It is time Bangladesh made the best use of trade opportunities, assistance and investment from China with a more concrete and focused strategy to meet development challenges, experts have said.
They recommended more transparency in investment projects' terms and conditions, costs and monitoring alongside maintaining strategic autonomy.
The recommendations came at a dialogue, entitled "Bangladesh-China Development Cooperation: Experience and Outlook", virtually arranged by the Centre for Policy Dialogue (CPD) on Thursday.
The think tank also stressed the need for G2G and B2B investment opportunities to develop infrastructure in Bangladesh.
CPD Chairman Rehman Sobhan presided over the virtual event.
In his remarks, he said there were many generalised discussions on trade, investment and aid opportunities from China, but most of them remained unutilised due to a lack of focused and concrete strategy.
Chinese Ambassador to Bangladesh Li Jiming proposed that the government accept Chinese RMB as a trade settlement currency for Bangladesh and receive a soft loan worth $5 billion to diversify the base of foreign currency reserves of Bangladesh Bank.
Agreeing with the Chinese proposal, Rehman Sobhan urged the Bangladesh Bank and the finance ministry to accept the Chinese currency to harmonise trade with China.
He was dismissive of the possibility of any debt trap due to project support from China.
The noted economist also said it is a very positive idea that China means to provide a concessional loan to Bangladesh which could help diversify the base of the Bangladesh Bank's reserves.
Chinese entrepreneurs should find the concrete products for which they would like to invest in Bangladesh and export the items to China, he observed.
The CPD chair said the government should identify specific projects that are losing pace in the markets of the US and European Union because of their protectionism.
Minister of State for Foreign Affairs M Shahriar Alam was present at the programme as chief guest.
He said the government has been working very closely with the Chinese authorities in recognition of the needs of their importers.
There is an increasing interest in investment in Bangladesh, which will continue to grow in the exclusive economic zones in Anwara upazila of Chattogram, said the junior minister.
He reiterated Bangladesh's commitment to closer economic cooperation with China for mutual benefit.
The infrastructure deficit of Bangladesh is getting narrower through the increase in power generation and progress of some mega projects like Padma Bridge, Padma Rail Link, increasing the capacity of Chattogram Port, Matarbari Deep Seaport, Mongla Port, Duhazari Rail Project and Jamuna Rail Bridge Project.
Speaking on the occasion, Chinese Ambassador to Bangladesh Li Jiming said China is moving from light industries to heavy ones and his government recommends that entrepreneurs make offshore investment.
He identified bureaucratic red tape, lack of efficiency of government agencies and unskilled labour as the main hindrances to business in Bangladesh.
The envoy stressed the need for mutual political trust between the two countries and signing an MOU under Public Private Partnership to boost G2G investment from China.
Bangladesh Ambassador to China Mahbub Uz Zaman said duty-free access of 97% of Bangladeshi products to China will enhance export opportunity.
The President of Bangladesh Institute of Peace and Security Studies (BIPSS), Major General (Retd) ANM Muniruzzaman, said Bangladesh needs to remain very careful when it comes to protecting its national interests, as the strategic landscape in the Asia Pacific region is rapidly changing.
"The government needs to observe it very carefully. Don't become a part of military agreements or soft military agreements. We should be very careful in maintaining our status," he said, mentioning recent agreements between India and the US.
Terming China as Bangladesh's strategic and largest trading partner, the expert suggested that Bangladesh should explore opportunities beyond traditional cooperation.
He laid emphasis on cooperation in the areas of green economic development, smart agriculture, smart city development, water and river basin management, regional and sub-regional cooperation and opportunities in the post Covid-19 era.
Dr Debapriya Bhattacharya, distinguished fellow of the CPD, mentioned four approaches to make bilateral relations effective, such as value chain, market linkage, product and special approach.
Of these four, using value chain and product approach, China and Bangladesh can jointly reap the benefits of export to a third party, i.e. a country like Myanmar.
President of Bangladesh Enterprise Institute (BEI) M Humayun Kabir said the relationship between Bangladesh and China remains essential but it has not been trouble-free due to some interventions from some other parties.
Some bilateral issues turn out to be geo-political issues, he said, adding that major challenges to current development face interventions from India and China.
He recommended formulating an independent template for development complying with the global standard.
CPD Executive Director Fahmida Khatun moderated the event. She identified China as a major development partner of Bangladesh and urged the government to seek Chinese support to meet challenges that will arise after graduating from Least Developed Country (LDC) status by 2024.
Acceptance of Chinese Currency
Chinese Ambassador Li Jiming has proposed that Bangladesh accept the Chinese currency -- RBM -- as a trade settlement currency and has offered the country a soft loan to the tune of $5 billion.
"I have recently sent a letter to the governor of the Bangladesh Bank, mentioning that Bangladesh can consider, like other Asian countries, signing a currency swap agreement with China," he said.
"China can issue a loan in RMB worth $5 billion to Bangladesh in order to diversify the foreign currency reserves of the Bangladesh Bank."
"The Chinese currency is widely accepted as a trade settlement currency between China and many Asian countries. Why not Bangladesh then?" he posed a question.
In this regard, Prof Rehman Sobhan said: "China is the largest source of exports. It is a great opportunity to go for a trade settlement on the basis of the Chinese currency."
He termed the offer a very constructive idea.
HSBC Bangladesh Chief Executive Officer Md Mahbub Ur Rahman said if Bangladesh keeps on importing from China, which is a fact, and the trend of exports to China begins to increase, both import and export can happen faster with the RMB.
No risk of debt trap by China
Experts denied any significant risk of a debt trap due to infrastructure project loans from China.
Bangladesh Ambassador to China Mahbub Uz Zaman said, "The so-called trap will not happen in reality."
"Debt trap is relevant to some individual countries. A country needs to take its priority of needs and interest objectives into account while seeking loans and development assistance," he said.
In this case, Rehman Sobhan said project loans from a country will not create any debt trap, but traps can be created from loans from banks. He identified equity investment rather than loans to avoid any debt trap.
There are several debt trap episodes not relating to China. A huge commercial bank loan created such a trap in Latin America in the 1980s and in south-east Asian countries in 1990.
The recent global recession also pushed Greece into a trap to the tune of $100 billion.
The CPD chair said the Chinese initiative is a sensible idea. Sri Lanka and Pakistan have converted their debt liabilities into investment opportunities.