Dhaka is exploiting its strategic position to benefit from both Chinese and Indian largesse.
Bangladesh’s recently inked trade deal with China indicates a closer Sino-Bangladeshi alignment that has alarmed New Delhi and prompted a tug of war for the small state’s allegiances.
– Bangladesh is a crucial point of economic and security leverage in India and China’s strategic efforts to erode the other’s sphere of influence
– While China is often accused of seeking a debt trap investment strategy in Bangladesh, Dhaka has demonstrated financial prudence and exploited the bilateral relationship for its own gain, even penalising Beijing for its strategic ambitions
– Bangladesh is set to bolster its prominence by rounding out the China-Turkey-Pakistan quartet for leadership in the Islamic world
NOT YOUR DAVID AND GOLIATH STORY
China-India relations have deteriorated after the Galwan Valley border skirmish in June brought their latent rivalry into sharp relief. India responded by pivoting hard towards a Made in India campaign that aims to boost Indian manufacturing and boycott Chinese goods. In the midst of the renewed struggle, pundits have scrutinised Bangladesh’s role in the regional rivalry, casting predictions on how the South Asian nation would tilt.
On July 1, Bangladesh and China agreed to a preferential tariff program — targeted at least developing countries — in which China would increase the number of tariff-free Bangladeshi exports from 60% to 97% of their tariff line. The deal comes on the heels of a series of arrangements with China that has led many to criticise Dhaka’s perceived alignment with China on trade, defence and even vaccine production for the COVID-19 pandemic. However, such a characterisation simplifies South Asia’s complex relationships as zero-sum, where Bangladesh merely exists as a proxy in a Sino-Indian competition for regional influence. Bangladesh exerts its own agency as well as a burgeoning capacity as a model for economic development.
A HISTORY OF VIOLENCE
Dhaka’s relations with New Delhi became particularly frosty in the past year due in part to the latter’s enforcement of the National Register of Citizens in the bordering state of Assam and the Citizenship Amendment Act in 2019. These specifically disadvantaged Muslim asylum seekers from seeking opportunities in India. Assam is home to a significant Bangladeshi diaspora who are now treated as illegals in their own home — a perceived slight to Dhaka and its majority Muslim population. The register issue led Prime Minister Sheikh Hasina to refuse to grant an audience to Indian High Commissioner in Dhaka, Riva Ganguly Das, as her tenure was ending, though Bangladesh insists “relations with India remain as good as before”.
Issues with border security also reflect the breakdown in relations. The Border Guard Bangladesh reported that until August this year, 33 Bangladeshis were killed along the Bangladesh-India frontiers, prompting high-level talks between the two border forces. Attempts have been made to recognise the deterioration in cooperation and to ‘reset’ relations, and Indian External Affairs Minister S. Jaishankar and his counterpart Abdul Momen agreed to hold a Joint Consultative Commission in September, aimed at taking bilateral ties forward. This bonhomie was exemplified when India’s Foreign Secretary Harsh Shringla braved the pandemic earlier this year to meet Hasina and establish a comprehensive roadmap outlining key infrastructure projects to be completed in a time-bound manner. The projects include expediting the long-gestating Akhaura-Agartala rail link, dredging inland waterways and constructing the India-Bangladesh Friendship Pipeline, which are aimed at aiding Bangladesh’s development.
However, residual tensions and the fact that trade volume this year between India and Bangladesh dropped from $2 billion to $421 million year-on-year has prompted Dhaka to diversify its exports by turning to Beijing as well as the US and Singapore. Bangladesh has not rejected Indian attempts at restitution but appears to have stalled diplomatic visits to better secure the trade deal with China amid the growing trade deficit with its traditional ally.
CHINA’S JOURNEY TO THE WEST
India and China appear to view Bangladesh’s allegiance through a zero-sum lens. Hence, the rift in relations with India is tied directly to China capitalising on infrastructure and trade inroads in Dhaka. For example, China’s Beijing Construction Group beat out Indian competitors in its bid for a $250 million contract to build an airport terminal in Sylhet, a city in Bangladesh bordering India — a move that has caused consternation among policymakers in New Delhi. Similarly, following an eight-year hiatus on a water-sharing accord with India, Bangladesh’s Water Resources Ministry turned to China for a $1 billion investment in a water management project along the Teesta river.
While New Delhi remains amenable to strategic cooperation with Dhaka, delays and local opposition from states like Assam and West Bengal has led Bangladesh to consider Chinese corporations to expedite development projects. Such windfalls have been a long time coming, since President Xi Jinping’s first visit in 2016 where 27 Memorandum of Understandings (MOU) valued at $24 billion were signed to cement a Sino-Bangladeshi strategic trajectory.
Bangladesh features prominently as a linchpin in China’s recent belligerence towards India. China’s army has reportedly conducted drills and patrols along India’s northeastern border where the Siliguri corridor acts as a veritable Achilles Heel to India’s territorial security. While the Galwan Valley border clash received much attention, India remains vulnerable in this geographic ‘Chicken’s Neck’. Bangladesh’s location across the narrow territorial strip would be crucial in a time of wider conflict to facilitate the transmission of military and technical assistance either for defensive or offensive purposes.
NOT ITS FIRST RODEO
Whilst Beijing’s ‘debt trap diplomacy’ raises concerns, it is unlikely that Bangladesh will fall into said trap. Dhaka has decades of experience managing international aid and loans, working with a variety of bilateral and multilateral development partners. Bangladesh is also likely to remain cautious about the promises of Chinese investments with only 5 of the 27 MOUs enforced by 2019. Expect the Belt and Road Initiative to be subject to stringent review — Bangladesh has already scrapped the $1.6 billion Dhaka-Sylhet highway, blacklisting the China Harbour and Engineering Company, for attempted bribery.
Dhaka’s decision to opt for China’s preferential tariff program rather than a zero-rated tariff deal indicates a calculated move to diversify Bangladesh’s exports that is likely to enable it some manoeuvre room. As Bangladesh’s massive trade imbalance with China would not be reduced with a free trade agreement, the deal may be a ploy to inspire supply chain switches away from China.
Expect Bangladesh to be wary in putting all its eggs into the Chinese baskets, keeping one foot firmly on Indian soil. While Bangladesh’s deal with Chinese company Sinovac Biotech to conduct a stage-three clinical trial of its coronavirus vaccine is often cited evidence of Chinese alignment, Dhaka has also ensured that local pharmaceuticals would get prioritised supply from the Serum Institute of India.
Bangladesh has been hailed as a model for economic development, leading South Asia in multiple social development indices. Even after COVID-19, external debt has been managed at 14.7% of GDP and the Asian Development Bank has forecast Bangladesh to be one of the fastest-growing economies in Asia in 2020, likely to make a V-shaped recovery in 2021. However, it is not simply sustaining itself; it is actively asserting itself, courted heavily by regional powers. Bangladesh has the potential to be a part of the new vanguard of the Islamic world, together with Turkey and Pakistan. China, though a perpetrator of atrocities against Muslims itself, has thrown its funding support behind Pakistan, which has persistently condemned India’s abuses against Muslims in Kashmir. This transition of leadership comes as Saudi Arabia — traditionally the bastion of the Islamic world — has remained silent about these recent pan-Islamic issues. It is telling that Pakistan, a country with a tumultuous history with Bangladesh, lauded the role of Bengalis in the creation of Pakistan and has made overtures to rope Bangladesh into this regional reshuffling. With China and Turkey facilitating Pakistan’s sit-down with Bangladesh, this could spell disaster for India which has used the historical rift to strategically play both countries off each other.
India’s attempts to repair the relationship with Bangladesh may be too little too late. However, this does not necessarily mean China has edged it out. Expect Bangladesh to continue playing the two great powers off each other to continue securing the best deal for itself. Its strategic interest to both means it is unlikely to go out of fashion anytime soon.