China’s footprint in Bangladesh’s economy has expanded massively since 2016 and Beijing is now the South Asian nation’s biggest foreign investor, official figures show, with most of the Chinese money invested in a power sector tainted by allegations of bureaucratic corruption.
Beijing outpaced the United States as Bangladesh’s top investor in 2018, during which Dhaka recorded U.S. $3.6 billion in foreign direct investments (FDI), according to newly released official figures obtained by local media.
“The Chinese are now the largest foreign direct investors in Bangladesh,” Shams al-Mujahid, a director-general at the Bangladesh Investment Development Authority (BIDA), said. BIDA is an agency under Prime Minister Sheikh Hasina’s office.
China’s overall investment of U.S. $1.03 billion in 2018 represented a 16-fold increase compared with its 2016 investment of just over $61 million.
“The Chinese have been the largest investor almost everywhere in the world,” al-Mujahid said. “Bangladesh is no exception.”
According to the BIDA figures, the Netherlands last year ranked as Bangladesh’s second-largest foreign investor behind China, with $692 million, while Britain took the third spot with $371 million. Britain was Bangladesh’s biggest foreign investor in 2017, with $313 million. In 2018, the United States, traditionally one of Bangladesh’s biggest investors, ranked fourth with $174 million in direct investments, according to the figures.
FDI has been a major source of foreign capital for Bangladesh since 1980, when the country adopted its Foreign Private Investment Act.
In 1995, Bangladesh opened up foreign investments in the mobile telecommunications sector mainly because of the absence of ground-telephone infrastructure in the country. It attracted investments from telecoms giants such as Norway’s Telenor and Egypt’s Orascom.
But Bangladesh also struggled with power outages, with the nation experiencing its worst electricity crisis in 2008 and 2009. Reports said one blackout alone, in 2014, affected as many as 100 million people more than 60 percent of the population.
As persistent energy crises plagued Bangladesh, Chinese leader Xi Jinping unveiled the One Belt, One Road (OBOR) plan in 2013, saying that the massive infrastructure initiative would accelerate development in many of the world’s poorest countries by building trade routes that would bring economic benefits.
OBOR, which critics say is a tool for Beijing to amass geopolitical power, is an ambitious project reaching from China to many points across the globe through investments that could rise above U.S. $1 trillion.
Heavily Invested in Power Sector
As part of OBOR, Chinese banks have earmarked $23 billion to build coal-fired power plants in 23 countries, according to the Institute for Energy Economics and Financial Analysis (IEEFA), a U.S.-based think tank.
Bangladesh is expected to be the biggest recipient with $7 billion, it said. In 2018, China invested more than $800 million in the South Asian nation’s power sector alone.
Last year, China Huadian Hongkong Company Limited signed a deal with a local partner to build a 1,320-megawatt plant at Moheshkhali island in Bangladesh.
China’s involvement in Bangladesh’s energy supply has spurred criticisms among Bangladeshi economists and experts who have underscored that the South Asian nation’s power sector is “poorly governed.”
“There is criticism regarding the business climate in Bangladesh. There is corruption, bureaucratic and legal hassles. But the Chinese businessmen have invested huge in the power sector,” said Hossain Zillur Rahman, an economist and former government adviser.
“They want to get maximum benefits from the power sector, which practically has no governance and no accountability,” Rahman said.
Khaleda Mahmood, chairman of the Bangladesh Power Development Board (PDB), brushed aside Rahman’s allegations.
“It is not true that the power sector has no governance,” he said, underscoring that his public-sector organisation was providing 45 percent of the country’s total electricity demand.
Last year, Transparency International (TI) gave Bangladesh a score of 26 in its Corruptions Perceptions Index. China received a score of 39.
The index, which ranks 180 countries and territories based on their perceived levels of public-sector corruption, uses a scale of 0 to 100, where 0 is highly corrupt and 100 is very clean, according to TI, a Berlin-based nonprofit that fights global corruption.
Allegations of corruptions had been raised in Bangladesh’s energy sector during the past few years, but those claims were revived less than a week after officials said that three Chinese companies had started lobbying Bangladesh for a contract to build the nation’s second nuclear power plant.
Mahbubul Hoq, chairman of Bangladesh Atomic Energy Commission,said that officials of three Chinese companies met with him during the past few months and expressed interest in building the second nuclear plant. It is expected to cost 1.5 trillion taka (U.S. $18 billion).
In 2009, the Bangladeshi parliament led by the ruling Awami League passed a law that authorised the Power Development Board to procure electricity from the private sectors, bypassing the lengthy bureaucratic process. The law shielded its officials from prosecution on matters related to procurement of electricity, according to its critics.
The law was initially passed to exist for two years, bringing temporary relief to the public, said Shahiduzzaman Sarker, Chairman of the Parliamentary Standing Committee on Energy and Mineral Resources. But it has been extended every two years, he said.
“The PDB enjoys immunity for its actions,” said Rahman, the economist. “So, there is no accountability in the sector.”