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The Financial Express

China's lending to Bangladesh surges

| Updated: February 02, 2021 09:48:32


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China has emerged as one of the leading bilateral development partners of Bangladesh as it disbursed US$460.41 million loans in the first half of the current fiscal year, insiders said on Friday.

The world's second-largest economy over the last three and a half years has enhanced its portfolio in Bangladesh with a steady growth in investments for the development work, they said.

Deputy secretary of the Economic Relations Division (ERD) Syed Ashrafuzzaman told the FE the Chinese investment for Bangladesh's development work has been significantly rising since FY'2018.

In FY'2018, Bangladesh received US$978.6 million worth loans from China, compared to only $64 million in FY2017, ERD statistics showed.

In the FY'2019, Beijing disbursed $515.08 million worth loa$695.5 million loans and grants, down from in FY2020.

Bangladesh and China turned their relationship into a strategic partnership in October 2016 with a deal signed between Prime Minister Sheikh Hasina and Chinese President Xi Jinping.

As part of Chinese president Xi Jinping's Belt and Road Initiative (BRI), Beijing and Dhaka signed deals worth some $21 billion for upgrading infrastructure, especially in transport, power and IT sector.

China is financing ongoing mega projects such as Padma railway link, Dasherkandi water treatment plant, the development of national ICT infra-network for Bangladesh government phase III (Info-Sarkar), the construction of a tunnel under the river Karnaphuli, and the installation of single point mooring (SPM) with the double pipeline.

China usually provides both concessional and costlier loans, including buyers' credit, to finance development projects.

Former ERD secretary Kazi Shofiqul Azam told the FE that since many of the projects have been implemented over the last few years with financial support from China, its aid disbursement has picked up.

"Bangladesh government has signed a Memorandum of Understanding (MoU) with China worth over $20 billion for implementing 27 development projects a few years back. Some of the projects' execution from the list has already been started. Thus, the aid inflow is maintaining a higher graph," he added.

Executive director of the South Asian Network on Economic Modeling (SANEM) Dr Selim Raihan said with the emergence of China as a leading lender, it is good for Bangladesh that the aid dependence on the west has been decreasing over the years.

Chinese financial support to Bangladesh's high-demanding infrastructure development work is paving the way for boosting its development, he told the FE.

"You know that China has one belt one road intuitive. Besides, Dhaka and Beijing are the partners of the Bangladesh-China-India-Myanmar Economic Corridor. So, it is expected that Bangladesh will be getting higher assistance from Beijing in future too," he said.

Dr Raihan, also an economics professor of Dhaka University, noted that along with China's enhanced financial support, the Bangladesh government has to ensure the governance in project implementation.

But Dhaka needs an "intelligent" and "wise" negotiations with Beijing without super-stringent terms while getting loans and to use the committed aid efficiently and transparently for the development of the country, the SANEM ED said.

Dr Raihan has also suggested executing the China-funded projects in time to avoid time and cost overrun.

A director of the China-funded project under the Power Division requesting anonymity told the FE that China does not take too much time to get permission for different procurement and project work.

"In most cases, we need to obtain approval from the multilateral and bilateral donors at every stage of procurement. But it is comparatively easy for getting approval from China," he added.

Meanwhile, the ERD in its Aid Flow Book for last FY2019-20 said there has been an increasing trend in the share of bilateral aid since FY2010-11.

"Some bilateral development partners such as China, Russia and India have become more active in the global aid architecture. Bangladesh, like many other countries, has been mobilising resources from these countries to fulfill its growing investment needs in the large infrastructures projects," it said.

Bangladesh government is currently implementing some nine development projects with Chinese loans totalling $7.1 billion.

The big projects are: Padma bridge rail link, a tunnel under the river Karnaphuli, power grid network strengthening and the installation of single point mooring.

An MoU titled 'Strengthening and Production Capacity Cooperation' was signed between Bangladesh and China comprising 27 investment projects under the $21 billion loan package in October 2016.

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