HomeBangladeshBangladesh's Economic Possibilities in the Indian Ocean

Bangladesh’s Economic Possibilities in the Indian Ocean

Background

Bangladesh in the decades of 2010s made great strides in maritime delimitations with Myanmar in 2012 and India in 2014, finally opening up the vast Exclusive Economic Zone (EEZ) roughly the same size as the land area of Bangladesh in the Bay of Bengal as well as gaining uninterrupted access to the High Seas (HS) in the Indian Ocean. As a result of this, the Government of Bangladesh has taken plans to construct two deep seaports. One is in Paira, Patukhali district of Khulna division. Even though the Government hastily inaugurated the port in 2013 with little to no infrastructural development, subsequent delays in constructing requisite port infrastructures as of 2020 have made the project a white elephant. However, another deep seaport in Matarbari, Maheshkhali Upazila in Cox’s Bazar district, has gained the Government’s top priority. Originally the port would be built for ease of logistics in the construction of the Matarbari Coal-Powered Plant. But upon seeing the region’s potential as the economic hub connecting the South and South-East Asia, the Government had decided to turn it into a deep seaport. The port’s construction officially started on 16th November 2020 with a cost[i] projected at 17,775 crore takas (2 billion US Dollars).

The Historical importance of Bangladesh as an Economic Hub

Looking from a geopolitical point of view, Bangladesh is at a substantial geographic disadvantage. It is almost surrounded by India on all three sides (North, East, and West), save for the South where the Bay of Bengal lies. Historically, however, the Bay of Bengal was the gateway through which the European colonists like the British East India Company (EIC) entered Bengal and ultimately turned the entire region into the British Raj’s foundation in the subcontinent for almost 200 years from 1757 to 1947. For the EIC, the Bay of Bengal was vital not only for hoarding the riches of Bengal to Britain but also due to its proximity with the Malacca and Java islands in South-East Asia, which was home to some of the most expensive spices like Saffron and Nutmegs. Even though the Dutch East India Company later colonized the entire Indonesian islands and its adjoining areas in the early part of the 19th century, the British East India Company positively benefitted from conducting trade monopoly in the region by using the Bengal region as an economic hub, to which the latter European powers like France and Denmark had to heavily rely on for conducting trade in the spice prosperous South-East Asia. For the French and Dutch colonists, the Bay of Bengal served as a transitional hub either for reaching Dutch Indonesia or French Indo-China (Vietnam, Laos, Cambodia, etc.) or sailing towards the European mainland.

Picture 1: Old Dutch East India Company map of Bay of Bengal and Indian Subcontinent (circa 1800).

 

Bangladesh’s Economic Rise in the 2010s

Once considered the “Basket Case” according to former US National Security Adviser Henry Kissinger after attaining independence in a bloody civil war in 1971, Bangladesh had come a long way. A decade ago, Bangladesh’s Per Capita GDP (781 USD) was nowhere near India’s Per Capita GDP (1,357 USD). But now, it has overtaken[ii] the Per Capita GDP of the world’s fifth-largest economy by the end of the fiscal year 2020, according to IMF. In reality, due to Covid-19 Pandemic, India’s Per Capita GDP took a nosedive and decreased to negative 10%, reaching 1,877 USD. Despite the onset of a calamitous pandemic, Bangladesh’s GDP increased to a positive 4%, i.e., 1,888 USD. Even though the margin isn’t that huge, this shows how much our current Awami League regime under the able leadership of Prime Minister Sheikh Hasina is determined to fulfill her election manifesto of turning Bangladesh into a developing country from the ignominious Least Developed Country (LDC) status by the year 2024 and a developed nation by the year 2041.

Picture 2″ Four Megaprojects of Bangladesh (Clockwise: 1. Padma Multipurpose Bridge, 2. Metro Rail Dhaka, 3. Matarbari Deep Seaport and Coal-Powered Station and 4. Rooppur Nuclear Power Plant).

From this perspective, it is no brainer that the Government of Bangladesh had taken a gamble by undertaking massive infrastructure development projects[iii] to boost our GDP, as seen in the construction of Padma Bridge, which would connect South Bangladesh with Central Bangladesh. Moreover, Metro-Rail is rapidly constructed in Dhaka’s capital city that would make traveling quicker from one part to another in the capital instead of conventional transports, which falls victim to traffic jams. Foreign investors from East Asian countries like China[iv], Japan[v], and Korea[vi] are becoming more interested in investing in infrastructural developments or building manufacturing plants in the Export Processing Zones (EPZs) due to low labor and tax costs. But for this to take place, a deep sea-port through where heavy tankers and transport vessels can anchors is of utmost necessity and keeping that in mind, the Government of Bangladesh has decided to construct the Matarbari Deep Sea-Port to take complete advantage of the Bay of Bengal and its proximity with trade routes in South-East Asia.

Implications for Bangladesh as an Economic Hub in the Indian Ocean

As a result of resolving the maritime disputes between Myanmar and India, Bangladesh has finally got access to the Indian Ocean through the Bay of Bengal. Despite its geopolitical disadvantage given that India surrounds it on all three directions, barring the South where the Bay of Bengal lies, Bangladesh has the highest annual GDP growth rate among the South Asian countries, which currently stands at 7.9%, a 0.3 down[vii] from 8.2% in 2019 due to the Covid-19 Pandemic. So, Bangladesh has all the potential to turn the tables. Its landlocked neighboring countries in the North like Nepal[viii] (mainly imports apparel, gold, iron, fuel, machinery, and equipment from non-neighboring countries like Indonesia, Thailand, Australia, South Africa) and Bhutan[ix] depend on the Mongla and Chattagram sea-ports as transits for shipping. And with the inaccessible North-East states of India popularly known as “The Seven Sister States” (Assam, Meghalaya, Tripura, Mizoram, Manipur, Nagaland, and Arunachal Pradesh) demanding greater economic developments from the Central Government in New Delhi, India thought of using Bangladeshi ports for transshipment of goods across the North-East states. A Standard Operating Procedure (SOP) was already signed[x] bilaterally between the two countries on Prime Minister Sheikh Hasina’s visit to India in October 2019.

Picture 3: Proposed Transshipment Route with Nepal and Bhutan.

The SOP permits transshipment of Indian goods from Chattagram port and Mongla port on four routes across the land (road and rail) and water routes to Agartala (Tripura) from Akhaura; Dawki (Meghalaya) from Tamabil; Sutarkandi (Assam) from Sheila; and Srimantpur (Tripura) from Bibirbazar in Bangladesh. Here, Bangladesh will benefit to some extent from this venture. Experts feel that this bilateral venture between the two neighboring countries would significantly improve revenue generation and business services in Bangladesh.  It is also assumed that in the long run, this venture would help Bangladesh in job creation and investment in the logistical sector since Bangladeshi vessels and trucks will be utilized to move the Indian cargo. Indian cargo also has to pay requisite taxes to use the facility in Bangladesh.

Priorities for Bangladesh

Given the vast economic prospects in the Indian Ocean Rim (IOR), Bangladesh must capitalize on each and every opportunity that presents itself and being an economic hub for trade is among the trump cards Bangladesh could use to overcome its geopolitical limitations. Already neighboring countries like India, Nepal, and Bhutan are getting heavily dependent on Bangladesh for the transshipment of goods and commodities. And if the trump card is played right by the Awami League Government of Bangladesh, Bangladesh can easily generate[xi] 1.3 billion USD annually from fees and taxes alone imposed on the transshipment of goods.

For that to even matter, Bangladesh must not remain content with being just the transshipment country for India, Nepal and Bhutan, but also look at the bigger picture of being an economic hub like Dubai (UAE), Mumbai (India), Chennai (India) and Singapore, etc. by taking advantage of the Indian Ocean, the second busiest ocean trade route in the world after the Atlantic Ocean. From the geopolitical point of view, China had been encircling[xii] India for quite some time now under the guise of String of Pearls by taking leases of Gwadar deep sea-port in Pakistan, Hambantota deep sea-port in Sri Lanka, and Male deep sea-port in the Maldives. For its greater interest, Bangladesh should not fall victim to China’s so-called loan traps and antagonize India by handing over control of a sea-port to the Chinese lease.

And given the influx of Rohingya refugees in 2017, the relationship between Bangladesh and Myanmar had been all times low at this point. Either intentionally or unintentionally, Myanmar had been wrongfully showing the island of St. Martin as its own repeatedly for the past couple of years despite numerous protests[xiii] from the Ministry of Foreign Affairs (MOFA) in Bangladesh. If Bangladesh were to become an economic hub in the Indian Ocean where Myanmar is also a competitor, Bangladesh should and must prioritize its security in the Bay of Bengal and build pragmatic relations with Myanmar by fostering good bilateral political and economic relations, but not without resolving the Rohingya issue first-hand.

For its greater interest, Bangladesh must build good economic relations with coastal countries in the Indian Ocean Rim, most notably Australia, Indonesia, Pakistan, Persian Gulf countries, Thailand, Malaysia, Singapore, Kenya, Tanzania, Mozambique and South Africa for realizing its goals, keeping Nepal, Bhutan and India (Seven-Sister States) in mind. It could either be bilateral or multilateral given the needs and circumstances for export and import of commodities following the regulations of GATT (Global Agreement on Trade and Tariffs) and GATS (Global Agreement on Trade and Services) by the World Trade Organization (WTO).

 

Policy Recommendations

The following are the policy recommendations for the Bangladeshi government, think tanks, and foreign policy experts should Bangladesh seriously consider becoming an economic hub keeping in the mind the geopolitical, geo-economic, and geo-strategic realities and considerations in mind.

  • Building an environment conducive for trade and commerce in Bangladesh by undertaking realistic infrastructural development and port facilities in the coastal districts of Bangladesh.
  • Fostering even stronger political and economic ties with India, Nepal, and Bhutan either bilaterally or multilaterally.
  • Not to antagonize India under any circumstances by disrupting the fragile balance in the India-Bangladesh-China dynamics by becoming pawns to China’s anti-Indian schemes.
  • Fostering good economic relations with Myanmar, but not by compromising the Rohingya issue first-hand.
  • Taking full advantage of the economic scope and possibilities of the Indian Ocean Rim by building strong political and economic relations with coastal countries of the Indian Ocean, either bilaterally or multilaterally with non-neighboring countries like Australia, Indonesia, Pakistan, Persian Gulf countries, Thailand, Malaysia, Singapore, Kenya, Tanzania, Mozambique, and South Africa.
  • Becoming an attractive maritime transit-point for re-fueling and tourist destination for cargo and passenger ships along the Indian Ocean by initiating infrastructure development in the Chattagram and Khulna regions of Bangladesh.
  • Bridging the land-locked countries of Nepal and Bhutan with coastal countries of the Indian Ocean like Australia, Indonesia, Pakistan, Persian Gulf countries, Thailand, Malaysia, Singapore, Kenya, Tanzania, Mozambique, and South Africa.

[i] Aziz, A., 2020. ‘Venus Triumph’ becomes the first ship to dock at Matarbari deep seaport. [online] Dhaka Tribune. Available at: <https://www.dhakatribune.com/bangladesh/2020/12/29/venus-triumph-becomes-the-first-ship-to-dock-at-matarbari-deep-sea-port> [Accessed 28 January 2021].

[ii] Mohammed, S., 2020. Bangladesh’s Economic Victory Over India: A Moral Victory?. [online] Rationibus Bangladesh. Available at: <https://www.rationibusbd.com/bangladeshs-economic-victory-over-india-a-moral-victory/> [Accessed 28 January 2021].

[iii] Rahman, M., 2019. Mega projects of Bangladesh and prospective impacts in transforming the economy. [online] Saudi Gazette. Available at: <https://www.saudigazette.com.sa/article/562003/World/Asia/Mega-projects-of-Bangladesh-and-prospective-impacts-in-transforming-the-economy> [Accessed 28 January 2021].

 

[iv] Pitman, A., 2020. China’s Stake in Bangladesh Is Overplayed. [online] The Diplomat. Available at: <https://thediplomat.com/2020/08/chinas-stake-in-bangladesh-is-overplayed/> [Accessed 28 January 2021].

[v] Rafi Bhuiyan, T., 2020. Japanese Investment: The opportunity for Bangladesh’s economic growth. [online] The Financial Express. Available at: <https://www.thefinancialexpress.com.bd/views/japanese-investment-the-opportunity-for-bangladeshs-economic-growth-1607433051#:~:text=Since%201974%2C%20the%20total%20amount,increased%20by%2040%20per%20cent.> [Accessed 28 January 2021].

[vi] Dhaka Tribune. 2020. S Korean envoy discusses investment opportunities in Bangladesh. [online] Available at: <https://www.dhakatribune.com/business/2020/10/25/s-korean-envoy-discusses-investment-opportunities-in-bangladesh> [Accessed 28 January 2021].

[vii] Data.worldbank.org. 2019. GDP growth (annual %) – Bangladesh | Data. [online] Available at: <https://data.worldbank.org/indicator/NY.GDP.MKTP.KD.ZG?end=2019&locations=BD&start=1961&view=chart> [Accessed 28 January 2021].

[viii] International Trade Center. 2020. Nepal. [online] Available at: <https://www.intracen.org/country/nepal/#:~:text=Nepal%20mainly%20exports%20carpets%2C%20beverage,Thailand%20are%20main%20import%20partners.> [Accessed 30 January 2021].

[ix] International Trade Center. 2020. Bhutan. [online] Available at: <https://www.intracen.org/country/bhutan/#:~:text=Country%20Brief&text=The%20country%27s%20trade%20is%20majorly,%2C%20vehicles%2C%20wood%20and%20food.> [Accessed 30 January 2021].

[x] Bhattacharjee, J., 2020. Bangladesh: New boost to maritime connectivity with India | ORF. [online] ORF. Available at: <https://www.orfonline.org/research/bangladesh-new-boost-to-maritime-connectivity-with-india/> [Accessed 28 January 2021].

[xi] Abedin, M., 2019. India’s Seven Sisters: Making a win-win connectivity deal. [online] The Financial Express. Available at: <https://www.thefinancialexpress.com.bd/views/reviews/indias-seven-sisters-making-a-win-win-connectivity-deal-1573654697> [Accessed 30 January 2021].

[xii] Dabas, M., 2017. Here Is All You Should Know About ‘String Of Pearls’, China’s Policy To Encircle India. [online] India Times. Available at: <https://www.indiatimes.com/news/india/here-is-all-you-should-know-about-string-of-pearls-china-s-policy-to-encircle-india-324315.html> [Accessed 30 January 2021].

[xiii] Bhuiyan, H., 2019. Myanmar again shows Saint Martin’s as its territory. [online] Dhaka Tribune. Available at: <https://www.dhakatribune.com/bangladesh/foreign-affairs/2019/02/14/myanmar-again-shows-st-martin-s-as-its-territory> [Accessed 30 January 2021].

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