Emphasis on new investments, not just loans

In the last decade and a half, Bangladesh-China bilateral trade has increased by 426.59 percent. 15 years ago, i.e. in the fiscal year 2008-09, the trade between the two countries was only 351.45 billion dollars, which in the fiscal year 2022-23 stood at 1850.40 billion dollars. But the export of Bangladesh is very less compared to the import. In Prime Minister Sheikh Hasina’s visit to China, reducing this trade deficit and attracting investment is of special importance.

China is not only a major commercial partner of Bangladesh, but they are also playing a role in the country’s major infrastructure development. Continuity in this regard is necessary to accelerate economic progress. The governments of the two countries are keen to take commercial relations to a new level. Bangladesh is expecting more loans from this development partner country. At the same time, special importance is being given to China to increase new investment in Bangladesh. Businessmen and economists of the country feel that investment is necessary along with loans.

Bilateral trade

According to the data of Bangladesh Bank, the bilateral trade between Bangladesh and China in the financial year 2022-23 was 1850.40 billion dollars. Against the import of 1782.66 billion dollars from China, Bangladesh’s export to the country was 67.73 billion dollars. The trade deficit was over $17.15 billion. In the fiscal year 2008-09, Bangladesh imported goods worth 341.75 billion dollars from China. And the export from Bangladesh to China was about 100 million dollars.

Bangladesh-China trade

Bangladesh’s export to China in 11 months of 2023-24 financial year (up to May 2024) is 76 million 10 million dollars. Which is more than the fiscal year 2022-23. China’s highest export earnings as a single product during this period came from the garment sector. The amount of which is 29 million dollars.

Our aim should be to figure out how to bring Chinese businessmen here, especially businessmen in the sectors we import. If we can produce 5 percent of the raw material on our own, it will be a big achievement for us. Former President of DCCI Abul Kasem Khan

Bangladesh imports the most cotton from China. Bangladesh imported $225 million worth of cotton in the fiscal year 2022-23. The second highest import was nuclear reactors and boilers – valued at $215 million. Electronics and electrical appliances have been imported worth 172 million dollars.

Prime Minister’s visit to China

Prime Minister Sheikh Hasina is going on a bilateral visit to China on Monday (July 8). His first visit to China after forming the government for the fourth consecutive term is quite significant. Attracting China to invest will be at the center of discussion during the visit. The main objective is to reduce the trade deficit and increase new investment.

The visit has spread hope between the businessmen of the two countries. Their expectation is that Bangladesh-China trade relations will be stronger.

The special aspect of the visit will be China’s loan of more than 5,400 million yuan equivalent to 7 billion dollars for Bangladesh. Out of this, the country can lend Bangladesh an equivalent amount of 5 billion dollars under trade support and 200 billion dollars under budget support in local currency.

The question now is whether Bangladesh will focus only on loans or will also focus on investment. And if the investment is then in what kind of industry? Economists and businessmen feel that investment should be attracted in productive and backward industries. Because Bangladesh is import dependent and has to import a large amount of raw materials. However, in taking a loan, one should be aware of the interest rate and repayment terms and duration so as not to get caught in the debt trap.

Areas of investment attraction

97 percent of Bangladeshi products enjoy duty-free access to the Chinese market. But the exporters are not able to use this opportunity. Experts feel that there is no alternative to investment to avail the duty-free benefits.

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Former president of Dhaka Chamber of Commerce and Industry (DCCI) Abul Kasem Khan told Jago News, ‘China’s role in the global production system is many. China is established as a global supplier of raw materials. We import large quantities of raw materials to meet export and domestic demand. So our trade deficit will not decrease but will increase. Because the type and size of our business is growing day by day.’

‘Our aim should be how to bring Chinese businessmen here, especially businessmen in the kind of products we import. If we can produce 5 percent of the raw material we need ourselves, that is a big achievement for us. It will increase our capacity, reduce import dependence.’ Kasem commented.

‘Chinese investment can play a role in Bangladesh to meet the challenges of LDC transition. Because we need to increase our own capacity in many areas. China needs investment and strategic support there. We are the second largest apparel exporter in the world. China is at the top here.’

To take advantage of duty-free access to the Chinese market, Bangladesh needs to attract investment in manufacturing industries. Emphasis should be placed on diversification of products. Backward industries should be developed in the country through Chinese investment.- Dr. MA Razzaq

This business leader claims that our exports are dependent on the garment sector. So here you have to aim well. China’s investment will help product diversification and create high value apparel products.

Bangladesh Garments Manufacturers and Exporters Association (BGMEA) vice-president Abdullah Hill Rakib told Jago News, ‘We have many opportunities to increase the export of garment products made of manmade fiber. China is far ahead in the global market in this regard. They have the capability, capacity and technology.’

Rakib said, ‘If we can make an agreement with China that they will invest in this industry here and help us acquire technological know-how, then Bangladesh will be able to do much better in this sector.’

“If Bangladesh wants to become China Plus in exporting manmade fiber apparel products, then we have to be their strategic partner. All the countries that have done well have done it through this method.’ Rakib said.

The way we work is constantly changing due to the influence of technology. New technologies are being added to the production system. Therefore, economists are of the opinion that initiatives should be taken to attract investment in technology development and efficiency improvement projects. They said artificial intelligence (AI) has new opportunities and challenges, where China’s investment is important. We need to incorporate this new technology into the production system through technical assistance.

To attract investment

Ted Group Managing Director Ashiqur Rahman Tuhin said,
‘China is very important in terms of import and export. Exports are very less compared to the amount of raw materials we import. China needs to attract investment in backward sectors of other industries, including ready-made garments. If investment comes, we will get raw materials easily and we can export products in a short time.’

Necessary support and action is needed to attract investment and businesses that are moving away from China. If necessary, they should be given investment facilities in special regions, Tuhin said.

He said, ‘In order to attract foreign investment, we need to make our policies and laws compatible with business. Laws need to be reformed somewhere. Not only in notebooks, there should be practical initiatives.’

He also felt that Comprehensive Economic Partnership Agreement (CEPA) and Free Trade Agreement (FTA) should be strengthened to increase trade and investment.

Loan or investment?

“We are getting funding from China for various projects. These have helped a lot in developing our infrastructure. But to take advantage of improved infrastructure, we need to attract more than just loans, we need to attract investment and pay special attention to where increased investment will lead to economic growth.’ Chairman of Research and Policy Integration for Development (RAPID). MA Razzak told Jago News.

Three said, ‘Bangladesh needs to attract investment in manufacturing industries to take advantage of duty-free access to China’s market. Emphasis should be placed on diversification of products. Backward industries should be developed in the country through Chinese investment.’

Economists as well as business leaders have advised caution on loans.

Abul Kasem Khan said, ‘A large amount of funds for the implementation of ongoing and new big projects is expected from this visit. But we have to be careful not to become overly dependent on China and fall into a debt trap. Interest rate in taking loan should be taken into account repayment time and ability. A strong role has to be played so that the interest is reduced.’

According to the data of Bangladesh Bank, Bangladesh received foreign investment worth 260 million dollars from China in the last financial year. Out of this, about 13 million dollars came from the energy sector and 3.32 billion dollars from textiles. Meanwhile, Bangladesh received a total of 3 billion dollars of foreign investment. China was third.
In 2021, China released 88.79 billion dollars even though there was no commitment. In 2022, the pledged debt is 112.69 billion dollars, the discount is 98.95 billion dollars. In 2023, the discount is $113.27 billion against the pledged debt of $27.62 billion.

China has promised a total loan of 10.29 billion dollars to Bangladesh so far. Discounted 6.54 billion US dollars. 10 million dollars in concessions only grants.