A GREAT GAME ACROSS PROSAIC BAY OF BENGAL
– IMTIAZ A HUSSAIN –
The Brahmatputra-Gangetic delta is not the Central Asia of the 19th Century, when rivalry between Great Britain and Tsarist Russia prompted Halford John Mackinder’s Heartland thesis: that whichever country controlled East Europe controlled the Eurasian “heartland”, the “world islands” of Europe, Asia, and Africa, and the Americas and Australian “outlying island”. More popularly known as “the great game,” the rivalry faded under 20th Century developments, which also disembowelled Mackinder’s geo-strategic view. Yet, does the 21st Century posit a milder “great game” across the far more prosaic Bay of Bengal?, writes Imtiaz A Hussain, Professor of International Relations, formerly in Universidad Iberoamerica, Mexico City on the theme infrastructure-building and diplomacy.
He observes, Bangladesh does not have any serious rivalry with any contending global powers. Yet, since many have been eyeing the Bay of Bengal/Indian Ocean, Bangladesh’s opportunity to reap non-military harvests should not be lost. Our most significant post-1971 goal of infrastructural development should lead us to squeeze every Bay concession to a contending power for extra infrastructural mileage. How Bangladesh can successfully punch above its global weight is reduced to its infrastructural wherewithal, and thereby a foreign trade-off between the economic/technological cookies we seek from partners jostling with economic, military, social, or environmental agendas. How we navigate this web might not ultimately differ from how the motley Afghani groups prevented regional and European powers from prevailing in that “great game”.
Whereas this observation lays the playground and players, we will notice that many of the country’s infrastructural needs lie at the interstices of dormant or emergent rivalries: China-Japan and China-India among the dormant, China-United States, India-Japan-the United States, and China-Russia-Pakistan axes in the emergent, energizing all sorts of spoilers in-between, such as Myanmar, Sri Lanka, and, if we take one false step, ourselves too. Littered with the spoiler, challenger, and leadership opportunities we face a full-time job ahead.
Given our meagre material and physical resources, our “great game” seeks no more than reputation enhancement: from a low middle-income entrant to a low high-income aspirant, with appropriate non-readymade garment (RMG) capabilities reflecting evaporating poverty. To rank among the top-25 in economic size is our due given our 200+ mid-21st Century population, but the climb from the 1971 “basket-case” starting-point, through the RMG revolution, only got us into the mid-30 ranking. How do we reach our target from where we are, might depend on who we play with, how we play them amid their rivalries, and what may keep us attractive enough over what will be a long-haul.
China is a current partner but not keen on building a blood-brother relationship; India must reluctantly build that blood-brother relationship now; Japan seeks a serious relationship somewhere between mere partnership and blood-brotherhood, while the United States, much like China, but for different reasons, needs to play the partnership card to stretch future mileage in whatever directions; both the European Union (EU) and western multilateral organizations also want to go beyond partnership, more through universal/multilateral principles, norms, behaviours, and values than self-promoting interests; and multinational corporations, swinging as they do between one-night stands and long-term commitments, sway commensurately with how open the national cookie-jar.
These classifications have been approximated from a number of recent developments and dynamics, much of which will be further spelled out in succeeding observation. In China’s global game, for instance, we may be but a cog, but located too close to an emergent Chinese threat, India, for China to ignore. Though China is going out of its way to engage India economically, even their economic growth-rates predict future contestation. China cannot challenge India in the Brahmaputra-Ganges delta without adequate local footings (Pakistan alone is not sufficient). China is our partner over the Padma Bridge, Karnaphuli Tunnel, and telecommunications, but the Sonadia port stalemate paradoxically preserves a necessary power-balance.
Given its own desire to integrate the north-east with the mainland, India embarked upon highway projects with Southeast Asia, to both thwart China’s regional policies and keep up with Japan. Courting Bangladesh through the Land Border Agreement, for example, was but a small price to pay for huge future returns from Southeast Asia if those highways can be weaved through Bangladesh into Kolkata and the Indian heartland. Against China’s cordial Myanmar relations, which could easily provide China its much-cherished Indian Ocean window, India would be understandably irritated in a very unstable part of its union. We kept the playing-field even by allocating the Padma Bridge to China (since it also helped us swallow the pungent World Bank medicine), while renewing transport infrastructures (trucks, buses, automobiles), and concluding a string of coal-energy project with India.
Japan rekindled some ugly memories by becoming one of China’s largest trading partner and investment source. On the brink of a demographic catastrophe, Japan’s future safeguards against an awakened dragon prompted Shinto Abe’s aggressive “Broader Asia” approach. His Dhaka visit, Matarbari deals on soft terms, and any other bilateral projects would fall within the ring-around-China range that “Broader Asia” seeks. Yet, since Japan contentiously changed its constitution to facilitate overseas militarily actions, if needed, and finding in the process, the United States directly hopping on board with India biding time, we need to draw the line somewhere before the economic turns militaristic.
That takes us to the United States, the largest market in human history and the source of much of our own fortunes (export income, remittances, and, as evident in New York during September 2015, a growing inter-governmental link with where the United Nations, which desperately seeks leaders, like Bangladesh on multiple non-military fronts). Here, we confront a mysterious obstacle in power rivalry: the separation of governmental powers, obscuring many of the reasons why other countries either hate or love the United States. Our “hate” components stem from the GSP (generalized system of [trade] preferences) denial and reluctant U.S. acceptance of the 2013 election, while the several “love” counterparts (especially various principles) constantly struggle to find anchor. Engaging not just the chief executive but also legislators, as well as social and business groups, must be the multi-pronged U.S. entry-ticket, which our prime minister lavishly tapped during her September 2015 New York visit.
We will face more contentious issues with the United States, but the essence of blood-pressure management amid hard-talk keeps the door open, at least if the European Union case is any indicator. We have no choice with the EU, where 60% of our 2014-5 RMG export earnings emanated, but to get down to brass-tacks. Fortunately thus far, the cans of worms being opened here, like environmental protection, educational extensions, and transparency awareness, among others, fall into our areas of strength or need.
Infrastructural diplomacy involves corporations in reflecting our relations with them, leaving for the next two to collect, collate, and convey our constraints and possibilities, respectively. Bangladesh’s rise as a global player arguably depends on this Bay rivalry and infrastructural development trade-off. We should not be worried if this “great game” is quashed the way Mackinder’s was, since any glow as a global player would be outshone by the enabling condition of the country moving towards its more cherished goals of a high-income, mid-century developed country. Whether we get there or not depends directly upon our button-pushing skills right now.
Bangladesh cannot live with India and without it
Only two countries in the world have audaciously built a wall against an entire neighbour, then seduced, somewhat successfully, the walled people. Just as the United States and Mexico share a paradoxical history, so too India and Bangladesh: without India in 1971, frankly, our independence would have been too difficult to achieve; and again, without a democrat India accepting the results of the 2013 elections, we would hardly be dabbling in the super league of global competition today. Yet, almost everything else in between shows first-love disintegrating completely into mutual mistrust and acrimony, only for a second-love to emerge under Narendra Modi’s hawkish administration after Bangladesh’s best friend, the Congress Party, was decimated in 2014.
Not by chance, opportunities for Jawaharlal Nehru’s “tryst with destiny” resurfaced more brilliantly in the 1990s amid Manmohan Singh’s breathtaking reforms than during Nehru’s life. One seed sown in 1997 spoke volumes of Bangladesh’s future trajectory: the Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation (BIMSTEC), initiated to strengthen partnerships with such neighbours as Bangladesh, Bhutan, Myanmar, and Nepal, inducting Sri Lanka and Thailand when India’s “Look East” policy approach took on the more assertive “Act East” label. Central to this economic and technological free-trade area proposal was to avoid Pakistan, which had reduced the South Asian Association of Regional Cooperation (SAARC) into a farcical congregation. Critical to its future has been Modi appointing India’s Ambassador to Thailand, Harsh Vardhan Shringla, to Bangladesh when Ambassador Pankaj Saran’s term ends in December 2015.
Timing matters in diplomacy. India’s “Act East” approach mirrored Thailand’s “Look West” approach, and synchronized Bangladesh’s “Look East” orientation. When the four-lane Mekong-India Corridor (or Trilateral Highway), linking India’s north-east provinces with Southeast Asia, opens in 2016, Bangladesh could remain a bystander or an active participant depending on any feeder highway connecting Kolkata through Bangladesh, ironically over the Chinese-built Padma Bridge.
Promoting that goal has been an energy-based Bangladesh-India integration. Based on coal, amid intense environmentally-driven local opposition, Bangladesh and India agreed in 2015 to begin constructing the 1,320 MW Maitree Super Thermal Power Project in Rampal, Bagerhat, near the environmentally sensitive Sunderban Ecological Forest, by which India would export 500 MW of electricity through Bheramara in Bangladesh. Bangladesh imports 5,000 MW of Indian electricity against the 7,000 MW it needs today. When this demand will explode to 40,000 MW by 2030, without Indian support (through National Thermal Power Corporation in the public sector, or the likes of Adani Power from the private sector), our growth would be strangulated.
Behind controversial initiatives like these, Bangladesh’s energy infrastructure is building its own solar sources, but also diversifying partners. How Hasina and Modi tackle citizen concerns, as well French, German, and Norwegian bond-holders retracting from Rampal-type engagements, may be dwarfed by India’s “Act Asia” promises. Facing Chinese and Indian highways, on the one hand, as well as Indian and Japanese coal-energy investments, on the other, Bangladesh’s best policy option would be to stick with its proven areas of comparative advantage (environmental protection) and concurrent priority (infrastructural development), without meddling with Southeast Asian or the Bay of Bengal rivalries. Playing one side off against another to coax more environmentally-friendly outcomes would serve us well, if we can supply the finely-tuned diplomacy needed.
Tactical changes could also be probed elsewhere, using quid pro quo diplomacy. Compensatory exchanges could range from eliminating Indian barriers on jute exports, managing the cattle flow given the Indian marketing ban, controlling the gold/currency trade, opening readymade garment (RMG) outlets within India through federal-provincial arrangements within India, and resolving the thorny river water-flows, particularly of the Teesta. Our interest are not unknown, but with the end-game approaching, firmness in posturing, flexibility in instruments, and an option-shopping appearance should amply convey that we are in business for business too: hard ball-playing has a way of delivering that amity-suffusing camaraderie cannot match, a language Modi understands all too well.
Down the road, the more TATA trucks inundate our highways (and paves the way for Indian automobiles, petrol-stations, border-outposts, and all other related paraphernalia, to monopolize our transportation structure), the greater our balancing imperative. Japan should be encouraged to go beyond building Dhaka’s rapid transportation system, and both the Matarbari power-plant and port, into newer projects, just as China should also be induced to take that Sonadia/Payra dip into the Bay of Bengal for the sea-port: we have no sea-ports, and Japan’s Matarbari will not be enough for our needs now, let alone later.
Further complicating this ambivalent atmosphere, where nationalistic preferences toss and turn with regional aspirations, was the South Asian Economic Conclave, springing from initiatives to connect Bangladesh, Bhutan, India, and Nepal (BBIN, an abbreviated “South Asia” vision being dovetailed in New Delhi), during September 2015.
Actively supported by the World Bank, whose South Asian Vice President, Annette Dixon, sees Bangladesh being “uniquely positioned to take advantage of its location . . . [and as] a centre point of different initiatives . . . [connecting BBIN] . . . with the Asian and other East Asian countries.” Since infrastructure development is at the heart of this “sub-regional connectivity,” it is to our advantage to remain engaged. Yet, the simultaneous sanctions against BBIN member, Nepal (for changing to a secular constitution), not to mention unresolved trade choke-points with Bangladesh, alert us from plunging too deep, especially when India’s key South Asian partner remains none other than Bangladesh in a South Asia where Pakistan and Sri Lanka seem unsettled with the status quo.
Most importantly, our future in this bilateral relationship should be less Bhutan-like and far more than Sri Lanka-like. Crucial to us punching above our weight is to do it with India, and with Indian acknowledgement and applause. Without India, it will be onerous, but how relational deficits like this can be calibrated warrants that we examine Japan next, before turning to China.
Japan, the ‘Asian NATO’, in the Bay
Bangladesh and Japan have enjoyed better than cordial relations from the very start: when China and the United States took the side of Pakistan during our war of independence, Japan avoided the fray, permitting relations to flower after 1971. From that angle, Shinzo Abe’s September 2014 visit was as much a logical step as it was a concerted drive to upgrade those relations. Why suddenly?
The explicit answer has much to do with China’s dramatic rattling of the superpower pecking order, which adopted a serious anti-Japan undertone following Abe’s December 2013 Yasukuni Shrine visit (“to pay respect to the [World War II] dead,” he explained). While South Korea and Taiwan were also offended by that ultra-nationalistic action, Abe’s Quadrilateral Security Dialogue (QSD) sought bilateral Asian defence agreements along China’s perimeter with Australia, India, and the United States from 2007. Abe hoped to extend partnership to Indonesia, the Philippines, South Korea, and Vietnam as well. China calls it the “Asian NATO,” but behind the “stick” surfacing along Bay of Bengal shores, the plentiful “carrots” interest us more.
Abe’s “Broader Asia” policy approach hopes to align with democracy-subscribing Asian countries against a communist giant (inheriting a successful Cold War formula), while the “no sacred cow” liberalisation flank behind Abenomics (the other flanks being straight-forward monetary easing and fiscal; stimuli), meshes with the U.S. Trans-Pacific Partnership (TPP) that not only intrudes upon China’s southern and eastern perimeter, but also excludes China.
To make all of these functional, Abe has formally apologised to many Southeast Asian countries that Japan either invaded or threatened up to World War II (a first-timer in Japan), and pursued a string of juicy economic agreements and long-term assistance. Bangladesh fitted in nicely, not from wartime memories, but by claiming democracy, hugging India, bridging Southeast Asia, and, at a time of economic renewal amid the demographic time-bomb, expanding investment opportunities.
Of course, pushing the China-alert argument too far would be imprudent. In 2012, for example, both China and Japan traded almost a trillion-dollar worth of goods and services, with China still the largest Japanese export market and destination of 11 per cent of its foreign investment (or 7.0 per cent of China’s total inflows). The acerbic 2012 Senkaku/Diaoyo island conflagration in the East China Sea sharply reduced Japanese investment in China owing to violent anti-Japanese protests, while Chinese tourists also avoided Japan, where they were the biggest spenders. Recovery on both fronts suggests no immediate battle-cry between the two for now.
Japan has also publicly stated its Bay of Bengal engagements which are also not China-baiting nor even a scramble with China for infrastructural jackpots. Yet, Matarbari was a twin-sided project of which Japan will pay $3.7 billion, operating through Shumitomo Corporation and Marubeni (the controversial corporation was awarded the Bibiyana, Haripur, and Bheramara power projects, worth a total of 1,200 MW amid complaints of governmental favouritism, but this was before it was penalised by the U.S. government for bribery earlier this year).
JICA (Japanese International Cooperation Agency) will take up the funding for the 1,200-MW project, alongside building Bangladesh’s first sea-port (Chittagong, Mongla, and Khulna are all river-ports), mostly to absorb imported coal from Japan’s QSD partners in Asia. Though it has been blown up as a direct challenge to any Chinese sea-port built in Sonadia some 25 km away (in the same collection of islands off Cox’s Bazar), China has held back from commitment. Japan’s Sonadia interest dates back to 2006, when Pacific Consultant International undertook a feasibility study, while China first floated its interest in 2012. Again, no casus belli; but obviously climate change or El Ni�o has not alone raised Bay temperatures this year.
More to Japan’s credit, JICA has signed up to create Dhaka’s first mass rapid transit-way (MRT) by 2019. This is only the first of three phases involving the construction of 20.1 km of a metro-line worth $2.8 billion, ironically, with the Delhi Metro organisation as a consultant.
With both Japan and India tip-toeing across Bangladesh with huge infrastructural inducements, crystalising our positions helps. First, we need those infrastructure facilities desperately. Second, both Indian and Japanese enthusiasm may easily lose their glow, the former, for example, by any sudden change of government in Dhaka, the latter by failing to find signs of future dividends, and both by rising social costs within Bangladesh, unless we get so carried away as to not have pre-emptive plans.
Third, widening our export markets, to Japan, particularly, would be most consistent, plausible, and exploratory, making Japan’s Bangladeshi investments more meaningful. Finally, accenting India and Japan keeps our Chinese interest balanced without losing sight of the larger market awaiting us in China, or China’s pregnant interest to opening up other energy-plants and sea-ports for us.
Japan’s security-driven “Broader Asia” should become our economic playground. Since many contending countries can help us with solar energy (China, the European Union, India, Japan, and the United States), our “Broader Asia” interpretation should, like Japan’s, keep pathways leading out of Asia.
Do we have ample political and economic hats to rotate? The answer might be influenced by more endogenous vectors than exogenous, another reason why opportunity, like Hollywood’s immortalised postman, may not knock twice.
Economic size and tyranny of non-economic dynamics
It was observed that Bangladesh was not among 57 countries in the 2014 Quality of Life Index (QOLI) list: India, Pakistan, and Sri Lanka only made it from South Asia. In the same year, the International Monetary Fund (IMF) found Bangladesh’s gross domestic product (GDP) to be the 35th largest in the world among countries. It had moved up from the 37th spot in the World Bank’s estimation of the weighted 2005-14 average, while the CIA Handbook found it retaining the same 35th position in the weighted average of a larger span, from 1993 to 2014.
Overall, it has held its ground, and particularly impressive is that it does not depend on a natural product, like petroleum, to dictate its economic fortunes. By following the traditional pathway of low-wage production, it has put into place the infrastructure of future growth and climbing that ladder faster in the next 25 years than in the last 25. Still, the gap between the 57th and the 35th is too vast to ignore.
This is the logical conclusion of putting economic size of Bangladesh in perspective. During the last 25 years, it has competed (successfully) with Iraq for the 35th spot; and like Iraq, eight other countries with a higher ranking than Bangladesh’s, rely, to varying degrees, on oil exports to fuel their economies: Russia with the 6th largest economy,
Indonesia with the 9th, Mexico with the 11th, Sa’udi Arabia with the 14th, Iran with the 18th, the United Arab Emirates with 32nd, Algeria with 33th, and Venezuela with the 34th. Among them, Sa’udi Arabia and the Emirates have cushioned themselves by vastly expanding their service sector, from banking, finance, and investment to wooing tourists (pilgrims for Sa’udi Arabia) and hosting international sports tournaments (Emirates). That leave two politically torn countries Bangladesh should overtake soon: Algeria and Venezuela. With a 2014 GDP of about U.S. $599.8 billion, the Emirates is not that far removed from Bangladesh’s 2014 GDP of U.S. $533.7 billion.
Central to Bangladesh’s likely ascent have been (a) the ongoing oil-price collapse, which is not only hurting the above-mentioned oil-exporting countries, but is also easing as a Bangladesh import constraint; (b) the continued surge in ready-made garments (RMGs) demand, permitting Bangladesh to weather its own 2013-14 political crisis; (c) Bangladesh’s heavy infrastructural investments underway, from highways and ports to alternative energy sources, such as solar; (d) the relatively more transparent Bangladesh economy, but also how it is aligning with China, the United States, India, and Japan, the world’s first, second, third, and fourth largest economies today; (e) Bangladesh’s relatively stable economic growth rate, averaging above 4.5 per cent annually during the past 25 years, which none of the other oil-exporting countries can claim; and (f) Bangladesh’s huge population of 161 million not only creating a robust domestic market that few oil-exporting countries can match, but whose population growth-rate has also stabilised around the ideal replacement level (around 2).
Added to these are unfolding plurilateral economic agreements. One with Malaysia (ranked 28th in economic size with a 2014 GDP of U.S. $746.1 billion) last month can only be mutually beneficial, while exploring opportunities in our neighbourhood with Indonesia ((U.S. $2,676.1 billion), Thailand (ranked 22nd with U.S. $985.5 billion), and the Philippines (ranked 30th with U.S. $ 692.2 billion) would not only open non-RMG frontiers, but also extract more from our manpower resources. Unlike oil, any RMG industry mobilises a far larger work force and must compete in the global market to survive rather than arbitrarily set oligopolistic export prices, as with oil. The result is a multi-dimensional brand name for the country abroad rather than a single-brand identification, like a banana republic.
Both above factors (deteriorating oil-prices and diversifying brand name) should easily push Bangladesh into the 20-something ranking for economic size. Beyond that, on the positive side of the ledger, it will have to play on the mutual rivalries between China, India, Japan, and the United States to squeeze as much as possible in terms of appropriate infrastructural and industrial investments, through posts, bridges, metropolitan high-speed rails, and export processing zones. These it must do – as, indeed, it currently is doing – without taking sides since all four of these economic giants have upgraded the South/Southeast Asia corners of the world for their own future economic betterment.
Over the past 25 years, Bangladesh’s 4.83 per cent annualised economic growth rate was surpassed by 146 countries (some as tiny as Aruba, Fiji, Macao, Malta, Palau, Samoa, Timor-Leste, and Tuvalu, for example), while its 2.76 per cent GDP/capita annualised growth rate was ranked 166th out of 210 countries. In conjunction with both natural threats (climate change, flooding, and so forth) and man-made (hartals, oborodhs, and the like), Bangladesh must also upgrade its social and political infrastructure to supplement its economic transformation: literacy, women in the workplace as well as in the education marketplace and professional fields, universally recognised democratic claims, and sustainability remain areas demanding increasing attention. These are the missing blanks capable of shaking the economy as dramatically as any sudden oil-embargo or oil glut. These are what literally prevent us from joining the top-20 largest economies. We can have the cash, but do we have the needed spunk?
Nonetheless, predictions of Bangladesh’s nominal GDP expanding from U.S. $205.3 billion in 2015 and U.S. $321.9 in 2020 (the 50th anniversary of our independence) suggest crossing the trillion-threshold in 2045 (U.S. $1.18 trillion), then almost doubling to U.S. $2.2 trillion in 2060.
Only 27 other countries will have a larger economic size than ours. Just in the neighbourhood, we will have overtaken Pakistan (U.S. $1.78 trillion in 2060), but Vietnam will have overtaken us as well (U.S. $2.43 trillion). Our population would break the 200-million mark, and how much higher can our growth rate take us will depend upon how conscientiously we groom our children now. Compared to our brutal beginning in the 1970s, our reason to smile now should not conceal our greater future obligations.
“One Belt, One Road,” or one heck of a fix?
Unlike India and Japan, China did not help us during our independence; yet, over 40 years, this one bilateral relationship of Bangladesh has undergone a remarkable somersault, with both countries and many of their social groups bridging the gulf far more robustly and legitimately than, say, Bangladesh and Pakistan or Bangladeshis and Pakistanis. Like India and Japan, China too is rearranging its priorities according to its drastically altered global ranking: the Cold War kept China’s global leadership at bay, but when it ended, China’s climb up that ladder has been in historical leaps and bounds.
With them have been resurrected prior Chinese claims to world leadership, with the “One Belt, One Road” (OBOR) catch-all slogan capturing the essential thrusts: on the one hand is the Silk Road Economic Belt running across Eurasia, and institutionalised, for instance, through the Shanghai Framework Organisation that courteously but effectively replaced Russia behind the steering wheel; and the Maritime Silk Route, encompassing the South China Sea, South Pacific, and the Indian Ocean, connecting the Silk Road Economic Belt through a South and Southeast flank. It is not quite the Mackinder Heartland thesis, let alone Mahan’s sea-power argument, but supposed parallels point to why China cannot be excluded from any country’s future growth trajectory: since the 1980s, China has captured world markets, built an unprecedented trillion-dollar treasure chest through surpluses wrought by mercantilist policies, and now seeks the pay-offs through investment, extraction, and exploitation (and even more hopefully, more economic liberalisation).
One consequence is that Bangladesh cannot be a determinant of China’s policy interests (as indeed no single country can): each is only a cog in a machine that single-handedly conquered the U.S. market, evicted Japan from the second economic-sized slot before targeting the largest, diverted U.S. (and European) investors from the rest of the world to build its own infrastructures, thrown its own state-run gargantuan enterprises into competitive global markets, and, if not building trade surpluses unabashedly with cash-surplus countries, then overwhelming cash-strapped countries with ample largesse, either to extract minerals or to build the kind of dependency Alfred Hirschman first observed of German Economics/Labour Minister Hjalmar Schacht in East Europe under Adolf Hitler.
Bangladesh nicely fitted into China’s “strings of pearls” doctrine, a string of military and economic outposts between the Middle East oil-producers and the voracious new consumer, China. Protection at certain choke-points, like the straits of Hormuz and Malacca, strengthened China’s sea-port development in Pakistan (Gwadar) in order to feed new land routes to China through war-torn Baluchistan and Afghanistan; and through Myanmar and/or Bangladesh. These thoughts culminated in such other networks as the China-Pakistan Economic Corridor and the Bangladesh-China-India-Myanmar Economic Corridor (BCIM-EC).
Spin-offs for Bangladesh included China’s Harbour Engineering Company upgrading Chittagong port, leading to the expression of interests in Sonadia sea-port building across the barren island, or alternatively in Payra. While these sea-ports still remain on China’s wish-list and as a Bangladeshi pipe-dream, China at least clinched the specific Karnaphuli Tunnel and Padma Bridge projects, not to mention significant telecommunications awards.
China Communication Construction Company won the two-lane, $1-billion Karnaphuli project during Sheikh Hasina’s June 2014 visit, scheduled to begin work this year and be complete during 2019. It would develop the Dhaka-Cox’s Bazar highway and feed into the Asian Highway Network later. One-third of the money would go into land-purchase.
Even more stunning (and controversial) was wresting the 5.15 km Padma Bridge (with 15.1 km of approach roads) from the World Bank, Asian Development Bank, and Japan International Cooperation Agency for China in July 2015. It entails a 4-lane upper road segment and a rail segment below, between Lohajong in Munshigana, to Madaripur/Shariatpur. Embarrassed by the World Bank’s corruption charges, the government grabbed China Railway Engineering Corporation’s interest-free loan, feeding into China’s wildest dream of managing an alternate development banking institution than the U.S.-controlled World Bank.
China’s Asian Infrastructure and Investment Bank (AIIB) was proposed in 2013, and by June 2015, more than 50 countries had signed the Articles of Agreement, including India, almost all in Asia, as well as Australia, New Zealand, and Israel. With China holding 30 per cent of the shares and Bangladesh 0.67 per cent, the institution is important for not including the United States (much as the U.S. Trans-Pacific Partnership did not include China), though divisiveness has been modified through the interest of a number of European countries, including Great Britain.
For a country not receptive of its independence, Bangladesh jumping from a hallowed western-oriented ship to a Chinese counterpart that threatens neither India (which is on board) nor the United States (since so many closer U.S. allies have also joined), may be a preview of unfolding atmospherics. It shows Bangladesh toying with the kind of a game that must be played when multiple options prevail, the no-frills, self-seeking approach that typically wins the deal: it was a fitting reversal to the World Bank Padma embarrassment, raising a question if the aging financial institution can be of any other Bangladesh relevance; but it was soberly managed by Prime Minister Sheikh Hasina at the U.N. General Assembly visit during September 2015, when both Chinese and U.S. (and European and “northern”/”western”) interests were amply boosted.
Nudging the China card nonetheless fuels a silently tempestuous U.S. relationship. Until then, whether we like or not, China is in the ballpark to stay; and though keeping a distance from any dragons, especially a fiery one, a lesson many mothers teach their children, the setting here may be more conducive to play than staying away.
Distinguishing strategic from tactical goals with the United States
As a partner of Bangladesh’s growth, the United States is both necessary and sufficient. It is the largest market in human history, so our access is pivotal to our growth and catalytic to our climb if the stated goal of $50 billion worth of RMG exports by our fiftieth birthday (2021) is to ring true. We also share a neo-liberal embrace, in many ways the tip of a vast value iceberg between the two countries: democracy is a part of it, no matter how defined or measured; so too the preference for moderate Islam over the radical; converging peacekeeping interests, over which, in fact, we take the veteran leader’s role against the U.S. neophyte; and, of course, cooperation of all sorts, from education and human rights to security.
From a hostile start 44 years ago, bilateral relations have blossomed, without necessarily concealing dissimilarities or incompatibilities. How to force unity from disparate positions remains a work in progress. Our diverging labour rights positions, for example, illustrate how a mutually acceptable transformation time-table is more difficult to achieve than discuss: a social context impinges upon necessary labour reforms (to determine wage-levels, build associations, and cultivate appropriate ILO-based freedoms) far more directly and comprehensively than it did the United States at any time in its own economic transformation. That social context consists of significant poverty, a protruding patrimonial structure, male domination, and hostility towards unions. It is not only far different from the U.S. social context, but also impossible to replicate overnight in a relationship that carries more inter-governmental anchors than non-governmental or transnational, and thereby seeks short-term solutions over long-haul transformations.
When our democracy interpretations diverged in 2013-4, for example, neither side invoked the historical view, which elevates inherent propensities over meaningless yardstick measurements. Modifying what democracy means for Bangladesh against a credible security overhang is the kind of a temporary retreat from democracy meant to strengthen it.
This practice does not differ at all from U.S. departures from its own democratic ideals that also ended up enhancing democracy, as evident in its 1860s Civil War, culmination of the women’s suffragette movement in the 1920s, and the 1965 Voting Rights Act to cap the Civil Rights Movement. Given our common interests and what is at stake, resorting to broader interpretive lenses in cases could produce the modus operandi and mutually beneficial outcomes in our bilateral relationship over the long-haul.
Identifying and de-escalating concurrent areas of disagreements must distinguish between the “tactics” being pursued (instruments) and the “strategic” interests (intentions). Whereas the former involves ad-hoc measures, typically for short-term dispensation, the latter gravitates towards shared values, of which free-market liberalism, democratic rights, and security harmony presently dominate. Properly handled, they defuse tension, preserve unity, and elevate hopes.
Nowhere else, in fact, can we currently profit more in such a trade-off than by restoring the general system (of trade) preferences (GSP): if not Barrack Obama, a long list of Republican legislators waits in line to halt any concessions, not necessarily targeting Bangladesh, but a president they have been uncomfortable with. Since we have to weave through the firing-lines, a quid pro approach might serve us better than any sine qua non alternative.
Our middle-income priorities include depoliticising labour while ingraining universal labour laws; revitalising dispute settlement that our own lawyers have been sceptical about; pushing transparency until it becomes irreversible; and tackling corruption, the gargantuan beast that every citizen, from a rickshaw-walla to an entrepreneur, confronts with every step to shove under the carpet. That the policy-making “buck” does not necessarily stop at the Oval Office alerts us to work with a traditionally more reluctant foreign policy partner, the Congress, but presenting any meaningful pathway from GSP-denial to its restoration should clinch the deal for us.
Dividends would follow instantly: on his next visit, U.S. Assistant Trade Representative for South and Central Asia, Michael Delaney or his successor, should be left with no choice but to wave the green GSP signal. Ambassador Marcia Bernicat would be able to afford a wider smile, and our own Commerce Minister Tofail Ahmed’s sine qua non TICFA (Trade and Investment Cooperation Forum Agreement) stance would dissolve against the new-found incentives.
Since TICFA belongs to the “strategic” list, alongside security dialogues and a wide variety of both inter-governmental and non-governmental parleys, disrupting them in a globalising world bottlenecks our expansive imperative and discourages transactional interests of likely traders, investors, and other countries.
Irreversibly reforming the entire 16-point GSP agenda gives our exporters more time and relief (the argument that because RMG sales expanded 4.7 per cent during the GSP suspension sends the wrong message to the wrong players at the wrong time: many countries subconsciously follow U.S. positions, so the GSP damage could reverberate beyond the Atlantic, if not during the 4-5 year duration of concluded RMG contracts, then clearly in 10 or 15 years).
It also puts us behind the steering wheel of bilateral relations: we would be able to shift attention to our pet areas rather than those of others, deepen existing engagements, instead diverting attention/resources to the issues others raise at to the table, and cultivate a dialogue rather than defection, knowing that no bridge would ever be too far to cross.
These are consistent with the long-list of other uplifting and progressive areas of infrastructure-construction and bilateral cooperation: as an ancient partner, the U.S. Agency of International Development just disbursed $22 million of loans guarantees to manufacturers to install safety measures (notice how the labour-related infrastructure benefits); the U.S. Overseas Private Investment Corporation (OPIC) protects U.S. corporations operating here (the domestic business infrastructure is strengthened), and exposes an opportunity for third-ranked U.S. investors in Bangladesh to overtake top-tiered and second-placed British and Australian investment (helping the domestic corporate infrastructure to build external bridges); and the U.S. Export-Import Bank (EXIP) supports U.S. exporters to Bangladesh by up to almost $250 million (fortifying, again, foreign investment infrastructures, both domestically and within the external context). Tapping such economic infrastructure-boosting measures is impossible when political tensions thwart foundational institution-creation.
Like the 1986 U.S.-Bangladesh Bilateral Investment Treaty has survived, with modifications, for over a generation, contributing as it did to an infrastructural underbelly, it now shares attention with other mutually-engaging higher-end infrastructural efforts.
President Barack Obama and Prime Minister Sheikh Hasina did not co-chair a peacekeeping conference on September 28, 2015 that simply dropped from the sky; it was, instead, a follow-up to the Hasina-Joe Biden co-chairpersonship of the same initiative last year. Similarly, the prime minister’s Champions of the Earth and ITU (International Telecommunication Union) awards were not just about our recent environment and ICT accomplishments, but examples of long-lasting infrastructural cooperation moving into higher-gear between the two countries already feeling the pangs of climate change.
From economic infrastructural discussions, we must shift to non-economic arenas, and to the European Union, where the human context overrides the material. The predominantly inter-governmental superstructure of Bangladesh-U.S. relations can profit by adding more of a human measure to statistical considerations (like the GSP 16-point).
European stakes in Bangladeshi thresholds
Very much like the United States, the 2013-4 EU (European Union) concern about our democracy translated into a drive to reform our institutions, but unlike the United States, no GSP (general system of preferences)-type wrinkle dangled like a Damoclean sword over our trade privileges. Why the Bangladesh-EU interlock is predicated to smoothen rough bilateral edges better than the Bangladesh-U.S. counterpart does can be reduced to three features: (a) EU expectations mirror international/multilateral expectations more than self-seeking goals; (b) EU directs abstract principles to specific grassroots cases, thereby shifting beyond the government to civil society, as opposed to the U.S. tendency to inter-link the government even if the vehicle is a social group; and (c) the absence of a power-context opens more tangible developmental inroads that a power reputation obfuscates.
Though a belated hands-on partner than the United States, the 2001 EU Cooperation Agreement opened three flanks of attention and support: social sustainability, trade expansion through diversification, and balancing socio-economic growth with environmental safeguards. Fortunately for Bangladesh, its microfinance innovation from the 1970s under Grameen Bank’s Dr Muhammed Yunus, and the unfolding engagements of globally-reputed non-governmental actors, like the Association for Social Advancement (ASA, another microfinance player), and Bangladesh Rural Advancement Committee (BRAC), another global award-winning enterprise under the equally celebrated Sir Fazle Hasan Abed), supplied plenty of societal openings to make substantial multilateral differences.
The more recent joint-visit of the French and German foreign ministers (FMs), Laurent Fabius and Dr. Frank-Walter Steinmeier, itself another diplomatic innovation, recognised Sheikh Hasina’s leadership role on the environmental front precisely on the eve of France hosting a major conference (at the end of the year, and where Bangladesh’s contributions can be expected). Though the FMs’ plan to travel to the Patuakhali grassroots for first-hand climate change observations did not materialise, too many European groups silently working on this (environmental) front can assert how the fundamentals have been falling into place for quite some time.
Just as Moving Coastlines: Emergence and Use of Land in the Ganges-Brahmaputra-Meghna Estuary, edited by Koen de Wilde, for example, chronicles enormous water-front reclamations already underway, The Netherlands and the International Labour Organisation funded a 5-year, $5.4-million project promoting “workplace rights and industrial relations” against RMG factory disasters. Germany’s Senior Experten Services, for example, has collaborated not just on water desalination along the coast, but also environmentally protecting the Sunderbans alongside Shushilan, vocational training with the Khundkar Foundation in Comilla, while helping nursing, autistic children, hospitals, and students (through the German Academic Exchange Service, or DAAD). Some of these are also arenas where the Swedish International Development Agency seeks “inclusive and sustainable growth.”
Optimism and opportunity bound both sides to ever-ambitious programmes, anchored in Bilateral Development Cooperation plans. The first, in 2007, produced a Country Reduction Paper targeting human development, governance, and economic development, yet elevating more pro-poor and primary education emphases than anticipated. So much so that the second 6-year plan, called the Multi-Annual Indicative programme, raised the previous �403 million budget by almost three-quarters to �690 million, addressing, as one might expect, democratic governance, nutrition security, and education/skills development, all through a bottom-up societal approach than the top-down alternative that invariably gets tangled up in governmental bureaucracies.
That these more or less coincided with the U.N. MDG (Millennium Development Goals) campaign further bonded the two sides. As a pre-MDG leader in many of the MDG categories, coupled with its no-frill, low-profile, and hands-on engagement, many EU members were better placed than many (or any) other external entities to pull Bangladesh up by its bootstraps until it becomes a middle-income country. Additional emphases on this is evident in (a) the 8-point EIDHR (European Instrument on Democracy and Human Rights) programme, due to produce its report at the end of 2015; (b) DEAR (Development Education and Awareness Raising) efforts to consolidate civil society organisations at the grassroots levels; and (c) promoting local-global links through civil society organisations.
Once the U.N. SDG (Sustainable Development Goals) programme picks up momentum, and the Paris environmental conference concludes, we can expect these growing links to expand, exposing different yet equally significant non-economic infrastructures. On the one hand, these initiatives and projects have been helping Bangladesh to better integrate within, and on the other, these can only expand bilateral trade opportunities and openings infinitely with EU countries. In other words, the direct consequences of galvanising principles-based EU-stamped infrastructures also spawn tangible but indirect EU-related transactions, in addition to mobilising the subjects of these initiatives: the masses rather than the government.
For example, with the United Kingdom becoming Bangladesh’s largest source of incoming foreign direct investment, the slow but conspicuous elevation of Bangladesh-born British citizens has multiplied social links and channelled more merchandise flows both ways than just human beings. Similar results await Bangladesh on the European continent. Together, West European countries account for a large proportion of historical and RMG exports: muslin to England during the empire; tea and jute to England from the time of Indian partition until recently; Germany as the second-largest RMG importer, Sweden crossing the $5-billion RMG import threshold; and so forth. These have translated into educational exchanges, joint-research among professionals, and fall-backs for future economic contingencies.
Europe’s looming demographic crisis, for example, will have to turn to capable, constructive, and culturally consistent immigrants at some point, much as Germany’s Chancellor Angela Merkel’s Syrian welcoming-mat has been initiating. The Economist recently documented Europe’s dire demographic straits through the growing dependency-ratio of the pre-15 and 65+ age-groups upon the 15-65 working-age population: for France, this presently is 57.6 per cent, Britain 54.2, The Netherlands 52.2, Germany 51.4, Spain 50, Poland 47.7, and Hungary 47, among others, against the conventional standard that this ratio should not exceed 33.3 per cent or so (that the costs of one person in the pre-15 or post-65 age-group require at least 3 working individuals). With the demographic time-bomb ticking, no wonder a Syrian migrant EU plan distributed 43,000 refugees to Germany, 32,000 to France, 15,000 to Spain, 11,000 to Poland, and 9,000 to The Netherlands, among others, immediately, in spite of an exploding anti-Muslim and anti-immigrant sentiment.
With its moderate Muslim history, lifestyles, and aspirations, Bangladesh’s resonance can only widen and deepen should that European need for workers and professionals become more urgent. This is where extended years of collaboration at the grassroots level matters, just as irreversible Bangladeshi reforms and infrastructural investments only narrows the wide extant economic and socio-cultural gaps between both sides. This is not to depict the inevitability of the plight, nor to advocate something as sensitive as migration as the solution; or even to point Bangladesh as the beacon of future West European hope. The central point is simple: just as the Europeans have helped us cross the choppy seas of infrastructural development when we have needed that the most, given our younger population, we will be there to lend a hand if and when European machines grind to a halt for the lack of personnel.
While there is a lot to be gained mutually, treating the European Union exclusively from the rest of the world would be increasingly counter-productive: not only does the European Union resort to global and multilateral yardsticks to prepare its country-specific plans and programmes, but the expanding globalisation tentacles also conflicts with such a country-specific or nationalistic approach. Since keeping synch with the United Nations, for example, keeps us in the mainstream, turning to that entity in the next piece illustrates another diplomatic puzzle: the costs of jumping ships for political purposes is not worth the abstract economic benefits.
Between the rock of northern multilateralism and the hard place of the southern challenge
When Bangladesh enthusiastically ratified China’s equally assertive Asian Infrastructural and Investment Bank (AIIB) initiative, this year, it was no doubt ventilating some of the frustration spawned by the World Bank backtracking from the 2013 Padma Bridge commitment. As China stepped in, a fraying World Bank unnecessarily strengthened the AIIB case as an alternative to western multilateralism: Bretton Woods pillars had served as the fulcrum of Western/Atlantic/Northern multilateralism from the late 1940s in monetary and trade institutionalisation, more generally, the United Nations network to which they all belonged.
Yet, accepting AIIB as a “southern” alternative is tough medicine: just as the Trans-Pacific Partnership (TPP) directly aims to isolate China, the AIIB goal is to isolate the United States, one reason why the United States is not joining, in spite of selected other western countries and India expressing observer-status or full membership interest. On a business negotiating table, forging multiple multilateral/plurilateral membership carries mileage, even if it means dispatching more diplomats to more destinations without always bringing back some meat. On a similar political table, however, the multiplicity and redundancy predict unnecessary tension for the long-haul, and particularly when they function within a power-competitiveness framework, as China’s leadership climb is obtrusively encouraging today. The end-result leaves both sides worse off. Our infrastructural crusade directs us to money-markets, not blueprint-building, architectural rearrangements of the extant order, or turf-battles of contending powers.
On the one hand, China’s south-south partnership drive appeals to countries like Bangladesh, and meshes well with the prime minister’s call for developed countries (DCs) to do more for their less developed counterparts (LDCs), especially in terms of intellectual property rights that emerging/frontier economies like Bangladesh’s do not want to be bottled-up by. Most of all, since China quickly relieved Bangladesh’s brief Padma Bridge embarrassment over a critically needed infrastructure, holding hands with China over other similar projects only made sense. That must still remain the purpose of only one hand, leaving the other to beckon new friends. At its extreme, China’s AIIB initiative will produce across Asia what the U.S.-funded Marshall Plan produced across Europe after World War II: growth in ideologically compatible countries, leaving in the lurch such naysayers as the Soviet Union and East Europe then, and conceivably India and Japan for China now. If we can do business without political strings, incremental gains await us every step of the way.
On the other hand is an entirely Bangladesh-centric long-term view. As the Asian Development Bank (ADB) noted, our annual growth-rate improved to 6.7 per cent for the year when the rest of the world failed to improve (or the World Bank calculation of our 6.5 per cent growth-rate remaining the same as last year’s, while other countries have registered less impressive figures). Our need to climb up from and sustain our middle-income status demands we not only cross 7.0 per cent on a consistent basis each year, but also notch a double-digit growth-rate every now and then.
That expansion depends (and has depended) directly upon exports and foreign exchange earnings. Since our dominant exports do not go to “southern” markets, our “southern” market probes, particularly across Latin America, may offer too little too late to have any major growth-rate impact: these markets take 3-5 years to develop, and a minimum of 10 to equal the size of their “northern” counterparts in the best case scenario. Our income during that interim must continue to come from established, “western” markets, “north” of the equator. To show any indication of jumping the “northern” ship would put into motion all sorts of business alarm-clocks to our detriment. That cannot be our route, since in 2015 there seems to be an emerging and mutually constructive convergence and conversation between the “north” and Bangladesh on many fronts, an opportunity to be seized, not left for bargaining.
China’s President Xi Jinping agreed to Prime Minister Sheikh Hasina’s proposal in New York in September 2015 to narrow the Bangladesh-China trade-gap. Our next task should be to push the RMG (ready-made garment) sales-pitch to the hitherto leading RMG exporter, China, which is already facing the pressures of diminishing returns. This should become a “strategic” goal while RMG comparative advantage still lies in our favour for the next 5-10 years. Until any concession is made on this front, to want to roll over at China’s AIIB command would be an untutored policy-response for which we may have to more to lose than gain over the long haul.
South-south conversations/platforms/prognostications have been around for over a half-century (one recalls the futile 1975 New International Economic Order, even before that Ra�l Pr�bisch’s articulation of structural trade inequalities between the “north” and the “south”), but they have not supplied the meat less developed countries (LDCs) needed to vault into developed ranks. In fact, only when these were all abandoned slowly, but steadily, by LDC neo-liberalism from the 1980s, did some countries make the critical developmental breakthrough under “northern” auspices (Brazil, Chile, Mexico, among others).
With trade, Bangladesh snuggled into neo-liberalism with more heart, mind, and soul than many other countries, but divesting here would be equally costly as with investment. That does not mean we cannot explore other plurilateral agreements, particularly those with softer terms on intellectual property rights and GSP (generalised system of preferences) equivalents, but working to soften “northern” terms over both must continue simultaneously since our markets are there for now, have been there historically, and will continue to be there during our middle-income lifespan. Again, only with conducive changes in bilateral trade can we push the China card: it is a huge market that we must access, if not in the short-term through RMG exports, then later through new product-lines.
Besides, if we are to get the $8.0 billion our Board of Investment says we need for infrastructural development, and to get it rapidly, we do not have the choice but to shop in every money market, “northern” and “southern”. We may be too wed-locked to “northern” multilateralism, but experimenting with China’s more relaxed labour approach to see what worker-employee infrastructure eventually evolves as our appropriate style should not be discarded, in case the GSP-denial continues longer than expected, and the worse-case TPP outcomes become our reality (they should not if, and only if, we play the juggling game rather than adopt sine qua non posturing).
Though it is a complex and overly multi-dimensional, one common, central, and commanding globalisation feature has been to open options and distribute one’s eggs in as many baskets as possible. This requires overcoming China or U.S. pressure groups in Dhaka, and a leadership that shows the capacity to be inclusive rather than exclusive or vindictive. At no juncture in this century, and even less in the previous, have we reached a crossroads like this. Reassuringly this year, the prime minister is demonstrating, through the awards she won, the substitution of World Bank funding, and the Waldorf Astoria engagement with businessmen that we are ready, willing, and able to walk down the “northern” multilateral pathway (a) with needed adjustments, and (b) without having to foreclose other options. That keeps the door open for the private sector and the “northern” bloc, a subject the series turns to next.
Infrastructural road to modernisation is flung open
From the earliest records available, it is clear we have a tradition of buying our Qurbani animals in the “haat” (informal market run privately) than from government-sponsored arrangements, just as the “konar dokaan” (corner store) exposes a business instinct so much at odds with the socialism we have preached and practised (through public sector enterprises) throughout our history. In short, private investment of the family-owned type dots that tradition more than public investment. It is clearly behind the steering wheel of the liberalised/globalised contemporary context today, yet also the unabashed springboard of human and environmental exploitation. Because of the proverbial bad apple in any bunch (of anything), one practical remedy would be to have enough “good” apples to drive out the “bad”, thus reverting the mistaken dictum dubbed Gresham’s Law.
Sticking with the Qurbani anecdote for just a little longer, we also noted how, as soon as sales were being concluded, four state-run banks quickly increased the funds available for purchasing leather from Taka five billion in 2014 to Taka seven billion this year (Janata: 2.5 billion, Sonali: 1.95, Rupali: 1.35, and Agrani: 1.2), taking the lead from private banks, such as BASIC Bank, National Bank and City Bank, among those that made immediate offers. The point should be clear: public investment is not to be downsized or eliminated. We need both, and only competitive practices will determine the survivors, a thought much in keeping with the “corporate social responsibility’ (CSR) notion articulately attributed to Bangladesh Bank practices in this very newspaper (Hasnat Abdul Hye, September 24, 2015). Mr. Hasnat Abdul Hye even established “inclusive banking” as a Bangladeshi innovation, one that goes beyond monitoring/manipulating the monetary market to uplifting the social-base, and as cognizant of the needs “down there” as the yearnings “up there.”
As a symptom of private investment, private banking has never had the door opened as widely as right now; indeed, at no other time has our need for them been as great as it currently is, driven not only by a robust generation-long growth-rate, but also an eagerness to demonstrate we are a worthy enough middle-income entrant, capable of climbing into the high-income bracket by mid-century if the private sector takes the lead. That demands more investment than all our entrepreneurs can muster. Foreign investment must enter through a wider front-door than ever before with fewer trip-wires, like hidden taxes, hollow transparency, and rampaging corruption, but most of all, to quash concerns and apprehensions that political quibbles, breakdowns, “hartals” (strikes) and “oborrodhs” (stoppages) determine/dictate businesses.
Both the last two years were some sort of a “dark-age” in mobilizing foreign investors precisely because of the political hangovers. Fortunately, more light is being seen in the investment tunnel this year, and if adroitly handled against stubborn stumbling-blocks, could catalyse our 50th birthday anniversary celebrations and mid-century hopes.
Our Business Council for International Understanding (BCIU) arranged for Prime Minister Sheikh Hasina to engage with the heads of 27 global firms during her September 2015 U.S. visit, assuring them we “share the same set of values and ethos” (“freedom, democracy, human rights, inclusion, equality, pluralism, secularism”), and that our “planned and responsible industrialisation” includes opening 18 Special Economic Zones for foreign investors, and broadening the playing field to include “road, power, energy, tourism and hospitality, waste management and water supply,” most emphatically the pharmaceuticals, shipbuilding, knowledge and ICT industries, and the vast Bay of Bengal resources. That was an astonishing agenda, befitting the Waldorf Astoria Hotel chain’s reputation for breakthrough moments that goes back to 1993 when Mexico’s Commerce and Industrial Development Minister Herminio Blanco announced Mexico’s mind-boggling privatisation/liberalisation programme to convert a less developed country into a developed country. The North American Free Trade Agreement did just that subsequently. Many lessons can be drawn from that for us.
Hasina was instantly rewarded when SkyPower Global’s President and Chief Executive Officer Kerry Adler offered $4.3 billion to develop a 2,000 megawatt solar power sector, with jobs for 42,000 people (no less in Tungipara, home of Bangabandhu), and receive a bonus of 1.5 million home lanterns for free. While many other business leaders engaged in the actual deliberations, suffice it to say this was the result of a protracted mobilising campaign to get global businesses to take a chance on Bangladesh (and continue to bite even amid distress signals like the frequent factory fires, and, more recently, the murder of foreign citizens). Yet, new directions were also being explored. Reflecting the “digitalised Bangladesh” dream of Hasina’s son and ICT Adviser Sajeeb Ahmed Wazed Joy, the software shift has also mobilised globalised corporations, like Android, Blackberry, IPhones and Samsung Galaxy to come, invest, and reap $260 million worth of fortunes last year.
These are not irreversible developments. Political or religious problems can just as well derail every enthusiastic foreign investor. The need to cultivate them against all odds seems presently the most viable road to a staggering middle-income identity and high-income entry: they build the very infrastructures appropriate to this stage of our human development, and relevant to our own industrial transformation from a manufacturing hub into a service platform. Since SkyPower Global’s offer goes a huge way to meet our $8.0 billion infrastructural need at this juncture, we can shift more attention to spreading such invitations and incentives while raising as much enthusiasm and allocations in an increasingly hungry foreign money market, given the saturation within China, constraints belittling the BRICS (Brazil, Russia, India, China and South Africa) group, and oil-price collapse strangulation of other emergent/frontier economies. Since we have escaped these maladies, the infrastructural road to modernisation is flung open: bridges, ports, and tunnels are under construction, the key highways near completion, factories approach capacity production, energy-supply has been prioritised, and lowered interest-rates beckon both investors and consumers. These must open up new sectors, deepen old ones, and whittle away administrative bottlenecks to appeal to hungry businessmen abroad. Dare we proceed further? If we do not, all will have been in vain.
Constraints: Understanding the nature of foreign investment
We may review some obvious constraints, before stock-taking opportunities. Since foreign investment has emerged as the backbone of infrastructural breakthroughs, understanding the nature of foreign investment sets the tone below of what we must do at home in order to successfully navigate the global sources, where market competition mixes with political rivalry.
Raymond Vernon’s eye-raising 1971 thesis that corporations steal state sovereignty, prompted Robert Gilpin to distinguish between the “necessary” and “sufficient” conditions of corporate operations. He sought to explain world leadership, but his argument applies to both the domestic context and for aspiring or emerging countries, like Bangladesh. The “necessary” condition was political order and the “sufficient”, the economic and technological resources invoked.
For Bangladesh, the political order is amply clear: specifically the routine nuisances of strikes and stoppages, but broadly, apprehensions of a security breakdown, as for example, political parties directing sine qua non positions against each other without adequate quid pro quo deliberations, or mobilising Islamic extremism against foreigners generally, western foreigners more particularly, and targeted individuals/institutions most narrowly. Any security umbrella must have parallel contingencies, both at the smallest threat level and within panoramic blueprints. Foreign investors typically hold on tighter to their chips as the targets get more specific, knowing that the broader picture is strewn with leeways. Our last two years were riddled by broad, particular, and targeted threats, given the strikes and stoppages: one opposition party against the government (broad); RMG factories or “gonojagoron” versus religious forces (particular); and Rana Tower plant or specific bloggers (narrowed). In the absence of contingencies, hell broke loose at all three levels.
Islam is not hostile to business, although its call for greater corporate social responsibility (CSR) than western literatures usually posit, and its interest-elimination mandate do invite justifiable rethinking on the part of corporations: not only are some of our banks introducing interest accounts and “zakat”, but also the CSR drive, as institutionalised by Bangladesh Bank, seems to be seeping down to private banks. That said, gluttonous corporate (or individual) behaviour sets up targets for any group, including Islamic. Historically, Islam has blended well with private entrepreneurship, as evident in the bustling Hajj business, Eid shopping, and generally, in pushing humans to release their potentialities. Once business incentives surpass disincentives, corporations examine the logistics, ranging from the wages to be paid to assembly-line workers, how these connect with both unions and governmental legislations, what facilities permit the fastest and most cost-efficient access to countries (which is the meat of the whole story), and the kind of a marketing or distributional system needed. All of these require specific infrastructures. All of them need to be globally streamlined if we expect cash to flow in from the outside for us to climb the income ladder.
Wages, to begin with, pose the first set of thorns: they have to be marginal enough to attract the investor in the first place, with the key questions being if, at the margin, both ends can be met, and national and international laws have been satisfied. If these do not, as is of relevance to Bangladesh, can the gap be offset by those CSR fringe-benefits, such as housing, or healthcare, or a free-lunch? Labour laws inform corporations about protections against strikes and stoppages; but even if they do, whether the cost-benefit analysis favours investment begs attention. Where the host corporation draws the line is crucial to the foreign investor’s entry. Once infrastructures relating to wages, corporate social responsibilities, prevailing local practices, and relevant national legislations bearing upon proprietorship, taxes, profit distribution, and so forth, have been ironed out, attention shifts to the exogenous setting, the market, transportation, and consumer tastes.
Clearly, “konar dokaans” (corner stores) will not do in any globalised operations, but they must not be downsized nor eliminated: they perform crucial indirect tasks, uphold family-run initiatives, and serve as a last resort even in strikes and stoppages. The need to supplement them with malls increases as fast as the climb of any LDC (least developed country) community into middle-income or higher category. Having them conveys the size and senses of the consumers, with chain-stores appealing all the more since one contract with any particular franchise can cover the entire network nationally rather than piecemeal contracts with different operators, and, most of all, communication networks (from telephones to transportation companies, highways, as opposed to roads, steamboats, ports, and ships, not to mention banks, insurance companies, and lawyers), serve as a litmus test of corporate interest.
No wonder infrastructural development has overtaken poverty and education as a vital Bangladesh interest at this moment: not that poverty and education have been demoted or eliminated, but we now have more than half a population of 160+ million people literate enough and free from life’s margins whose hopes and goals need to be fulfilled through free choices (necessitating the democratic vote) and ample material resources (to sustain the upward economic climb). No middle-income society can survive without these; and no upward-mobility from here is possible without cultivating them. Once done, reaching the beckoning nirvana is not automatic, but what that entails is the subject of the concluding piece of this series, next.
To be sure, then, constraints mobilise diplomacy locally, domestically, and between corporations and countries; while the length, breadth, and depth of any country’s infrastructural stock foreshadow the country’s future mileage, an Achilles heel for all, but for us, not from the lack of resources, rather from galvanising the desired atmosphere. Face-lifting measures, crucial to attracting investors, must accompany deepening-pocket treasures.
Today’s challenges demand intellectual weapons
Once the “necessary” condition of political order satisfies foreign investors, shifting to the “sufficient” conditions becomes neither automatic nor uphill. For Bangladesh there is both a domestic and external context involved, but the meat is in the intertwining. Bluntly put, our dilemmas boil down to what brand-names we carry, how we navigate the choppy seas of both global market competition and state-based security considerations, and why our infrastructure portfolio should constantly sift between the adaptive and permanent varieties.
Domestically, brand-name generation is as important as brand-diversification, conveying where our comparative advantage keeps fluctuating to and how we are selling our image abroad. For one full generation, the RMG magic has not only established a robust brand-name, but also sustained its glamour for over one generation (typically 25-30 years for us, that is, the span between entering and leaving the work-force). Its current momentum is enough to predict another decade more of the RMG magic continuing, barring any political upheaval or another Bangladesh emerging in the world (it is unlikely if Myanmar or Vietnam, or even any African contender, can become viable enough in the next 5-10 years).
Yet life begins after the leading industry exhausts itself, when a far broader swathe of our development and future history beg attention. Starting with England’s Lancashire mills, every developed country had to have some kind of a textiles springboard in addition to a food industry: as social animals, we all need food and clothes first. Our time in the textiles sun began in the 1980s, and quite a game-changer it became. With food we will be able to hold our own by breaking our backs, a far cry from the 1970s when we broke many a backs to no avail.
Other raw materials, like jute, tea, and fish, face more competition now than ever before, from not only other countries but also synthetics; and some, like tea, can no longer supply our own needs to fetch foreign income, a fate awaiting fish and shrimp. Behind those limits lie better news for an upwardly-mobile country like ours: we must lay infrastructures leading in other upscale directions, away from primary and secondary sectors to the tertiary (service-sector training, jobs, and consumerism). The central ones cannot but be educational: future dividends will not be in the farms or factories, since these have been utilised to the fullest and their diminishing returns from increasing competition strongly indicates shifting pastures elsewhere, like classrooms and workshops, where intellectual innovation makes more noise than mechanical (software over hardware).
Fortunately, our education sector is vibrant, and with migrants and expatriates trained abroad, we have been making waves on ICT (information and communications technologies) fronts. As an emergent brand-name, it is of vital interest: if, by our 50th anniversary we are not digitalised enough, we will simply miss the last boat to nirvana, and be abandoned by both corporations and increasingly savvy and cosmopolitan consumers. Better than becoming a permanent low middle-income “basket-case”, we need fuel for the onerous climb to a top middle-income position before entertaining high-income aspirations. That is not an easy task. The income difference between the low and top middle-income is ten-fold. It took us half a century to accomplish that, with 1971 being the last year we had a per capita income below $100. If our plan is to enter the high-income bracket by the end of the SDG (Sustainable Development Goals)-tenure in 2030, we better boogey: we need much more than a 7 per cent annual growth-rate; and this cannot come from textiles, food, or other raw materials.
ICT cultivation invites foreign investors at a time when our relative lower-wages plus software-generating brain-power expansion gives us a huge advantage as the supplier of all ICT needs in developed countries. Many of them face a forthcoming demographic Armageddon, and even if they do not, costs of living based upon spiralling wages, salaries, pensions and infrastructural breakdown/maintenance compel them to look abroad for the best prices and talents for their everyday needs. Today these include a cell, laptop, desktop, and software programming, at the least. We have already entered this playing field, and can stand far taller if primary, secondary, and higher education pave the way to post-graduate training elsewhere abroad.
Again, power-rivalry or economic competition intervenes: post-graduate training at the commanding institutional heights cannot be dispersed equally everywhere. Choices matter. Since the ICT world has been encrypted in the English language, whether we are comfortable with that or not, it is the direct vehicle to post-graduate destinations presently; and if we muddle our relations with the “northern” countries, we end up short-changing our own future. Our students can learn a lot in China, India, Japan, and the like, but it will be in U.S. or U.K. institutions, versed in English, where pathways must head if we are to glitter.
Shifting to a different arena, SkyPartner Global’s recent offer coincided with a silently unfolding arena for much longer, exposing another brand-name for us: our solar-energy capacity. We remain critically energy-dependent, and are poised to becoming even more so. Quick-step responses can arrest this gap (for example, a string of coal-based thermal stations plant the very seeds of decay plaguing many upwardly-mobile countries, with China and India coming to mind instantly), but inflict enormous environmental damages. That would be catastrophic: our future hopes would lose their playground. We will become, like many others, a middle-income cripple.
Solar energy promises an alternative, increasingly lucrative export outlet, and a brand-name through its varied applications for a long time to come. These also add, like the ICT brand-name, to the family of necessary future infrastructures, capable of delivering us to the high-income nirvana-land and a full-fledged developed country by mid-century. By then, the corresponding social adjustments and transformations should have taken place: no child marriage, substitution of the servant system, the sewage and pollutant blights either under far stricter controls or eliminated, and peace across the delta between political parties, differently-oriented Islamic believers, and across religious divides, natives and immigrants, and citizens and expatriates.
We have not come so far to give up so easily. Stern challenges were overcome in the darkest 1970s through sheer extensions of our physical resources (as evident in our independence war, then surviving the famine, coups, plots, low-wages, and so forth).
Today’s challenges demand intellectual weapons: education and innovations. Is the younger generation ready for the pens, pencils, libraries, and classrooms? Before these options used to be expensive and prohibitive; today they face another stubborn opponent in student indifference, bred in part by globalisation and technological changes. In the hustle-bustle of adjusting to them, we could easily miss the entre of our developmental meal. Nirvana awaits silently, smilingly, across the brook, but only for the intellectually adventurous who refuse to yield. Mid-century Bangladesh will belong to them.
The writer is Professor of International Relations, formerly in Universidad Iberoamerica, Mexico City.
DECEMBER 28, 2015