By Nitya Chakraborty
Bangladesh is the diplomatic battleground of two superpowers USA and China since the interim Government took over power on August 9 this year following the ouster of the Sheikh Hasina led Awami League regime on August 5 last. In the last five weeks of the new government led by Chief Adviser Dr Muhammad Yunus, there have been twists and turns, but the two contending global influencers are in a serious political game.
US with its vast deployment of funds, international financial institutions and influence over the top man of the interim government Dr. Yunus, has won on political grounds. Dr. Yunus has agreed to delay the national elections indefinitely till the three key reforms are implemented. USA wants this as the US administration is seeking more time to consolidate its contacts among the stakeholders in Bangladesh politics including the main party BNP. US is also pursuing its goal of getting base facilities in the Ocean waters of Bangladesh territory but the process is slow, as its prime competitor China is monitoring all developments preparing to counter every action of the US in Dhaka.
China has scored a goal by persuading the Bangladesh Government to make the country a member of the China led trade bloc Regional Comprehensive Economic Partnership (RCEP) which the Awami League Government did not join despite pressures on Sheikh Hasina from Beijing. During Sheikh Hasina’s visit to Beijing last July, the issue came up at the high level talks but she was non-committal. The talks took place at a time when the anti-quota movement of the students was spreading fast. The Bangladesh PM had to cut short her visit to China to deal with the turbulent political situation in her country.
In the last fortnight the commerce ministry of the interim government held detailed discussions on the issue of joining RCEP. New arguments were put out, jettisoning the earlier positioning of the Sheikh Hasina government and the final proposal was sent to the highest authorities for formally joining the RCEP. It is the first formal step taken by Bangladesh to join the RCEP – a major trade agreement that includes trade in services, investment, economic and technical cooperation, and dispute settlement.
Sources explain that Bangladesh decided to join the RCEP mainly because it will lose preferential trade benefits to markets that make up the Association of Southeast Asian Nations (ASEAN) group once it graduates from the list of least developed countries (LDCs) in 2026. The 10 ASEAN nations — namely Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam — are potential markets for Bangladesh. Moreover, the RCEP also includes five other countries that have signed the ASEAN Free Trade Agreement (FTA): China, Japan, South Korea, Australia and New Zealand.
These 15 countries within the RCEP account for 30 percent of global GDP, 31 percent of global foreign direct investment (FDI) and one-fourth of global trade. The RCEP was formally launched in November 2020 and came into effect in January 2022 before opening up its platform in July 2023 and allowing other countries to join. Any developed or developing country as well as LDCs can join as members. India has refused to be a member of RCEP although there is a view that India could take advantage of RCEP in boosting its exports. But the views of the Prime Minister’s Office prevailed and India kept out of the China-led trade block RCEP.
The commerce ministry of Bangladesh has completed formalities for joining the RCEP. Primarily, it is assessed that Bangladesh’s export would increase by $3.26 billion and FDI by 3.36 percent. Bangladesh urgently needs FDI at a speedier pace to deal with the problem of unemployment. The youth of Bangladesh are impatient without any secure jobs. They were the vanguards of the anti-Hasina movement. The Yunus government has to take cognisance of their immediate requirements.
The apparel industry will account for a significant portion of the exports while the demand for skilled and unskilled workers in the garment sector will rise by 18 percent, according to the commerce ministry document. Overall, the country’s GDP will increase by 0.26 percent if it joins the RCEP. However, if competitiveness is not increased, the services, investment and e-commerce sectors will face numerous challenges. Since Bangladesh is located in South Asia and is also a member of the ASEAN Regional Forum, the country will need to negotiate separately with member countries. However, it will also enjoy the benefit of geographical proximity. As a result, Bangladesh will benefit from the global value chain, the document said.
Indications are that a meeting is scheduled with Japan in Dhaka next month to initiate formal negotiations to sign an economic partnership agreement (EPA). Bangladesh and Japan have already completed a joint feasibility study on the EPA. This started during Sheikh Hasina’s tenure. Now the interim government has endorsed the proposal. The meeting in November to seal the deal for a Free Trade Agreement (FTA) with China will also start shortly.
What about India, the biggest trade partner of Bangladesh in South Asia? The transition in Bangladesh has delayed the process for a Comprehensive Economic Partnership Agreement (CEPA) which was discussed at preliminary level during Sheikh Hasina’s regime. Bangladesh and India completed a joint feasibility study on CEPA in 2022. The recommendations in the report are favourable to the growth of Bangladesh economy. It is likely that Bangladesh will take initiative only after the political situation stabilizes further.
Bangladesh is India’s biggest trade partner in South Asia and India is the second biggest trade partner of Bangladesh in Asia. India is Bangladesh’s largest export destination in Asia, with approximately USD 2 billion of Bangladeshi exports to India in FY 2022-23. In FY 2022-23, the total bilateral trade is reported at USD 15.9 billion. Cooperation in the power and energy sector has become one of the important pillars of India-Bangladesh relations. Bangladesh is currently importing 1160 MW of power from India. The Joint Working Group (JWG)/Joint Steering Committee (JSC) on Power provides an institutional framework to promote bilateral cooperation in cross border trade of electricity. The Maitree Super Thermal Power Plant is operational for supplying electricity to the Bangladesh grid.
India-Bangladesh Friendship Pipeline between both countries for carriage of High Speed Diesel from India into Bangladesh was inaugurated by both Prime Ministers in March 2023. Further, ONGC Videsh Limited (OVL), in a consortium with Oil India Limited, is present in off-shore oil exploration. IOCL has also been registered as a G2G supplier in 2023 and is supplying POL products to Bangladesh.
Bangladesh is the largest development partner of India today. India has extended 4 Lines of Credits (LOC) to Bangladesh in the last 8 years amounting to around US$ 8 billion for development of infrastructure in various sectors including roads, railways, shipping and ports. In addition to LOCs, the Government of India has also provided grant assistance to Bangladesh for various infrastructure projects including, construction of Akhaura-Agartala rail link, dredging of inland waterways in Bangladesh and construction of India-Bangladesh Friendship Pipeline.
The Indian Government is still facing hostilities in Bangladesh from both the interim government and the political class. The main task of the Modi government at this stage is to protect its investments and ensure that the construction work in the assisted projects which halted after August 5 resumes and talks start early for CEPA between the two nations. It will take some time for full restoration of Indo-Bangladesh economic relations. South Block has to wait and watch and monitor closely the role of the two superpowers. (IPA Service)