bangladesh avoids chinese debt trap, building biggest bridge with own funds
Wednesday, November 07, 2018
CPEC & OBOR
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Bangladesh, one of India’s closest allies in the neighbourhood, has smartly avoided falling into the Chinese debt trap. Drawing lessons from experiences of Nepal, Sri Lanka and Maldives, it has decided to construct its biggest infrastructure project from its own finances.
Seen as a major achievement of Prime Minister Sheikh Hasina as she seeks re-election, the 20-kilometre-long rail and road bridges over Padma river are being built by self-generated funds to the tune of about Rs 30,000 crore in local currency. The bridges, along with connecting highways over what is often described as one of the world’s most treacherous rivers, are expected to be completed in the next few years.
“There is no international funding for this project and budget has been generated from Bangladesh’s own budget to avoid any repayment or debt trap,” said a person aware of the matter.
The railroad bridge over Padma river which the World Bank had earlier refused to fund will be part of the Asian Highway connecting Bangladesh with India and Southeast Asia, and generate trade and investments. “It is Hasina’s dream project and will be a major non-BRI (China’s Belt and Road Initiative) connectivity link in South Asia,” the person said, adding the World Bank had earlier refused to fund project on charges of corruption which were baseless. Subsequently Hasina decided to go ahead to generate own resources to fund the mega initiative.
Bangladesh government officials told ET that the bridge would establish a strategic link through capital Dhaka between economically backward southwest Bangladesh and the rest of the country, which is witnessing an economic boom following a decade of stability. The Asian Highway Priority Route No 1 and Trans Asian Railway will be built through the bridges over Padma river, they said.
One of the officials, who spoke on condition of anonymity, said that Bangladesh’s gross domestic product (GDP) would increase 1.26 per cent and regional GDP of southwest Bangladesh would increase 2.3 per cent from the expected spurt in trade and investments. Around 67 per cent of the project has been concluded as of last month when Hasina reviewed the venture.
While some Chinese firms are involved in the execution of the project selected through tenders, the initiative has no exposure to Chinese funds. Bangladesh has been cautious in accepting loans from China and has on occasions rejected Chinese firms vying for infrastructure projects and even blacklisted Chinese firms.
“Bangladesh is uniquely positioned to take advantage of its location in the eastern region of South Asia and the Padma bridge project will play a key role in that endeavour,” said an expert on regional connectivity, who did not wish to be identified. “The country will be a centre point of different initiatives that seek to connect Bhutan, India and Nepal with the ASEAN and other East Asian countries.”
The expert said that with deeper trade, investment and connectivity linkages within the sub-region, Bangladesh can benefit from new markets, new import sources of high quality and better priced products, and increasing opportunities for transport and logistics services.
The erstwhile Khaleda Zia regime in Bangladesh had strong reservations against granting connectivity and transit to the neighbouring countries on the pretext that it would infringe on the sovereignty of Bangladesh. The Sheikh Hasina-led government, however, realised that granting connectivity and transit was a win-win situation for Bangladesh. India’s grant of fresh $2 billion for infrastructure development will also contribute to building corridors for sub-regional connectivity.