Diplomatic Correspondent
Published:2024-10-15 03:36:23 BdST
Debt rescheduling, import credit from China crucial to Bangladesh economy: Experts
Leading economists and foreign relations experts on Monday stressed the need for debt rescheduling by the Chinese side with raising the loan repayment and grace period to enable Bangladesh to absorb the economic shock.
Addressing an international seminar on “Bangladesh-China Relations: A Future Outlook” in Dhaka city, they also opined that if China provide credit arrangements to Bangladesh for its imports from that country, it will help the country address the fragile balance of payment situation.
The Bangladesh Institute of International and Strategic Studies (BIISS) and the Centre for China Studies (SIIS-DU) jointly organised the seminar to commemorate the 50th anniversary of the establishment of diplomatic relations between China and Bangladesh.
Md Touhid Hossain, Adviser for Foreign Affairs, was the chief guest in the seminar, which was also addressed by Mr Yao Wen, Ambassador of China to Bangladesh, and Dr Debapriya Bhattacharya, Distinguished Fellow, CPD and Chair, Committee on White Paper on the State of Bangladesh’s Economy.
“Almost a quarter of our imports are coming from China, but the trade deficit is increasing. The trade deficit is increasing at a faster rate than the volume of trade itself. China has been generous by providing us, first, the 97 per cent duty-free and quota-free market access. Now it has gone up to 100 per cent, but we know by now in the world, trade does not depend on only market access based on tariffs and other financial considerations. It also depends on the process through which trade happens. It also depends on the non-trade barriers which are there,” Dr Debapriya said, adding, “So I think if you look at the future of Bangladesh exports to China, then it is not tariffs, it is the non-tariff barriers which we need to look at”.
Highlighting the need for restructuring Bangladesh's debt to China, he said, “As I mentioned, almost 9 per cent to 10 per cent of the financial flows are coming from China. And well, if you look at the debt situation of Bangladesh at this moment, almost 5.6 billion dollars are owed to China, which is almost 10 per cent of the country's total overseas debt. So debt repayment is becoming an increasing challenge for Bangladesh”
“And if you look at the Chinese loans which has come in, some of them have come as suppliers' credit. And if you see the shorter repayment period, shorter grace period, and higher commitment charges than others, you will immediately find out there are opportunities for streamlining them in the future” he said, noting that Chinese loan and Chinese debt in Bangladesh definitely demands a bit more closer look.
He suggested making the debt situation more compatible with Bangladesh's upcoming development requirements.
Mr Debapriya also observed that although foreign exchange reserves have improved in recent weeks, and foreign exchange flows have been quite sustainable in the recent past, a debt rescheduling is not totally out of the picture.
“At this moment, a debt rescheduling issue may soon come up to look at how we really pay back some of these loans which are really maturing very fast” he added.
About the importance of more Chinese investment in Bangladesh, he said China could integrate Bangladesh into the regional value chain through investments in the garments and manufacturing sectors.
What is becoming important now is to have more Chinese investment more in Bangladesh, particularly in the Chinese economic and industrial zone allocated in Anwara upazila on Chittagong, he said. He also argued that more investment in the Anwara EPZ is needed to make the Karanafuli Tunnel economically viable.
On the need for Chinese credit to support Bangladesh’s imports from China, he said, “Imports from China are critical for Bangladesh, and given that we do not have adequate foreign exchange now to pay up our debt, it is important to get a financing from China in order to underwrite those imports.”
“It is the old-fashioned open general license system that you open up a credit line which can only go to finance the imports which are coming from China and support that one and create no less pressure on our balance of payment situation”, he added.
“China remains one of the single largest providers of financial support to Bangladesh last year, 2023, for which we have the latest data that shows we received nearly $4 billion US dollar almost in financial support, which is about 9 per cent of the total flow to Bangladesh that year”, he told the seminar.
“We import almost $25 billion of goods from China. It is about 23 per cent of the total imports coming to Bangladesh, and China’s investment in Bangladesh has now reached almost $1.5 billion.”
“And what we see is important also in terms of human development. There are 20,000 Bangladeshi students studying in China at this very moment. So if this is one of the benchmarks and if you look at the future, why should Bangladesh be looking at China as its major source of development and economic cooperation in the future”, he added.
Highlighting the strength of China, he said, “China, as you may know, remains a driver of the global economy at this moment: at least 30 per cent of the global goods is attributable to China. We joke that if China catches cold, then the whole world sneezes. That is the economic situation what we have now. So we are talking about a country which has generated $600 billion of trade surplus. We are talking about a country which has $3000 billion in foreign exchange reserves”.
Foreign Adviser Touhid Hossain said Bangladesh could not capitalise on the duty-free access granted by China for various reasons.
“I would say that it’s basically our lack of competitiveness in many areas and lack of diversification. I think we need to concentrate on these two factors. We need to enhance our competitiveness,” he said.
He agreed with the need for debt rescheduling by China.
The adviser also said Bangladesh and China have very important defense cooperation.
“As we all know, China is a major supplier of our defense equipment and the modernisation of our military services that we are looking forward to. I think we need a lot of cooperation in this respect, from China,” he added.
About the collaboration in infrastructure development, he said, “Of course, there are some limitations, as has already been mentioned, and we need to overcome those so that the infrastructure development cooperation that exists between our two countries becomes more useful, more sustainable”.
“We also need enhanced cooperation in the energy sector, both in green and traditional projects that are ongoing in various areas, and we hope that these will be expedited and completed in time and become more useful for the Bangladesh economy,” he said.
Seeking Chinese cooperation in resolving the Rohingya crisis, he said, China has been cooperating with us in facilitating the return of Rohingya.
“We know that there is only one solution to this problem that people who are now in the camps in Bangladesh have to go back to their homeland. That is the only solution”.
“China has been with us, and there were trilateral dialogues, but unfortunately, previous initiatives have not resulted in any return of the Rohingya to their homeland”, he said.
“I would suggest that we all know that China has a lot of influence in Myanmar, now let us accept the reality, and we would look forward to more active Chinese role in ensuring that we can send back these people who are in a very deplorable situation. Their rights have been trampled upon, and they should be allowed to go back with rights and security so that we can get over this problem once and for all, and it is not repeated one again and again,” the foreign adviser opined.
He said, both countries, from the very beginning, have supported each other on matters of core interest and worked together on a path to realising their respective development goals.
“Now in the current situation, as Bangladesh has witnessed the most significant political change in its history, the future of Bangladesh in a post revolution setting requires a more comprehensive approach,” he said.
He added that the post-revolution trajectory of Bangladesh and its future relations with China will likely be influenced by various factors, including Bangladesh’s political stability and the changing dynamics of regional and global politics.
“Although the future of bilateral ties between Bangladesh and China can be shaped by several factors, the core elements of cooperation in the aspects of trade and investment, infrastructure development, technology sharing are propelled by mutual interests in economic investment and regional stability in the coming days,” he added.
Ambassador AFM Gousal Azam Sarker, Chairman, BISS presided over the seminar, where Major General Iftekhar Anis, Director General, BIISS, delivered the welcome address.
Professor Dr Yang Jiemian, Director of the Academic Advisory Council, SIIS, made special remarks during the event.
There were three working sessions during the seminar. The first working session, titled “The Impact of Bangladesh’s Changing Political Landscape on Regional Dynamics” was moderated by Ambassador Farooq Sobhan, former Foreign Secretary of Bangladesh.
The second working session, titled “Bangladesh’s Political, Economic, and Social Reforms and the Trends,” was moderated by Dr Zhang Jiu’an, Associate Research Fellow, Academy of Contemporary China and World Studies. Professor Amena Mohsin, Department of International Relations, University of Dhaka, moderated the third working session, titled “Strengthening China-Bangladesh Cooperation and Advancing the Comprehensive Strategic Cooperative Partnership.”
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