Whenever the Indian media begins to write about the immediate development of Bangladesh, my first impulse is to consult the monetary diaries to see if there have been new agreements or treaties. And that never fails: there is rarely a genuine basis for the rumor.
For example, a few months ago, when Indian newspapers began talking about Bangladesh’s history, it turned out to be just an exaggeration about an Indian company negotiating with a French company about the structure of a new refinery in Bangladesh.
So at the end of July, when the Indian media began talking about the collapse of relations between India and Bangladesh, I was curious to know what typhoon had been brewing in the tea cup. It turned out that the Indian corporate structure Larsen and Turbo had lost an offer for the Beijing Urban Construction Group for the renovation of Sylhet Airport.
Many security experts will tell you that the Bangladeshi government is angry with the structure of the Ram Temple in Ayodhya at the site of the demolished Babri Mosque or with India’s plan to identify a national citizen sign. The fact is, Sheikh Hasina’s government is not too involved in these problems. Its main objective is to force India to keep this deeply unpopular regime in power.
So what led Indian newspapers to say that Sheikh Hasina did not meet with the High Commissioner of India at Dhaka Riva Ganguli Das for 4 months despite repeated requests?
Interestingly, Indian newspapers have published this obvious sign of the deterioration of relations between India and Bangladesh, and have mentioned the editor of a pro-government Bengali newspaper, Shyamol Dotto. In fact, Shamol Dotto’s original article cited Indian newspapers as the number one source of this news.
In Microsoft Excel jargon, this is called a circular reference. An Indian newspaper quotes a Bangladeshi editor saying Hasina did not meet with an Indian envoy for four months. Turns out the Bangladeshi editor quoted a source from an Indian newspaper. Each time Microsoft Excel detects a circular reference, an error message appears. But in the case of Bangladesh and India, a multitude of security analysts who want to remain applicable make many circular references.
This has caused a stir from Jingo media and nationalist fanatics on all sides. A telephone verbal exchange between Hasina and Imran Khan of Pakistan at this time did not help. Later, it turned out that the Prime Minister of Bangladesh had not met with any foreigners in those few months due to the spread of Covid-19.
But have relations between India and Bangladesh cooled?
The Awami League has deep ties to India. It is a symbiotic appointment that cannot be made without either party. The challenge lies in managing expectations.
Before Bangladesh’s last national elections in 2018, after its stopover in India, Sheikh Hasina said bluntly: “We are not asking for returns. What we have given India will do for the rest of their lives.”
The problem is that Indian diplomats do not seem to feel the same way. The aggressive, unilateral deals of recent years show that India believes it brought the undemocratic government of Sheikh Hasina to power despite the will of the people. In return, it expects Sheikh Hasina to put India’s interests in Bangladesh first. India has no favours to return to Bangladesh. But as long as Sheikh Hasina is in power, she must always return that favour.
Sheikh Hasina has so far embraced those wishes. However, the state of Bangladesh’s finances is a problem. The government spends twice its income. Its one-year bank formula borrowing exceeds the accumulated loans of the last 49 years.
In the midst of this debauchery, control reassures the army, the police and the bureaucracy. Over the past decade, public servants’ salaries increased by 300%, despite a significant deterioration in the quality of services. According to a 2019 index by the Economic Intelligence Unit, Dhaka is the world’s top uninhabitable city after war-torn Damascus and Lagos in Nigeria. Bangladeshi government workers now charge more than Russia’s. They pay this favor by showing their loyalty to a government that is in effect through a transparent fraudulent election.
However, despite the repeated imposition of exorbitant indirect taxes on the population, the government has not been raising its income. Now, due to the Covid-19 pandemic, government revenues continue to decline.
The government wants cash, a lot of cash. And a significant source of government profits comes from VAT, taxes, and import tasks for primary project appliances. Many other industries, adding banks, insurance companies, electricity, energy, cement and steel, generate direct and oblique gains for the government around these projects. As a result, the government realizes that more new projects are needed to alleviate the deficit and revive the formal and casual industry.
While many security analysts would say that large Chinese investment projects are being carried out in Bangladesh and that Dhaka may fall into the Chinese debt trap, the opposite is true.
In 2016, the scale of Chinese President Xi Jinping in the country, 27 memorandums of understanding worth $24.45 billion were signed. International publications claim that China was making a strong investment in Bangladesh due to its Belt and Road initiative to counter Indian influence. In fact, as of June 2020, only seven projects worth $5.4 billion and only $1.54 billion dispensed in 4 years had been signed. To put this in perspective, the Bangladeshi government will pay its workers $8 billion a year.
Although Indian media claim that 28% of the country’s progress budget – $10 billion – goes to Bangladesh, the truth is that during the last decade of Sheikh Hasina’s government, Dhaka signed 3 lines of advertising credits with New Delhi worth $7.36 billion. Of this amount, $604 million comes from the first line of loans worth $862 million and $8.42 million from the line at the moment with a value of $2 billion. Not a penny has been released from the third, valued at $4.5 billion. The prestige of a fourth line of loans in the $500 million defense sector is also unclear.
This low budget outflow from India and China, along with a large deficit and declining revenue, has left the government in need of a number of primary projects to balance its budget.
After the global currency crisis of 2008, US bond yields fell and world capital flowed to emerging countries. As a result, Bangladesh has gained gigantic amounts of capital from monetary establishments over the years. Moreover, thanks to sacrifices made by other Bangladeshi people over the more than three decades, Bangladesh’s external debt has been minimized. Your credit score is higher than that of many of your peers in emerging countries.
But because of the coronavirus, the world capital is now seeking refuge in the Western Hemisphere. And everyone knows that Bangladesh’s official monetary knowledge is heavily manipulated and unreliable. Thanks to Covid-19, the world’s top countries are also on the brink of a currency crisis.
There is only one country that is interested in Bangladesh and can also finance an allocation of this magnitude. It is therefore not unexpected that during the closing months, the Bangladeshi government sent a letter to China requesting 26 allocations worth more than $16 billion, nine of which are new.
In the current circumstances, this is a huge amount of money. No country in the world would invest $16 billion in a country like Bangladesh unless there were strategic reasons. As a result, the Bangladeshi government would possibly have indicated to China that it is in a position to dance in the Chinese air.
Interestingly, the wish list sent to China also includes an allocation of $853.05 million for the built-in control and rehabilitation of the Teesta River. The appearance of this assignment on the list would possibly have shaken the confidence of the Indian security apparatus in Sheikh Hasina. However, this assignment is not new. The Bangladesh Water Development Board signed a Memorandum of Understanding with China Power in 2016 to conduct technical studies on Teesta. This irrigation allocation has no date of protection for India.
But the Indian security status quo’s shocking reaction to a downstream allocation designed for Bangladeshi farmers only shows how Bangladesh’s dignity as a country has been lost to India.
As many others have assumed, the scale of Indian Foreign Secretary Harsha Verdhan Sringla in Dhaka last week was intended to redress those disagreements. But, its scale in was interpreted through other people. Some high-puted hounds in Bangladesh claimed that Sringla’s scale in had not damaged the ice, as claimed by the Indian media rather than treating it coldly.
This type of hypothesis has contributed to the doubt that Bangladesh is making a basic policy replacement from India to China, which has a stir in the media.
In truth, the Awami League government would be very dissatisfied with that. Hasina’s government can see 3 benefits of this media frenzy.
1. If this hype is helping to convince China to distribute more money, that’s a smart thing to do.
2. With this sudden strengthening of the backbone opposed to Indian influence, the government can show other Bangladeshi people that they have more equitable relationships than they are willing to characterize them.
3. These movements can simply inspire India to drive projects. And Indian Foreign Minister Harsh Vardhan Shringla, on his last visit to Dhaka, pledged to do just the same thing.
But what can happen?
There are 3 possibilities.
1. Beijing is well aware that Hasina’s government wants cash to help itself. They will be willing to open their coffers a little, but they will know very well that the regime will observe Indian interests when necessary. This loyalty is more than strategic.
China is unlikely to realize the cunning of the Bangladeshi government after the 2013 election. After an imperfect election that was rejected by all primary powers except India, Bangladesh encouraged China to give it foreign legitimacy by providing Beijing with the matarbari seaport. However, after paintings from foreign networks slowly accepted the truth of Bangladesh’s unelected government, once all the initial paintings were completed, the government resigned from the contract during the final phase, increasing higher interest costs. You don’t have to be a diplomatic genius to know that this is because of the pressure.
Beijing’s reaction to Dhaka is likely to be high in these experiences.
2. At home, the ruling party’s media propaganda device will be very motivated to show how willing Hasina is to show India the door to Bangladesh’s interests. But aside from the party faithful, even four-year-olds are unlikely to be convinced.
3. In the Indian scene, the Indian media and the public will loudly denounce Chinese interference in the country in which they are located. But over time, the Awami League deserves to be able to convince experienced diplomats in the southern bloc of the desire for the party to carry out primary projects to help its regime. It deserves to be able to demonstrate that its relations with China are purely financial, as India has only limited capacity to fill a bottomless abyss in the form of an annual budget deficit in Bangladesh.
As such, in the medium term, fortunately they can allow Hasina to act as if he had replaced the direction towards China if this position brings much-needed investment. However, in return, he will have to abandon all sensitive projects to India.
Since these data are symmetrical and all parties are aware of this reality, the prestige quo in relations between Bangladesh, India and China is changing.
Zia Hassan is a political and economic analyst founded in Europe. He publishes in local and foreign media.