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Officials: Bangladesh Has Received Small Fraction in Chinese Loans for Projects

Kamran Reza Chowdhury
Dhaka
2019-12-06
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Chinese President Xi Jinping (right) speaks with Bangladesh Prime Minister Sheikh Hasina (left) during a meeting at the Diaoyutai State Guesthouse in Beijing, July 5, 2019.
Chinese President Xi Jinping (right) speaks with Bangladesh Prime Minister Sheikh Hasina (left) during a meeting at the Diaoyutai State Guesthouse in Beijing, July 5, 2019.
Pool/AFP

China has disbursed only 5 percent of a U.S. $20 billion loan package to Bangladesh tied to infrastructure projects there, although a 2016 memorandum set a four-year deadline for Dhaka to receive all the cash, according to Bangladeshi government officials.

The multibillion-dollar credit line from China for the construction of 27 projects was among a host of bilateral memoranda of understanding (MoUs) that were struck when Chinese President Xi Jinping made his first official visit to the South Asian nation in October 2016.

However, Beijing released only $1 billion in loan money linked to five of those projects, although the MoU set 2020 as a deadline for Dhaka to receive the funds, said an official at the Economic Relations Division (ERD), the unit at Bangladesh’s Ministry of Finance that oversees Chinese-funded projects.

“Since October 2016, we have been working to expedite the signing of loan agreements. But we have been able to sign six loan agreements. The Chinese government has so far released over U.S. $1 billion against five projects,” the senior official told BenarNews this week on condition of anonymity, saying he was not authorized to speak to the media.

He said complex bureaucratic procedures between both countries had slowed the process of China clearing respective feasibility studies and loans for each of the more than two dozen projects listed under the MoU. According to its terms, firms and workers from China will also be involved in the projects’ construction.

To accelerate the pace of the disbursal of the rest of the funds, Bangladeshi and Chinese officials met in Dhaka on Monday to discuss the issue, but neither side talked to reporters about the meeting’s outcome.

“We have discussed the progress on implementation of the Chinese-funded projects. But we have decided to not disclose the decision of the meeting to the media. The Chinese do not want us to talk to the press on this issue,” Shahriar Kader Siddiky, a joint secretary and chief of the Asia desk at the ERD, told BenarNews.

Siddiky also declined to share the agenda of Monday’s meeting of officials in the Sino-Bangladeshi joint working group, according to BDNews24, a local news website.

The Chinese embassy in Dhaka did not immediately respond to an inquiry from BenarNews seeking comment.

China’s footprint in Bangladesh’s economy has expanded massively since 2016, with Beijing now the South Asian nation’s biggest foreign investor, according to official figures. Beijing outpaced Washington as Bangladesh’s top investor in 2018, when overall Chinese investment reached $1.03 billion – a 16-fold increase from its investments in 2016.

Bangladesh is among countries that China has targeted for its One Belt, One Road initiative, Beijing’s strategic program to pump at least $1 trillion into building a modern-day Silk Road. OBOR aims to connect the world’s most populous nation to some 70 countries via a network of highways, railways, ports and bridges stretching from Asia to Europe, and also linking China to Africa.

Big-ticket items

The MoU that came out during Xi’s visit to Dhaka three years ago has not been released to the Bangladeshi public, but BenarNews obtained details about the 27 projects, including estimated costs, from the anonymous ERD senior official.

The list includes the construction of a $2.8 billion marine drive expressway connecting the southeastern towns of Sitakunda, Chittagong and Cox’s Bazar; a $2.1 billion project to build a four-lane highway between the capital Dhaka and Sylhet, in the country’s northeast; and a $2.6 billion rail link as part of the construction of the Padma Bridge, which is Bangladesh’s biggest infrastructure project.

So far, loans have been cleared for six of the 27 projects but five have officially received disbursements of Chinese loan money.

These include $534 million disbursed for the Padma Bridge rail-link; $266 million disbursed for the Karnaphuli River tunnel, a project estimated to cost $689 million; and $139 million disbursed for the third phase of the development of a national Information and Communications (ICT) infra-network, a project also known as Info-Sarkar and whose estimated cost is $152 million.

According to terms of related loan agreements, as spelled out under the MoU, Bangladesh has a five-year grace period from the start date of each loan agreement, and will then be expected to repay the loan at annual interest rate of 2 percent.

‘Necessary for Bangladesh’s development’

Local economists view these Chinese-backed infrastructure projects as overpriced, saying these could push Bangladesh into a debt trap.

“There is no transparency in the Chinese-funded projects,” Ahsan H. Mansur, executive director of the Policy Research Institute, a private think-tank, told BenarNews.

“Wherever the Chinese provide loans, the cost of the Chinese-funded projects is sometimes triple the original price.”

“That is why they avoid talking to the press. How they would defend the high price to the press? So, it is better to snub the press,” Mansur added, referring to government officials.

When an infrastructure project becomes economically unviable, “it becomes a burden for the country,” he said, alleging that corruption was a factor in the overpricing of projects.

He said he was “not against Chinese credit,” but was concerned about “the way it is done now.”

“More than three years have elapsed. But only $1 billion out of the promised $20 billion has been disbursed,” Mansur said.

As economist Hossain Zillur Rahman sees it, the Chinese want to be the world leader in the construction industry.

“The Chinese have huge volumes of cash. They want to give us loans. But we have to remain alert while receiving the credit,” he told BenarNews.

“We must not take a loan for a project, which will be beneficial for the people after 100 years. If we do so, we will fall in the debt trap,” he warned.

But Faruk Khan, a Bangladeshi MP and member of the country’s ruling Awami League party, dismissed concerns about the costs of Chinese-linked projects being inflated.

“The technical experts of the two countries jointly decide the price of a project. This is not possible to double the price of a project. This is a sweeping comment,” said Khan, chairman of the Parliamentary Standing Committee on Foreign Affairs.

“The Chinese loans are necessary for Bangladesh’s development. We have been receiving loans from China for the sake of the country,” he told BenarNews.

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