Sino-Bangladeshi Cooperation: The Rise of South Asia’s Economic Corridor

Despite escalating strife in Bangladesh, Dhaka and Beijing are intensifying plans for an economic corridor. It has an important role in China’s regional strategy and South Asia as a whole.

Recently, Bangladesh’s foreign minister Dipu Moni met his Chinese counterpart Wang Yi in Beijing to push forward the Bangladesh-China-India-Myanmar (BCIM) Economic Corridor.

The initiative follows China’s intensified cooperation with Pakistan and recent Asian summits in which both President Xi Jinping and Premier Li Keqiang have been promoting a new “maritime Silk Road” and deeper economic cooperation with Southeast Asia.

Bangladesh has a less-known but vital role in China’s regional rebalancing.

Economic progress

As the eastern part of Pakistan, Bangladesh was born with the Partition of Bengal and British India in 1947. After more than three decades of economic neglect and political marginalization, it gained independence in 1971. The fragile secular multiparty democracy was swept by political turmoil, famine and military coups, which were fueled by the Cold War and internal tensions.

After the eclipse of the US—Soviet bipolar rivalry, democracy was restored in 1991, which paved way to relative stability and economic progress.

Economically, Bangladesh is a large emerging economy. But with more than 160 million people, it is poor, vulnerable to political and economic turmoil, climate change, as well as the debt crises in the West. It depends on the garment sector, which suffers from slowing exports to Europe and the United States, and remittances, which have been harmed by construction slowdowns in advanced and emerging nations.

Today, a combination of factory fires and political turmoil is pushing Bangladesh’s $22 billion garment export industry into uncertainty. Despite greater costs, Vietnam and Cambodia are courting retailers.

In 2013, Bangladesh’s GDP growth decelerated for the second year in a row, to 6 percent. Half of the labor force is still employed in the agricultural sector, in which growth has decelerated. In turn, services growth has decreased to 6.1 percent, thanks to strikes and political violence.

With right policies, Dhaka could unleash a period of growth and prosperity. With wrong policies, it could suffer an era of stagnation and poverty.

Political turmoil

Two years ago, the ruling Awami League (AL) scrapped a two-decade old “caretaker government” system, whereby neutral leaders have taken over a quarter of a year before elections, to ensure fair polls. Ordinarily, AL should have stepped down by late October. Now it refuses to do so.

As a result, the opposition Bangladesh Nationalist Party (BNP) has begun to intensify nationwide strikes and boycott the elections. It has been emboldened by pre-election polls, which suggest that it is supported by 43 percent of the electorate, while AL has only 32 percent.

AL’s reputation has been tarnished by a slate of corruption scandals, one of which forced the World Bank to cancel a $1.2 billion loan for a vital bridge project.

Another AL-BNP friction point involves history. Since 2010, a tribunal has convicted leaders of BNP and Jamaat-e-Islami, the main Islamic Party, of human rights abuses during Bangladesh’s war of independence. Last Sunday, the tribunal sentenced two expatriates to death. In turn, both BNP and the Islamists have criticized the tribunal as an effort to neutralize the opposition.

Meanwhile, economic stagnation and escalating political turmoil is making the military uneasy.

From bilateral rapprochement to regional opportunities

Historically, Bangladesh and China share a rich history of trade and cultural exchange. In the postwar era, the Party had close ties with Bengali nationalist leaders.

In 1971, China supported Pakistan, a close ally which was mediating the rapprochement between Washington and Beijing, whereas Bangladesh was still close to India and its ally, the Soviet Union. In the mid-1970s, the assassination of Sheikh Mujibur Rahman led to a military regime, which began distancing the country from the Indo-Soviet allies. Diplomatic relations were instituted between Dhaka and Beijing, which have been sustained by successive governments in Bangladesh.

By 2012, the US was the most important trade partner of Bangladesh (17%), along with Germany and UK, while China was the country’s largest import partner (20%). But things are changing. Last June, President Obama announced the suspension of U.S. trade privileges for Bangladesh because of concerns over labor rights and worker safety, particularly in garment factories. Meanwhile, trade between Bangladesh and China exceeded $8 billion in 2012, which will be surpassed during the ongoing year.

While the Sino-Pakistan relations have served to balance India’s power in the region, the Sino-Bangladesh relations serve as a more neutral bridge to India. More recently, defense procurement has underscored cooperation between the Bangladesh armed forces and China.

Bangladesh is a founding member of the South Asian Association of Regional Cooperation (SAARC), in which China is an observer, thanks to Bangladeshi invitation. In turn, both Beijing and Dhaka see broader regional cooperation central to security and prosperity, as evidenced by the longstanding efforts toward the ‘quadrilateral’ grouping, comprising Bangladesh, China, as well as Myanmar and India; the BCIM Economic Corridor.

The BCIM is the nodal point of three emerging regional blocs: South, East and Southeast Asia. It also reflects China’s rising maritime power, which is encountering its U.S. counterpart along the sea lines that connect China to energy resources in the Middle East and Africa.

U.S. critics tend to see the BCIM as a “string of pearls” that could one day fuel China’s bid for regional primacy. Along the Economic Corridor, however, Bangladesh and Myanmar, certainly China, and perhaps even India see such regional economic integration as potential insurance for stability and prosperity in the future.

The original version of the commentary was released by South China Morning Post on November 4, 2013