Ship purchase, trade support to dominate PM Hasina's crucial China visit

Bangladesh is set to sign agreements with China to procure four large ships including two crude oil mother tankers with Chinese loans during Prime Minister Sheikh Hasina's upcoming visit to Beijing.

Experts describe the trip as crucial for the country's regional geopolitics and for maintaining developmental momentum amid economic challenges.

Officials say incorporating these vessels, which also includes two mother bulk carriers for transporting coal, food grains, cement clinkers, and other goods into Bangladesh's existing fleet, will reduce the country's dependency on foreign ships for transporting highly sensitive products such as fuel oil.

During the prime minister's visit, scheduled for 8-11 July, an announcement is expected regarding a trade support package from Beijing in Chinese currency, equivalent to $5 billion, with an interest rate of 1% and a grace period of 20 years.

The Bangladesh Shipping Corporation (BSC) will purchase the ships using financing from trade support at a cost of 1,676.54 million Yuan, which is around Tk2,486 crore.

The government anticipates receiving around $20 billion in funding from China across multiple sectors during the visit, with a significant portion allocated to various development projects.

$2b budget support, CEPA commencement and more

During the Prime Minister's visit, an announcement may be made regarding China providing reserve support or budget support to Bangladesh, as stated by Chinese Ambassador to Dhaka, Yao Wen. Sources indicate that Bangladesh has requested $2 billion in budget support from China.

Additionally, there could be announcements about the official commencement of the Comprehensive Economic Partnership Agreement (CEPA), along with initiatives related to bilateral trade and investment, the construction of a metro rail, development projects in the southern region including Payra Port, and securing Chinese loans for Bangladesh's infrastructure development.

According to sources, around 17 Memorandums of Understanding (MoUs), agreements, or letters of intent may be exchanged across various sectors during the visit.

Additionally, Prime Minister Sheikh Hasina and Chinese President Xi Jinping will officially inaugurate several projects in Bangladesh completed with Chinese funding. These include the 1320 MW coal power plant by S Alam Group and the Single Point Mooring with Double Pipeline project.

The Bangladesh Bank may also sign an MoU with China's National Financial Regulatory Administration to initiate trade in Taka-Yuan.

Mother tankers to transport fuel to single point mooring

Officials from the Bangladesh Shipping Corporation (BSC) said the ships will be purchased with a loan from the Chinese Exim Bank for 20 years with a five-year grace period at an interest rate of 2%. The China National Machinery Import and Export Corporation will supply them.

Each crude oil mother tanker has a capacity of 114,000 deadweight tonnage (DWT), while the mother bulk carriers have a capacity of 81,500 DWT. The construction period for the ships is estimated to be 32-34 months.

A senior BSC official, who wished to remain anonymous, told TBS that all the processes for purchasing these four ships with Chinese financing have been completed. A formal agreement signing or announcement in this regard may occur during the prime minister's visit.

Commodore Mahmudul Malek, managing director of the Bangladesh Shipping Corporation, said the Economic Relations Division (ERD) will sign the agreement on behalf of Bangladesh. The construction of the ships will commence immediately after the contract signing and they are expected to be delivered within two years.

Regarding the crude oil mother tankers, he said the mother tankers will transport oil near the Single Point Mooring with Double Pipeline Project. 

Each crude oil mother tanker will cost Tk780.84 crore. The import cost of each mother bulk carrier is Tk462.31 crore.

According to BSC officials, the ships will transport around 20 lakh tonnes of crude oil and 15.2 lakh tonnes of cargo annually.

The BSC currently does not have such large mother tankers. Officials say the government aims to ensure Bangladesh's fuel supply by transporting crude oil using these new ships.

Previously, the BSC purchased three product oil tankers and three bulk carriers with a loan of Tk1,500 crore from China, which were added to the BSC's fleet in 2018 and 2019.

MoU on infrastructure and construction

Furthermore, an MoU on Deepening Cooperation in Infrastructure and Engineering Construction is scheduled to be signed between Bangladesh's Economic Relations Division and China's Ministry of Commerce during the prime minister's visit.

Additionally, the Economic Relations Division (ERD) may sign a separate MoU with the China International Development Agency to join the China-led Global Development Initiative. The ERD will also sign another MoU with this Chinese organisation regarding the implementation of the 9th Bangladesh-China Friendship Bridge Project in Bangladesh, funded by China.

A joint statement by the two leaders is expected to announce the completion of the joint feasibility study for the Comprehensive Economic Partnership Agreement (CEPA) and the commencement of bilateral negotiations. Negotiations for the China-Bangladesh Bilateral Investment Treaty are also set to begin.

Announcements regarding the implementation of the sewage collection system under the Dasherkandi STP catchment project for Dhaka city, along with projects for water supply, sanitation, drainage, solid waste management, and faecal sludge management in municipalities funded by China, may be made during the visit.

Additionally, it is anticipated that the two leaders may jointly inaugurate the Modernisation of Telecommunication Network for Digital Connectivity project.

"Primarily national interest"

Shahab Enam Khan, professor of international relations at Jahangirnagar University, said the prime minister's visit to China is primarily driven by national interests.

"Essentially, economic considerations outweigh geopolitical issues during this tour," he said.

He, however, added, "Maintaining political balance between the US, China, and Myanmar is also a key aspect of the visit. The Rohingya crisis poses a security threat to the region, prompting Bangladesh to seek China's assistance in resolving this issue."

Shabab Khan further said during the visit, the highest priority is being given to forex stability, deferred payment arrangements, and budgetary support. Natural resource management is also a key focus area.

"The government is particularly seeking China's assistance in managing Bangladesh's internal water resources. This includes not only the Teesta River but also overall inland water management," he explained.

Professor Shahab Enam Khan said, "The government aims for Chinese funding to enhance Bangladesh's infrastructure. This development is not only beneficial for Bangladesh itself but also aims to accelerate infrastructure projects funded by China to improve connectivity with neighbouring countries."

He further said, "Bangladesh anticipates China's cooperation in enhancing digital connectivity. Technology transfer from China and Chinese investments will be crucial during the prime minister's visit. China plays a pivotal role as a development partner coordinating overall development efforts in Bangladesh." 

Source: The Business Standard.