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Conventional wisdom says when neighbouring superpowers clash, smaller neighbours become vulnerable. However, when it comes to the recent India-China face-off and its impact on the trade position of Bangladesh, this conventional wisdom seems to have turned on its head. Instead of losing, Bangladesh is reaping benefits. The Bangladesh - China relationship dates back to 1975, shortly after Bangladesh’s first Prime Minister, Sheikh Mujibur Rahman was assassinated. From then on, it has grown steadily over the last four decades. However, in Bangladeshi politics, India (read elephant) has always been the focus, given her role in Bangladesh’s liberation while China (read Dragon) has remained on the side-lines. Of late, India’s hegemonic posture and coercive tactics in terms of foreign policy decisions has strained Bangladesh’s relationship with India - particularly after the CAA-NRC incident and the fallout over sharing of the Teesta water.

Context

On account of Bangladesh’s vulnerable geopolitical location, India had traditionally played the most significant role in foreign policy decisions of Dhaka. But for the past ten years or so, as a prominent partner of China’s flagship Belt and Road Initiative (BRI) in South Asia, Bangladesh has got a constructive bargaining chip in dealings with India, something Dhaka has long sought.

The Chinese investment plans announced in October 2016 were comprehensive and illustrative. China and Bangladesh signed 27 memoranda of understandings (MoUs) - valued at $24 billion for Bangladesh. Chinese and Bangladeshi companies entered into 13 joint ventures - valued at $13.6 billion. In 2018-19, about 32.7% of the total imports of Bangladesh were from China, making it the largest source of imports followed by India (standing at 15.8%). The top imports were nuclear machinery, cotton and staple fibres, electrical equipment, crocheted fabrics, iron and steel, plastic, fertilisers, organic chemicals, paper and paperboard. Chinese imports are the fastest growing in Bangladesh with almost 85% growth observed during the time period between 2013-2019. China’s footprints in Bangladesh’s economy has expanded extraordinarily with Beijing being the South Asian nation’s biggest foreign investor at present - with a 16-fold increase in investments since 2016 - according to the figures reported by the Economic Relations Division of Bangladesh’s Ministry of Finance in March 2020.

China’s pandemic diplomacy

China clashed with India but at the same time tactfully stepped up trade diplomacy with two of New Delhi’s conventionally close allies - Dhaka and Kathmandu - through greater trade concessions. In this backdrop, on and from July 1, 2020 Beijing widened the scope to allow about 97% of Bangladeshi goods at concessional duties under an existing preferential trade agreement with Dhaka. Going by reports from the Foreign Ministry of Bangladesh as on June 19, 2020, 8,256 goods were exempted from Chinese tariffs. Dhaka described this as ‘economic diplomacy’, but China’s growing economic leverage has cast a shadow over her much older relationship with India. With regards to the Indo-Bangla relations, what made matters worse was Indian media houses floating theories that China dragged Bangladesh to its side by doing charity in the form of granting duty-free entry to 97% of Bangladeshi products.

In April, China’s Beijing Construction Group secured a $250 million contract for an airport terminal in Sylhet edging past Indian competition and that set off alarm bells in New Delhi. Other major Chinese involvements in Bangladesh include the China Major Bridge Engineering company involved with the construction of the Padma bridge and the China Communications Construction involved with the construction of a river tunnel in Chittagong. In June 2020, Dhaka sought financial assistance from Beijing to start work on nine projects worth $6.4 billion - including a seaport, a bridge and for Teesta water management among others. Resorting to pandemic diplomacy, China came up with the ‘sister-city alliance’ concept and gave a proposal of entering into a long-term partnership with civic bodies of selected Bangladeshi cities to tackle Covid-19 related challenges. China even sent a 10-member panel of medical experts to Bangladesh to review the situation and has recently announced that Dhaka will be given top priority when Chinese researchers develop a vaccine.

India not far behind

India is not lagging behind and has been quick to initiate a series of measures to win back the goodwill of her eastern ally. In May 2020, India provided 30,000 RT-PCR Covid-19 test kits to Bangladesh. It was provided in the third tranche of emergency medical assistance under the SAARC Covid-19 Emergency Fund. Bangladesh was the first country to receive the Indian test kits on priority. From June 2020, India has suddenly modulated its stand on the Rohingya issue. Instead of taking a definitive pro-Myanmar stance, India has now stated that Bangladesh’s concerns, when it comes to the Rohingya issue, must also be addressed. In July 2020, Bangladesh opened up the Chittagong port and the Mongla port for transhipments to the Indian state of Tripura. With 72% of Bangladesh’s rail engines in a worn-out condition, India gifted Bangladesh with 10 broad gauge diesel locomotives to tide over an emergency requirement and requisitioned 55 special freight trains to transport 1,25,000 tonnes of onions from Lasalgaon in Maharashtra to Dhaka, Darshana, Rohanpur and Benapole - thereby lifting the export ban imposed since September 2019. Also, a special train packed with 384 tonnes of red chilies travelled 1,370 kilometres from Guntur to Bangladesh. There are economic reasons for India to forge stronger ties. Bangladesh’s economy has been growing faster than 5% annually since 2004. In 2019, it grew by 8.1% and this year when most economies, including the Indian economy, are in position to contract, Bangladesh is projected to grow at 4.5%.

In fine

As tension grows between China and India, it is essential for Bangladesh to use its strategic position tactfully and be friendly with both of them to gain access to better trade and infrastructure facilities. Both China and India see investments in Bangladesh as a way to extend their influence and Bangladesh is grabbing this opportunity — an act of perfectly balancing between the ‘big brothers’.

- The writer is the Assistant Professor in Economics, Faculty of Commerce and Management St. Xavier’s University, Kolkata, India and a Visiting Research Fellow, NISPAcee, Slovak Republic.