This one is big.
Talks on Chinese loan proposals will be at the fore during Prime Minister Sheikh Hasina's upcoming visit to Beijing.
During her visit, Bangladesh may seek around $5 billion in budget support in addition to loans for a number of large projects, said a finance ministry official on condition of anonymity.
While visiting Bangladesh in October 2016, Chinese President Xi Jinping promised about $20 billion -- the largest amount committed by a bilateral partner of Bangladesh -- over the following four years to implement 27 projects.
Bangladesh is again expecting Chinese financing at a time when it is facing pressure to maintain adequate foreign currency reserves.
Hasina's is likely to be in China on July 8-11.
Seeking anonymity, a top official of the Economic Relations Division (ERD) said they have received proposals for large projects from different ministries which suggest taking loans.
The government has been in talks with China about the projects. However, nothing has been finalised yet, the official said.
One of the projects under consideration for Chinese funding is the construction of a broad-gauge rail line from Bhanga to Kuakata via Barishal and Payra Port. It is estimated to cost about $5 billion.
Another project under consideration is the MRT Line-2, from Gabtoli to Narayanganj via Gulistan with a branch line from Gulistan to Sadarghat.
The underground and elevated metro rail is estimated to cost around $5 billion.
Besides, Bangladesh has already sought more than 36 billion yuan, equivalent to $5 billion, as soft loans from China for trade facility.
At present, Bangladesh has about $22 billion trade deficit with China. Once received, the $5 billion policy loan will help the country ease the ongoing pressure on foreign currency reserves.
The ERD official said they were in talks with China regarding the policy loan and that a deal could be signed during Hasina's visit.
Although China had promised to lend about $20 billion in 2016, as of January this year, the two sides managed to sign agreements on only nine projects, involving $8.08 billion, figures from the ERD show.
Of the $8.08 billion, Bangladesh could utilise only $4.91 billion, less than a quarter of the money promised by China.
Red-tape on both sides is largely to blame for the slow loan disbursements, said officials and experts.
The ERD official said this time, loan agreements are expected to be signed under a model different from the one used after 2016.
After China promised the $20 billion, agreements were signed on a project-by-project basis.
This time, officials are expecting that the loan agreements would be signed during Hasina's visit.
Speaking to The Daily Star, Zahid Hussain, a former lead economist at the World Bank's Dhaka office, said what the Chinese president had announced was a promise.
He thinks that red-tape on both sides has been responsible for the slow progress and low fund disbursements.
Kazi Shofiqul Azam, a former secretary to the ERD, said there were bottlenecks on both sides, causing delays in loan-deal finalisation and implementation.
"The countries need to follow a number of formalities, and they are time-consuming sometimes. This has been the main reason behind the delays a project face … ."
STATUS OF 27 PROJECTS
Twenty-seven projects were supposed to be funded with the $20 billion initial commitment. Of those, two projects have been struck off the list.
Two projects – the digital connectivity project of Bangladesh Telecommunication Company Ltd (BTCL) and the Info Sarker-3 of the Bangladesh Computer Council -- involving $388 million have been implemented.
Seven other projects received $7.7 billion and their implementation is ongoing.
The Karnaphuli Tunnel, built under a $707 million project, has been opened to traffic.
The $550 million Single Point Mooring with a double pipeline project and the $2.67 billion Padma rail link project are nearing completion.
The expansion and strengthening of the power system network ($1.4 billion), the power grid network project ($977 million), the Dhaka-Ashulia elevated expressway project ($1.12 billion), and Rajshahi Wasa surface water treatment plant project ($276.25 million) -- are in various stages of implementation.
The loan applications have been sent for two projects. The loan agreement for the establishment of digital connectivity involving $473.75 million is likely to be signed this year.
Negotiations for commercial contracts to convert the Akhaura-Sylhet rail line to dual-gauge from metre gauge, involving $1.3 billion, and expansion and modernisation of Mongla port, costing $354 million, were underway.
Four projects are being evaluated by the Chinese side: Chinese economic and industrial zone in Chattogram ($221 million); construction of dual-gauge line parallel to the existing metre-gauge line on Joydevpur-Mymensingh-Jamalpur section ($902 million); water supply, sanitation, drainage and solid waste management for small size municipalities ($229 million); and construction of the sewage collection system under Dasherkandi sewage treatment plant catchment of Dhaka city ($198 million).
Talks on Chinese loan proposals will be at the fore during Prime Minister Sheikh Hasina’s upcoming visit to Beijing.
www.thedailystar.net
After almost a decade, prime minister Sheikh Hasina is to pay a state visit to China in the second week of July. During formal talks with Prime Minister Li Qiang on 9 July, financial assistance to meet Bangladesh's budget deficit and funding of new projects will be given importance.
Various areas of economic cooperation will gain focus during the forthcoming visit. In the backdrop of contemporary circumstances, geopolitics is likely to feature is discussions between the two leaders. A source at a high level in the government informed Prothom Alo of the matter.
According to diplomatic sources, a significant aspect of this visit will be a Chinese loan of USD 7 billion (USD 700 crore), equal to around 50.40 billion yuan (5,040 crore yuan). Of this, China will provide the equivalent USD 5 billion under trade assistance and the equivalent of USD 2 billion under budget assistance in local currency as credit to Bangladesh.
Also, just as decision has been taken for transactions in taka and rupees with India, a decision may also be taken for transactions in taka and yuan with China. An MoU to this end is being prepared.
Preparation is on so far for 11 instruments, including seven MoUs, to be signed during the prime minister's Beijing visit. Significant among these are China's Global Development Initiative (GDI), trade assistance, investment protection, digital economy, blue economy, announcement of free trade agreement study as well as construction and renovation of several friendship bridges.
Foreign secretary Masud Bin Momen told Prothom Alo priority will be attached to trade and economy during the prime minister's visit. Discussions will focus on addressing the existing trade imbalance and areas of assistance. Talks are on with China about trade assistance and budget assistance. This will possibly be finalised during the visit.
Visit before the visit
Two weeks in advance of the prime minister's Beijing visit, China's Communist Party central committee's international department minister Liu Jianchao arrived in Dhaka on Saturday. During his four-day trip he is scheduled to meet prime minister Sheikh Hasina and foreign minister Hasan Mahmud. He will also meet with leaders of Awami League and other political parties.
Diplomatic sources say that the Dhaka visit of such an important leader of China's Communist Party before the prime minister's Beijing visit is significant. Relations between the two countries at a political level grew close particularly after 2016.
Liu Jianchao will apprise Dhaka of Beijing's views concerning the upcoming visit. He will also try to understand Bangladesh's views concerning the future of relations between the two countries, added the sources.
Main visit two days
Diplomatic sources further say that prime minister Sheikh Hasina is scheduled to visit China from 8 to 11 July. However, the main agenda of the trip will be limited to 9 and 10 July.
On 9 July official talks will be held between the two prime ministers. On 10 July prime minister Sheikh Hasina will hold talks with the Chinese president Xi Jinping. The prime minister is also scheduled to meet with the president of the Chinese parliament National People's Congress of China, Zhou Lusi.
Large loans in Chinese currency
Dhaka and Beijing diplomatic sources say, Bangladesh has sought credit assistance from several countries in order to tackle the dollar crunch and the diminishing foreign exchange reserves. China is on the list of these countries. A few months ago China expressed interest in providing loans in yuan. The country has already started international transactions in yuan with several countries.
Initially China wanted to provide a trade facilitation loan in local currency equivalent to around USD 5 billion. And Bangladesh wanted loan as budget assistance. Bangladesh reasoned that if the loan was taken as trade assistance, it would become a commercial loan. This may mean high interest and shorter repayment deadline. That could put pressure on the foreign debt situation. In consideration of the country's overall condition, low interest long term loans can be taken. That makes it more logical to use the loan as budget assistance rather than trade facilitation. Later discussions were held with China about budget assistance loans.
At the start of this month Bangladesh and Chinese officials discussed the credit issue. Finally China agreed to providing credit both as trade facilitation and budget assistance. This correspondent was told by several officials present at the talks in Beijing, that the loan may be given from China International Development Cooperation Agency (CIDCA) and the state-owned EXIM Bank.
Tariff-free facilities even after 2026
There is a huge trade deficit between Bangladesh and China. While China provides 98 per cent tariff-free facilities on Bangladesh products, Bangladesh's exports to that country has hardly increased. Last year Bangladesh exported products of around USD 700 million and imported goods of over USD 20 billion.
Foreign secretary Masud Bin Momen said that the 98 per cent tariff-free facilities that China provides for Bangladeshi goods hardly makes any difference. It was also proposed that even after 2026 the tariff-free facilities should remain in place.
Transactions in local currency
Bangladesh's bilateral trade with China now exceeds USD 20 billion, almost all of which comprises imports by Bangladesh. Bangladesh has to spend huge amounts of dollars to import goods from China. The officials feel that if Bangladesh could use yuan for imports, this will be a big relief in this time of dollar crisis.
Foreign ministry officials have said that talks are on for trade transactions to be in taka-yuan as in the case of taka-rupee transactions with India. There are talks of an MoU to be signed in this regard between Bangladesh Bank and China's National Financial Regulatory Commission.
New projects
China's president Xi Jinping visited Dhaka in September 2016. During this historic visit, it was decided to implement 27 projects. Of these, 15 have been completed, six are underway and there is consideration of replacing the remaining six with new projects.
It has been learnt that Bangladesh raised some new projects for China's consideration at the foreign secretary level meeting between the two countries at the beginning of this month. It was pointed out to China that much delay is made in scrutinising the projects for which the feasibility of the projects is harmed.
Geopolitical discussions relevant
Bangladesh's prime minister is visiting Bangladesh at a time when much is happening at an international and regional level. After President Xi Jinping's Dhaka visit in 2016, ties between the two countries grew strong at a political level.
In this contest, according to diplomatic sources, it will be normal for the unstable situation in Rakhine, Myanmar, the Indo-Pacific, South China Sea, Taiwan and such issues to be raised in the discussions.
When their attention was drawn to talks at various levels between the two countries in recent times, several diplomats told this correspondent that China has raised the issues of the Indo-Pacific Strategy (IPS), as well as about the US and its allies. Even after Bangladesh declared its Indo-Pacific Outlook before prime minister Sheikh Hasina's Japan visit last year, Bangladesh held talks with China. China was not too pleased with the joint declaration during that trip. Later Bangladesh explained the matter and assuaged China's unease.
Diplomatic analysts feel that China is at present under pressure due to the Taiwan situation. This issue will be raised. Bangladesh as always followed the 'One China' policy. Bangladesh wants China's support for its development efforts. And China wants to consolidate its position among the South Asian countries by contributing to the development process. So China is likely to raise the issues of India, Japan, the US and such like-minded countries during talks this time.
When asked about the issue, Bangladesh former ambassador to China Munshi Faiz told Prothom Alo, the matter of economic cooperation in continuity of the past will gain priority during prime minister's China visit. Alongside bilateral relations, the matter of relations with India and geopolitical issues may emerge in the talks.
He further said in this regard we must advance forward, taking the sensitivity of all parties concerned. In consideration of national interests in the light of greater geopolitics, Bangladesh needs to explain to China that it gives due importance to the sensitivities and views of all countries.
Prime Minister Sheikh Hasina's upcoming visit to China to discuss a 7 billion dollar loan and economic cooperation, including trade assistance and budget assistance, to address Bangladesh's financial needs.
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