Sino-India rivalry for port dominance in Bangladesh
Sino-India rivalry for port dominance in Bangladesh
WRITTEN BY MAE CHOW AND SHAKTHI DE SILVA
24 April 2024
As Bangladesh stands on the brink of graduating from its status as a least developed country, it is actively seeking to bolster strategic partnerships to realise its ambition of transitioning into a developed economy. In this pursuit, the country is prioritising the development of port infrastructure to strengthen its socio-economic and political position and has so far welcomed financial assistance from both Beijing and New Delhi. As competition between China and India intensifies, Dhaka must be cautious in how it engages with both parties and implement port infrastructure projects which do not jeopardise its agency and autonomy.
Situated at the crossroads of South and Southeast Asia, Bangladesh is a potential hub for intra-regional trade in the Indo-Pacific. It joined the Chinese Belt and Road Initiative (BRI) in 2016 hoping to deepen economic integration with the region and, concomitantly, tap into China’s deep pockets. Port infrastructure could complement this objective while also granting Beijing greater opportunities to extend its maritime presence and project power into South Asia. This would also complement existing efforts at furthering connectivity through the Bangladesh-China-Myanmar Economic Corridor (BCM-EC) and BRI. Given its easy access to India’s northeastern states, New Delhi has also invested heavily in Bangladesh’s port infrastructure, particularly the Mongla Port. Since port infrastructure provides China and India with a valuable foothold in the Bay of Bengal, examining their investments in Bangladeshi ports illustrates their unfolding rivalry for influence not only in Bangladesh but also in the Indo-Pacific more broadly.
China’s maritime ambitions
China has sought to bolster its presence in the Bay of Bengal despite South Asia being regarded as part of India’s strategic backyard and the latter’s more recent Neighbourhood First Policy. As part of its Maritime Silk Road, China has contributed to the construction and operation of several ports in South Asia, including Myanmar (Kyaukpyu), Sri Lanka (Hambantota Port), and Bangladesh (Chittagong).
Ultimately, Bangladesh's ability to maintain constructive engagements with China and India will not only shape its own future trajectory but also contribute significantly to the stability and prosperity of the broader Indo-Pacific region.
In 2018, China overtook the US as the largest foreign direct investor in Bangladesh, and China Harbour Engineering Company started developing a 750-acre industrial park in Chittagong, an important port city. China will hold a 70 per cent share of the industrial park in exchange for its investment of approximately USD 10 billion. Sheikh Hasina’s government had also sought Chinese investment to develop the Sonadia Deep-Sea Port Project. While this USD 14 billion project has since been dropped due to environmental concerns, these agreements around strategic assets in the Bay of Bengal indicate a high level of bilateral engagement between Beijing and Dhaka, and thereby China’s growing influence in India’s immediate backyard. More recently, a Chinese-built single-point mooring system has become an integral part of Bangladesh’s first sea-land integrated super-large oil storage and transportation system at the Chittagong Port, showing an increasing Chinese footprint in Bangladesh’s largest port.
Under a BRI project in 2016, the China Harbour Engineering Company (CHEC) and China State Engineering and Construction Company (CSCEC), were able to edge India to secure a USD 510 million joint enhancement project at Payra Deep Seaport, the third largest port in Bangladesh. As part of the agreement, the Chinese were involved in a joint venture with Bangladesh to construct a 1320 MW coal-fired power plant near the banks of the Bay of Bengal. While the construction of the port was delayed by brawls when a Chinese worker was killed, power generation has continued and the two sides are working towards keeping the port’s infrastructure operational.
China's determined involvement and robust investment in Bangladesh's port infrastructure development, despite encountering challenges, underscore its broader strategic objectives in India’s backyard. The growing Chinese footprint in Bangladesh also indicates Beijing’s determination to advance its strategic interest in building critical infrastructure in Indian Ocean littoral nations, particularly those overlooking the Bay of Bengal.
India’s interests in Bangladesh
The Bay of Bengal is a critical area for India’s defence interests. As China continues to push its way into the Indian Ocean, there is pressure on India to secure its maritime interests. Facing escalating tensions and deteriorating relations with China, as well as China’s attempts to establish a “String Of Pearls” to encircle and undermine India’s dominance and influence in South Asia, India has a vested interest in securing close relations with its neighbours.
India’s Neighbourhood First Policy has been a central aspect of Prime Minister Narendra Modi’s foreign policy. In 2022, India officially extended 37 Lines of Credit (worth USD 14.2 billion) to support 162 infrastructure development projects in Bangladesh, Maldives, Myanmar, Nepal, and Sri Lanka. These Lines of Credit — which enable governments to use Indian credit to finance infrastructure and connectivity projects — demonstrate India’s commitment to its Neighbourhood First policy as well as its reaction to China’s growing footprint in the region. Bangladesh has received the largest concessional credit from India to a single country (USD 7.362 billion).
Bangladesh is home to over 350 Indian companies, making it a critical economic partner. Overseeing vital sea lines of communications and a crucial entry point to India’s landlocked northeast territory, Bangladesh’s Mongla Port could emerge as a key spot for Sino-Indian rivalry. After nine years of continued negotiations and grant assistance, Modi and Hasina launched three India-assisted development projects in November 2023. These include a dedicated project to develop the Khulna-Mongla Port Rail Line that will boost connectivity to the Mongla Port and reduce dependency on the Chittagong port. This renewed line of credit builds on a previously allocated USD 600 million by the Eigs India Consulting Engineers to the Mongla Port Authority.
However, the Mongla Port is also of vital interest to China as a way of increasing energy security by providing an alternative route to maritime transport, reducing Beijing’s dependence on the Malacca straits. Accordingly, China has also invested in expanding and modernising Mongla’s facilities as part of an umbrella deal to fund 27 development projects in the country.
Furthermore, the Bangladesh Export Processing Zone Authority (BEPZA) announced that the Chinese company Yun Sheng BD would establish a composite (textile, garments, and accessories) industry in the Mongla Export Processing Zone. China is also working on additional projects to develop the Mongla Port, including setting up an electrical and battery plant, which will integrate Bangladesh into regional electric vehicle manufacturing supply chains.
Bangladesh’s strategic autonomy at risk
On the face of it, competition by both Asian great powers to finance infrastructure appears to be a net benefit to Bangladesh. The latter’s ability to play off each party and get the best deal is naturally in Dhaka’s national interests. Even so, if competition between the two grows to the point where both vie for strategic assets, undercut one another, apply political pressure on Dhaka to choose one or the other, or actively lead to diplomatic disputes, this would hinder efforts by Bangladesh to maximise expected gains. Furthermore, as both parties actively compete to provide more attractive repayment conditions for loans and financial assistance, there are also concerns that projects would be initiated without adequate attention to the environment and livelihoods of the communities living close to these projects.
This situation requires a delicate balancing act and the onus lies on Bangladesh’s government to effectively manage pressures from both sides while maximising economic growth and development opportunities. Balancing the benefits of pursuing strategic partnerships with China and India simultaneously, particularly ensuring their continued interest in funding port infrastructure in Bangladesh, while safeguarding Bangladesh’s sovereignty and national interests, requires astute diplomacy and careful decision-making.
While competition can sometimes spur innovation and drive progress, it is essential to ensure that it occurs within a framework of mutually beneficial cooperation, transparency, and respect for sovereignty. Bangladesh must focus on the sustainability of infrastructure projects, their economic and societal impact, as well as leverage its position as a critical player in regional dynamics to extract maximum gains from these partnerships while ensuring that its developmental aspirations remain unhindered by external pressures. Ultimately, Bangladesh's ability to maintain constructive engagements with China and India will not only shape its own future trajectory but also contribute significantly to the stability and prosperity of the broader Indo-Pacific region.
DISCLAIMER: All views expressed are those of the writer and do not necessarily represent that of the 9DASHLINE.com platform.
Author biographies
Mae Chow is a Researcher attached to the Centre on Asia and Globalisation (CAG) at the Lee Kuan Yew School of Public Policy, National University of Singapore.
Shakthi De Silva is a Non-Resident Vasey Fellow at Pacific Forum International (USA) and a Visiting Lecturer at the Royal Institute of Colombo, Sri Lanka. Image credit: Flickr/Adam Jones.