen (approximately $2.05 billion) to fund six major infrastructure projects.

Bangladesh is one of the world’s fastest growing economies, accelerating at an average pace of six per cent per annum due to the development of its garment industries.

As such, the country has attracted significant international attention due to its potential market, large work force and competitive labour costs.

Bangladesh also holds considerable geopolitical importance due to its proximity to both India and the sea lanes of the Indian Ocean, according to a article published in www.futuredirections.org.au.

Consequently, Bangladesh has become something of a global staging ground of competing strategic interests, the most significant issue being the growing influence of China in the region.

As a result, Bangladesh is balancing not only the interests of Japan, but also those of India, China and the United States.

In its Seventh Five Year Plan (2016-2020), the Bangladeshi Government officially set the goal of becoming a middle income country by 2021.

In addition to the loans funding the Hazrat Shahjalal International Airport Expansion project, the Kanchpur, Meghna and Gumti Second Bridges construction project, the Dhaka Mass Rapid Transit development project, the Dhaka Underground Substation Construction project, the Small Scale Water Resources development project and the Matarbari Ultra Super Critical Coal-Fired Power project, JICA has stated that it will continue to support Bangladesh in its efforts to further economic growth and overcome domestic social challenges.

JICA has also made interesting advancements in key infrastructure projects in India’s north-east, given Indian Prime Minister Narendra Modi’s commitment to his “Act East” policy, and his assertions regarding the importance of its north-eastern states in the country’s strategic outreach towards South-East Asia.

In April, JICA and the Union Government in New Delhi signed a loan agreement for the provision of 67 billion yen ($771.9 million) to fund Phase I of the North-East Road Network Connectivity Improvement project.

Phase I will upgrade the existing National Highways 54 and 51 in Mizoram and Meghalaya, which will not only enhance transportation links between the north-eastern states and the rest of India, but will also play a significant role in linking India with Bangladesh.

The project complements the Indo-Pacific Economic Corridor linking South and South-East Asia, an initiative revived by the Trump Administration in the United States, and to some extent intended to potentially counter China’s ambitious “Belt and Road” initiative.

The initiative is the formalisation of Beijing’s strategy for bolstering its commercial trade routes, and Dhaka is a crucial participant as well as a key link in China’s Maritime Silk Road strategy. Announced as a commercial exercise, China has been establishing a network of ports extending from its own coastline through the Indian Ocean, South-East Asia, East Africa and the Mediterranean.

This activity has been cause for concern among many in South Asia states who perceive this so-called “String of Pearls” strategy to have potentially militaristic implications for the region.

Indeed, China faced a severe setback in February last year when Bangladesh shelved bilateral plans for the construction of a deep-sea port at Sonadia.

Beijing intended to design and operate the port that would have been an important transhipment hub for the Maritime Silk Road as well as easing China’s dependence on the potentially vulnerable Strait of Malacca chokepoint.

As a country reliant on seaborne trade, a China-financed deep-sea port would have been extremely beneficial, but Dhaka shelved the plans in response to a Japanese proposal which, along with a deep-sea port, included provision of four coal fired power plants in Chittagong in 2014.

Regional geopolitics also undoubtedly contributed to the decision. The US, India and Japan are all wary of China’s increasing presence in the Indian Ocean region and likely to have exerted some pressure on Bangladesh to cancel the Sonadia plans. Indeed, India gave significant support to the Awami League government during the 2014 Bangladesh elections, and the US is Bangladesh’s largest market for its textiles industry, as well as its largest source of foreign exchange earnings.

China is still likely to seek influence in Bangladesh, particularly through investments and participation in infrastructure projects, as the ever-growing importance of the Indian Ocean sea routes makes it imperative that China develop close ties with the Bay of Bengal littoral states, particularly Bangladesh. It can, however, expect its plans to be contested by other powers – Japan, India and the US – that are aiming to further their own strategic interests in Bangladesh.