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China and India are allowing a massive under-invoicing of their exports in Bangladesh, violating the rules of the World Trade Organisation (WTO), according to an East Asia Forum article.
By doing this, these two leading trade partners withhold far more funds from Bangladesh’s exchequer than they offer as loans, it says.
Titled ‘China and India’s geopolitical tug of war for Bangladesh’, the article has been jointly written by Forrest Cookson and Tom Felix JoehnK.
It argued that both the countries’ main influence over Bangladesh is in the area of trade — both run huge current account surpluses with Bangladesh.
The article mentioned that China exported $16–17 billion worth of goods to Bangladesh and this figure is much higher than the official one.
Here the authors have adjusted the official data for massive under-invoicing.
Again, China imported only $750 million from Bangladesh in the same fiscal year. They authors said that China’s foreign assistance to Bangladesh amounts to about $1 billion a year.
“A large $24 billion lending program, promised by China’s President Xi Jinping during his visit in October 2016, is only just getting underway,” they added.
The authors also pointed out in their article that Bangladesh’s current account deficit with India is at least $12 billion.
“India exports about $8 billion worth of goods to Bangladesh (once adjusted for under-invoicing) and imports just $260 million,” they wrote.
“Informal trade is in India’s favor by $2–3 billion, with remittances by Indians working in Bangladesh estimated to be around $2–4 billion.”
The authors further said that India’s annual disbursed foreign assistance to Bangladesh amounts to $150 million.
They pointed out that changes in the trade policies of China and India on Bangladesh may have the biggest impact on their respective influences in Bangladesh.
“For now, India is doing all it can to block exports from Bangladesh while China shows no signs of letting Bangladesh exports enter Chinese markets,” they added.
They categorically argued that these two Asian giants are now in a battle to enhance their influence in Bangladesh.
The article mentioned that the Indian government sees Bangladesh as an important neighbour for political, national security and religious reasons.
“Bangladesh is a transport corridor to India’s northeastern states and a vital alternative route to the vulnerable Siliguri corridor that in the past has been threatened by China’s military, isolating all of northeast India,” it added.
“India also fears that Islamic fundamentalism and jihadism in Bangladesh may spill over the border,” the writers mentioned.
The article was of the view that China’s broader programme of developing influence throughout Asia through trade, finance, military cooperation and soft power includes Bangladesh where Chinese influence is not dominant.
The writers observed that India and China are offering large sums of money for infrastructure projects in Bangladesh.
“But none of these projects are making much headway and efforts to build big coal-fired power plants have thrown up significant operational and environmental risks,” they opined.
They also mentioned that India’s and China’s manufacturing and energy investments in Bangladesh remain extremely low despite promising intentions.
Calling the view from Delhi on Bangladesh ‘very short term’, which the article says is basically ‘the strategy to keep the Awami League in power’ and ‘trying to block growing Chinese influence’.
“China, on the other hand, is playing a long game in Bangladesh,” it pointed out. “It balances its relations with the ruling Awami League and the anti-Indian, pro-army BNP.”
“China and India will do their best to edge each other out in their battle for influence in the Bay of Bengal and will try to exploit an economically weak Bangladesh,” it added.
“But they are likely to fail as Bangladesh continues to play hard to get and plays them off against each other,” the article observed.
The authors were of the view that Bangladesh is not a passive victim of this geopolitical competition in the Bay of Bengal.
“Bangladesh is using its strategic position to encourage it,” they mentioned.
“There is a clear awareness in Dhaka that both India and China take more than they give and that their infrastructure and manufacturing projects are of low quality (compared to those of Japan and South Korea)”.