Bangladesh has entered the era of tunnel with the launching of the Bangabandhu Sheikh Mujibur Rahman Tunnel under the Karnaphuli River in Chattogram on 28 October.

The China-funded project took seven long years to be implemented since 2016, when Bangladesh reached an understanding with China during its president Xi Jinping’s Dhaka trip.

Apart from the tunnel, the Chinese president also committed to funding $20 billion (around Tk 2150 billion) for 27 projects of different sectors in Bangladesh.

In its latest report, the Economic Relations Division (ERD) noted that a total of 10 projects have been signed with China in the last seven years, with the number of completed projects standing at only three. The lending nation has so far released Tk 469.35 billion in total.

It was learned through analysis of documents and conversations with officials that the remaining 17 projects are still at the initial stage, and none have begun formal implementation.

Officials said the authorities have adopted a go-slow policy in the China-funded projects considering the geopolitical reality. Bangladesh has expressed interest in 11 projects, while the fate of the remaining six projects remain uncertain.

Sharifa Khan, secretary of ERD, said all the projects undertaken during the Chinese president’s Dhaka trip seven years ago may not be relevant in the current reality. She added, "The projects might have been necessary then, but priorities have gone through significant changes and have been reshuffled now."

ERD officials also pointed out that Bangladesh is scheduled to graduate from the group of least developed countries (LDC) in 2026, and there will be no scope to avail Chinese loans with flexible conditions after the graduation.

They suggested completing the projects quickly with the flexible Chinese loans, as there are still three years left before the LDC graduation. The ERD wrote the issue to the finance minister last year.

In this regard, Salim Raihan, executive director of the South Asian Network on Economic Modeling (SANEM), said it will not be right to think that the infrastructure projects only improved the road transportation system. The authorities should ensure an investment-friendly environment and create employment opportunities to realize the loan money.

11 projects get priority

The ERD sent a letter to the Chinese embassy in Dhaka last year, along with a list of 11 projects that the government prioritizes. However, the letter did not mention anything regarding the six remaining projects.

The priority projects include the purchase of four sea-going vessels for the Bangladesh Shipping Corporation (BSC), overall management and reclamation of the Teesta River, setting up an economic zone at Anwara in Chattogram, upgrading the Akhaura-Sylhet rail track, installation of digital connectivity, and water supply to municipalities.

The ERD sought $5.02 billion from China for the 11 projects, but none of them has begun yet.

Another reason behind the slow pace of China-funded projects is the new process of contractor appointment. Since independence, the authorities used to appoint a contractor in China-funded projects based on direct recommendations from China without any tender.

But the ERD introduced a new policy in 2017 and changed the direct appointment system, leaving no way for extra income from the contractor appointment process. 

The new policy stipulated that the contractor will be appointed through the limited tendering method (LTM), with participation of only Chinese contractors. The China-funded projects lost momentum after introduction of the policy. 

Five projects dropped

The government issued a letter to the Chinese embassy, disclosing its decision to drop five projects planned to be implemented with Chinese funds.

The projects are -- the Dhaka-Sylhet four-lane highway, jute mill modernisation, 350MW coal-fired power plant at Gajaria in Munshiganj, prepaid meter for Power Development Board, and extension of Barapukuria coal mine in Dinajpur.

ERD sources said the Dhaka-Sylhet highway project was initially supposed to be implemented with funds from the Asian Development Bank (ADB). However, the authorities changed their decision and opted for a Chinese loan due to lobbying by an influential minister.

A Chinese firm, China Harbour Engineering Company, was initially appointed for the project but was later abandoned following an allegation of offering $100,000 to the road transport and highways division secretary Nazrul Islam.

Later, the authorities canceled the Chinese loan and sought fund from the ADB.

Three projects completed, seven in progress

The authorities have finished only three China-funded projects in the previous seven years -- the Karnaphuli Tunnel, sewage treatment plant in Dhaka, and a four-tier national data center.

The ongoing projects are the Padma Bridge rail link, single-point mooring in Chattogram, Dhaka-Ashulia elevated expressway, development of power supply line under PGCB, power supply system under DPDC, extension of the national information technology network, and the surface water supply project of Rajshahi WASA.

Trade with China

China is the top import partner of Bangladesh and the import volume tripled in the last 10 years.

In the fiscal year 2022-23, Bangladesh imported goods worth $75.6 billion, with the majority, amounting to $19.35 billion, coming from China. The imports from China were worth $12.93 billion in the previous fiscal, which indicates an year-on-year rise of $6.42 billion.

The export earnings from China in the fiscal year 2022-23 were nearly $680 million, which is only three and a half per cent of imports from the country.

Mustafizur Rahman, distinguished fellow at the Center for Policy Dialogue (CPD), said the loan money for infrastructure projects cannot be realised only through toll collection or transportation. The authorities should emphasise on investment, regional connectivity, and trade. There will be an alternative source of income had the three-dimensional approach been in place.

He underscored the need for careful scrutiny while undertaking more China-funded projects and said the authorities should take up projects with possible financial benefits.