Dancing of global masters in South Asia

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Bangladeshi Prime Minister Sheikh Hasina’s recent trip to China, following close on the heels of her January trip to India, demonstrates Bangladeshi leaders are leveraging the country’s increasingly important geostrategic position vis-à-vis Asia’s two rising powers. India is watching closely and with a certain degree of concern China’s growing interest in establishing links to South Asia, India’s traditional sphere of influence. The U.S., too, must find new ways to partner with Bangladesh – a country with the world’s third largest Muslim population – to encourage democratic trends, steady development of the country’s economy, and efforts to keep Islamist extremists at bay [2].

According to Bangladeshi Foreign Minister Dipu Moni, during Sheikh Hasina’s trip to China, she gained pledges from China [3] to finance further development of the Chittagong sea port as well as rail links from Chittagong through Burma to Yunnan province in China. Though not specifically in the joint statement between the two countries, this move will give Bangladesh the upgrades it needs to increase productivity and capabilities in Chittagong and give China an access route to the Indian Ocean for its goods. The port of Chittagong in Bangladesh, along with ports in Pakistan, Sri Lanka, and Burma, is often cited as a new outlet for China’s strategic and commercial purposes [4], giving it access to the Indian Ocean, a counter to Indian influence, and an alternative to the Malacca Straits route.

Yet, in her trip to India in January, Prime Minister Hasina also agreed to the opening up of the Chittagong port to goods shipped to and from India, Nepal, and Bhutan [5]. In addition, the United States has been active in Chittagong with the USS Patriot, a mine countermeasures ship, finishing a week long part call there on March 19. The USS Patriot is already the third U.S. naval vessel to visit Chittagong this year [6]. Thus, it seems Bangladesh is seeking to leverage its strategically located port to bring in as much business, partnerships, and naval visits as possible to increase the country’s economic and political status.

At a multilateral level, press reports indicate Prime Minister Hasina appealed to China to be more active in its observer role in the South Asian Association for Regional Cooperation (SAARC). In the joint statement [7], Bangladesh “expressed support for Chinese efforts to enhance cooperation with the SAARC community.”

The U.S. must also remain closely engaged in promoting South Asia regional cooperation, serving as an active observer within the SAARC. Asian allies Japan, South Korea, and Australia also have observer status within the SAARC. In coordination with these Asian allies, the U.S. should encourage South Asia countries to continue to lower barriers to trade, increase mechanisms for consolidating democracy, and improve counterterrorism cooperation efforts.

The increased Chinese engagement in South Asia and visits like that of the Bangladeshi PM to Beijing highlight the need for the U.S. to demonstrate the benefits of its own leadership and influence in the region and to collaborate more closely with India on initia­tives that strengthen economic development and democratic trends in the region [8].

Bangladesh's dilemma in choosing between India and China

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As Prime Minister Sheikh Hasina tours China, a debate is brewing in Bangladesh. Who is a greater friend? India or China? The answers vary.While Hasina is seeking regional connectivity involving Bangladesh, India, China and Myanmar, many Bangladeshis think differently.

“The key to Bangladesh’s global vision is connectivity. This means opening up Bangladesh to India and China, and frankly anyone else who wants,” The Daily Star newspaper said Friday.

That being the case, senior journalist Zafar Sobhan deprecated attempts to draw China in but keep India out. “There is a profoundly foolish school of thought among certain circles in Bangladesh that suggests that Bangladesh should seek to play China off against India and looks to China to provide a counter-weight to what they see as the regional hegemon.

“This kind of thinking, which governments in the past have dabbled in with notable lack of success, is the worst kind of amateurish realpolitik that would only antagonise both neighbours,” said Sobhan.

Leaders of the main opposition Bangladesh Nationalist Party (BNP) have advocated using China as a counterweight to India.

Haider Akbar Rono, leader of the Communist Party of Bangladesh (CPB), has called for Dhaka-Beijing proximity to “counter imperialist attacks” from India that he sees is in stratetic alliance with the US.

Lt Gen (retired) M. Mahbubur Rahman, a former Bangladesh Army chief, laments the “tyranny of geography” under which Bangladesh is surrounded by India.

“Although Dhaka’s relation with New Delhi is friendly, India’s military intervention may not be all together discounted in the event of any development in Bangladesh that might be considered prejudicial to the regional giant’s perceived security threat,” he wrote in the New Age.

“Against the backdrop of perceived threat from India, Bangladesh pursues a defence policy of no aggression but defending every inch of her land. To strengthen its position, Bangladesh can seek help from China,” he wrote.

Retired diplomat Mohammed Amjad Hossain wrote in New Age: “Although Bangladesh considers developing relations with China from political and economic point of views, India sees it from a different perspective.”

Bangladesh-Oregon partnership

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If you're looking for the center of gravity in America's relationship with the populous nation of Bangladesh this week, it's right in the middle of Portland, where some 120 people are attending a working summit that marks the public kickoff of the state partnership program between Oregon and Bangladesh.

At first blush, this may sound like a headscratcher, but it's a handy illustration of the utility of the National Guard Bureau's state partnership program, which pairs state militias like Oregon's with their counterparts in other countries with whom the United States enjoys cooperative relationships. Bangladesh and Oregon, via the Oregon National Guard, have been sending small delegations back and forth over the last year or so, and this week, the two sides are coming together in a big way.

The ambassadors of each nation, Akramul Qader and James Moriarty, each spoke at this morning's session, the first full working day of a three-day workshop. They each spoke of Bangladesh's rapid progress as a democracy, and each cited the continuing challenges the nation faces, from poverty to its proximity to places where terrorists operate. The partnership program is furthest along in forging cooperative military relationships between the Oregon National Guard and the Bangladeshi Army, giving a distinctly military cast to today's proceedings, which were well-attended by blue-uniformed members of the Oregon Air National Guard, their Army counterparts in green, and the visiting Bangladeshis in khaki-colored dress uniforms.

Today's presenters included Maj. Gen. Fred Rees, Oregon's Adjutant General, Gen. Bruce Prunk, commander of the Oregon Air National Guard, Maj. Gen. Peter Pawling, who's acting chief of staff of the United States Pacific Command, and Maj. Gen. Abdul Wadud, Bangladesh's Principal Staff Officer for the Armed Forces.One area that is further along than the others relates to port security, partly because the Port of Portland's chief of security, Mark Crosby, is a lieutenant colonel in the Oregon Air National Guard. He and his Bangladeshi counterparts have conducted talks about best security practices, a point of particular interest to such U.S. agencies as the FAA and TSA, which have sought to push the security screening envelope outside the homeland, to airports such as Amsterdam, London and, yes, Dhaka, Bangladesh.

Bangladesh is in the middle of an expansion of its domestic and international air carrier capacity, so the timing for this initiative is good, Prunk pointed out.Here's a Bangladesh fact that I'll bet you didn't know: The country is a leader in providing troops to U.N. peacekeeping missions. Ambassador Qader said the country has provided more than 10,500 peackeepers and more than 2,100 police to the United Nations through the years. (Some 88 Bangladeshi peacekeepers have been killed in the course of this work.)

The workshop continues at the Nines Hotel for two more days. If you're watching the Blazers on TV tonight, you may see a contingent of American guys with short haircuts, accompanied by a group of southern Asians. That's the face of the Oregon-Bangladesh partnership program.

Bangladesh economy: Growth challenge

FROM March 2 ISSUE OF VIEWSWIRE OF THE ECONOMIST INTELLIGENCE UNIT
Bangladesh is in the fortunate position of having been far less exposed to the global recession than many other economies, but mild signs of weakness are emerging. Indeed, whereas a number of the Asian economies that contracted sharply during the past year can now expect to post robust recoveries in 2010—albeit from a low base—economic growth in Bangladesh in the coming fiscal year (which starts in July) will do no better than remain at roughly the same level as in 2008/09. Still, at close to 6%, the country's growth rate will remain healthy.

Unlike many economies in Asia, that of Bangladesh has shown remarkable resilience in the past year. Part of the reason is the fact that the export sector accounts for a fairly small proportion of GDP. In 2008/09 (July-June) exports of goods and services accounted for 20% of GDP, compared with more than 200% in Singapore and around 100% in Malaysia, meaning that Bangladesh has been less affected by the downturn in the global demand. Indeed, in real terms exports of goods and services surged by 12.2% in 2008/09, and the Economist Intelligence Unit expects them to grow by a still-respectable 5.6% in 2009/10.

In addition, inflows of workers' remittances have remained strong—although part of this strength is attributable to the repatriation of savings by skilled workers who have returned to Bangladesh after losing their jobs abroad, as well as to fresh remittances from Bangladeshis living overseas, who, prompted by fears of a collapse in the financial systems of their host countries, have sent savings back to Bangladesh. The agricultural sector has also played a part in the economy's relatively strong performance in the past year or so, reporting healthy rises in food production, and particularly in output of rice, the country's main staple.

However, the latest economic indicators also point to signs of weakness. The value of merchandise exports was down by 7.7% year on year to US$1.2bn in November 2009. On a cumulative basis, the value of exports declined by 6.9% year on year in the first five months of 2009/10. A breakdown of various export categories shows falls in the value of exports of frozen food, ceramic products and tea. But the decline in overall merchandise exports is largely attributable to a drop in the value of shipments of readymade garments, which account for more than 70% of total exports.

In the first five months of 2009/10 exports of knitwear fell by 5.7% year on year, while exports of woven garments declined by 7.9%. Exports also followed a downward trend in volume terms in the five-month period. But comments from members of the Bangladesh Garment Manufacturers and Exporters Association hint at a brightening outlook for the garment sector, with many members reporting a rise in orders in recent weeks.

The value of merchandise imports has also been falling, although this largely reflects lower global prices for energy and industrial raw materials compared with the highs of 2008. More worryingly, Bangladesh continues to import fewer items of capital machinery compared with the year-earlier period—a likely indication of weak business sentiment. Like exports, there are tentative signs of a rise in total imports in the months ahead.

The government expects imports of wheat to rise to 400,000 tonnes in April-May, as a result of an increase in consumption and stagnant local production. It also plans to import 300,000 tonnes of rice in 2009/10 to boost food stocks.

Outlook
We forecast that real GDP growth in Bangladesh will average 5.8% a year in 2009/10 and 2010/11 (the "forecast period"), underpinned by a steady expansion in private consumption and investment. The main determinants of private consumption will be the performance of the agricultural sector and remittances from the Bangladeshi diaspora and those working overseas. Although the agricultural sector accounts for only 20% of overall GDP at factor cost, it is still the country's largest employer and is the main source of income for around one-half of the working population. We expect the agricultural sector to grow by an average of 4% in the forecast period, a slightly slower rate compared with 2008/09, when bumper rice harvests resulted in a rise of 4.6%.

Inflows of workers' remittances will remain another source of growth in private consumption. Such inflows have been healthy in recent months, though the pace of growth in remittances will moderate in 2010 as the rate at which Bangladeshis take up positions abroad will remain relatively subdued. We expect private consumption to expand by an annual average of 5.6% in the forecast period, contributing an average of 3.7 percentage points a year to GDP growth.

We think gross fixed investment will add an average of 1.7 percentage points to the annual GDP growth rate in the forecast period. This component is dominated by the private sector, which accounts for 80% of gross investment. Private investment will be bolstered by improving business sentiment and government efforts to attract greater foreign direct investment from India and from members of the Bangladeshi diaspora residing in OECD countries.