BRI and Bangladesh: An Impressive Track Record of Partnership



Professor Mustafizur Rahman, Barta24.com, Dhaka
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Bangladesh formally joined the BRI in October 2016 when President of China Xi Jinping made an official visit to Bangladesh. BRI (Belt & Road Initiative) celebrates ten years of its founding anniversary this year, the milestone coincides with seven years of Bangladesh’s involvement with this defining initiative of the twenty-first century.

Following the signing of the MOUs during his visit, President Xi stated “We agreed to elevate China-Bangladesh ties from a comprehensive partnership to a strategic partnership”. On her part, the Prime Minister of Bangladesh  Sheikh Hasina mentioned “Bangladesh is willing to actively work with China within the framework of the BRI, and support building an Economic Corridor linking the BCIM so as to push forward development in various fields such as investments, agriculture, transport infrastructure and connectivity”. Looking back, over the past seven years considerable progress has been made to take the partnership forward in line with the aforesaid statements by the two leaders.

The five pillars of BRI are: Facilitating Connectivity, Unimpeded Trade, Financial Cooperation, People to People Connectivity and Policy Coordination. As may be recalled, deals worth about USD 40.0 billion were signed at the time of President Xi’s visit, with investment projects of both Government to Government and joint ventures types. The various projects that have already been implemented and are planned to be implemented, fall under many of the aforesaid pillars of cooperation. These projects are being implemented in Bangladesh with financial, technical and implementational support from China.

Many Chinese construction companies are involved. The projects include transport and infrastructure,development and modernisation of information and communication technology (ICT), strengthening of power system network and enhancement of public utilities such as Dasherkandi Sewage Treatment Plant which is the largest in South Asia as also many others.

These infrastructures are critically important for Bangladesh’s sustainable economic development and well-being of its people. For example, the 170 km rail line over the Padma multi-purpose bridge which connects the capital Dhaka with 20 southern districts of Bangladesh is a vitally important transport connectivity project that will help bring Bangladesh under a unified rail and multimodal connectivity network; the distance between Dhaka and the end point (Barishal) will be reduced significantly.

Peoples travel time will come down significantly, cargo movement will be facilitated and marketing and distribution of products will be speedier. The rail line will be a key component of multi-model connectivity not only for Bangladesh but also will link Bangladesh with the Trans-Asian Transport network.

Built with Chinese finance (60 percent, with rest coming from Bangladesh government) and by Chinese companies, the rail link, in conjunction with the recently built bridge over the river Padma (built with Bangladesh’s own finance), is expected to be operation in 2024. The rail line will play an important role in realizing the potentials of the planned special economic zones to be built in southern part of Bangladesh.

Chinese experts, engineers and workers are helping Bangladesh to build many of these infrastructures. Chinese Exim Bank, the Asian Infrastructure Investment Bank and New Development Bank are helping Bangladesh to access the much needed credit.

Yet another project being implemented is the tunnel under the river Karnaphuli in the south, the first of its kind in South Asia. The tunnel will connect the Korean Export Processing Zone, Dhaka-Chattogram-Cox’s Bazar Highway, and the Chattogram airport and will also be part of the Asian Highway. The tunnel will facilitate connectivity with Bangladesh’s first deep sea port being built in Matarbari in the south. The Dhaka-Ashulia Elevated Expressway is yet another important transport link being built with Chinese support which will significantly ease the prevailing traffic congestion in the Dhaka city.

The power system and Power Grid Network projects being built with Chinese support will help Bangladesh to ensure energy security, while the support for Telecom and ICT Network projects will enable Bangladesh to access the benefits of the twenty-first century ICT as also the fourth industrial revolution (4IR).

The nine mega-projects under construction in Bangladesh at present, with about USD 10.0 billion credit support from China, will help attract domestic and foreign investment to Bangladesh, generate employment, strengthen competitiveness and help earn foreign exchange through export. It is important that these projects are built in a cost-effective way and put into operation in a timely manner so that the Bangladesh economy could reap maximum benefits from these investment and the expected rates of economic and financial returns areassured.

When completed, these projects will play an important role in Bangladesh’s development through triangulation of transport-logistics connectivity, investment connectivity and trade connectivity.

While the highly promising BCIM-Economic Corridor Project is for now halted, there is a potential opportunity for Bangladesh to take advantage of the transport networks being built with help from China in Myanmar, and by India in Bangladesh (with support of the three lines of credit offered by India).

All these together will strengthen Bangladesh’s multimodal connectivity which is expected to help the Country to translate its comparative advantages into competitive advantage. These will play an important role in view of Bangladesh's strategy to deepen regional and sub-regional cooperation in Southern Asia.

Over the recent past years, Sino-Bangladesh bilateral relationship has also branched out into many new areas. Many Bangladeshi students are studying in Chinese institutions for higher studies, thanks to scholarships provided by the Chinese government. Various exchanges between the two countries involving policymakers, business people, investors and academics of the two countries have seen notable rise in recent years.

China continues to remain by far the largest source of import for Bangladesh (about USD 25.6 billion). However, Bangladesh’s export to China has remained dismally low, at less than USD 1.0 billion in spite of the duty-free, quota-free preferential treatment accorded by China for almost all exports from Bangladesh.

Going forward, Bangladesh will need to strengthen its supply-side capacities to take advantage of the more than USD 2720.0 billion worth of annual import market of China. It is crucially important to ensure that Bangladesh is able to generate the expected income from the Chinese projects to meet the debt servicing liabilities, in time and with ease.

This will be possible if, thanks to the Chinese projects in Bangladesh, investment is stimulated, economic activities are boosted, income earning opportunities are created and government’s revenue earning projections are realized. In this regard, attracting Chinese investment to Bangladesh, which is able to take advantage of the infrastructures being built with Chinese support, can play an important role.

If the supply-side capacities created by the Chinese investment enable Bangladesh to access the Chinese market with competitive strength thanks to preferential market access offered by China, this will help bring down the existing bilateral trade gap the large size of which is a concern for Bangladesh.

As BRI crosses the milestone of its first decade, one hopes that Bangladesh-China bilateral relationship will deepen over the the next decade, to the benefit of our two economies and our two people.

Bangladesh at present stands at a crossroads. Diversified bilateral cooperation with China can potentially be a key driver if Bangladesh is to reap the benefits of its geographical location as an important gateway to the Bay of Bengal, by deepening regional cooperation with countries in its neighbourhood. Bilateral relationship with China could be a game changer and play a defining role in this connection.

[Professor Mustafizur Rahman is a Distinguished Fellow at the Centre for Policy Dialogue (CPD)]

 

   

The price of sugar increased by Tk. 20 per kg



Staff Correspondent, Barta24.com
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The Bangladesh Sugar and Food Industry Corporation (BSFIC) has set the maximum retail price of government mill sugar at Tk. 160 per kg by increasing Tk. 20 per kg. Apart from this, from now on, the mill gate selling price of 50 kg of bagged sugar of the corporation has been fixed at Tk. 150 (one kg) and at dealer level at Tk. 157 (one kg).

BSFIC informed this in a circular on Thursday (February 22).

It is said that the sale price of sugar produced by BSFIC has been re-fixed in line with the international and domestic market price of sugar. Government's cooperation is needed to control the sugar market on the occasion of fasting in the market.

Besides, the selling price of 1 kg of packaged sugar in mill gate or corporate super shops of the corporation has been set at Tk. 155 and the maximum retail selling price in various super shops, basements and markets of sugar industry buildings has been set at Tk. 160.

It should be noted that some companies are selling government sugar at high prices in the market. The company has fixed the price of sugar in a packet of sugar at last Tk. 140 per kg.

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Orders to increase electricity, oil and gas prices are coming



Serajul Islam Siraj, Special Correspondent, Barta24.com, Dhaka
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The price of electricity may increase soon, the price of oil and gas may also increase in the near future. State Minister for Power, Energy and Mineral Resources Nasrul Hamid has said that the price of electricity has increased at the consumer level, but gas will be increased only for electricity generation.

The State Minister said on Tuesday (February 20) afternoon that we want to adjust the prices as soon as possible. Consumer-level prices of electricity may increase marginally. Those who are big customers may have higher prices. We do not want to subsidize self-reliant consumers.

Nasrul Hamid also said that the dollar rate has become the biggest problem. Earlier, the dollar was available at Tk. 78, now it is around Tk. 120. About Tk. 40 are being spent on one dollar. It has created a huge deficit. Although the prices remained unchanged in the international market, due to the increase in the value of the dollar, price adjustments became necessary.

Last on January 30, 2023, the electricity price was increased by executive order at the consumer level. 3 weeks before that on January 12 the gazette was published with an average increase of 5 percent.

Since the formation of Bangladesh Energy Regulatory Commission in 2005, the organization has been determining the price of electricity. On November 21, 2022, the wholesale price of electricity was increased by 19.92 percent to Tk. 6.20 per unit. After that, the distribution companies requested to increase the price of electricity at the customer level. BERC initiated the process following the application of the distribution companies. On January 8, the preparations for the announcement of the new rates were almost completed. But BERC was stopped midway and prices were increased by executive order. It is said that the process of extending the executive order is going on.

On the other hand, in February 2023, the Division of Energy and Mineral Resources increased the price of gas in an executive order. And through public hearing, Bangladesh Energy Regulatory Commission increased the price of gas in June 2022. Preparations are underway to raise gas prices again.

In response to a question, the State Minister said that according to the previous announcement, the price of fuel oil will be linked to the international market from March. The new rates will be implemented from the first week. If the price increases in the international market, the price will increase, and if it decreases, it will decrease.

If adjusted according to the current international market price, will the price increase or decrease? In response to such a question, he said; if the duty is imposed according to the commercial envisage of oil import, the price will increase slightly. And if quantity based duty is considered then the price may not increase.

In the recent past, furnace oil, widely used in power generation, was priced at 300 dollars per ton. At the import level, 15 percent VAT, 5 percent advance tax (AT) and 10 percent duty together would amount to 35 percent duty amounting to 105 dollars. That is, the price of the product with duty was like 400 dollars. The price of that furnace oil went up to 700 dollars per ton, while a duty of about 35 per cent was still levied. It had to pay a duty of 245 dollars per ton which is close to the price of the previous product. Due to this, the price of the product skyrocketed.

For this reason, the Ministry of Power, Energy and Mineral Resources has been demanding for a long time to break the value-based VAT structure and introduce a quantity-based VAT. A quantity based framework is followed in many countries. There is a tug-of-war between the NBR and the ministry on pursuing the matter in Bangladesh as well.

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International tender for offshore oil and gas exploration on March 7



Serajul Islam Siraj, Special Correspondent, Barta24.com, Dhaka
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Chairman of Petrobangla Janendra Nath Sarkar has confirmed to Barta24.com that an international tender will be floated for oil and gas exploration in the sea on March 7.

Earlier this month, the Chairman of Petrobangla confirmed that the tender will be called in March. He said, 6 months time will be given for submission of bid documents. We want to finalize PSC (Production Sharing Contract) in November or December. Before this, road-shows will be held in different countries.

What about companies like American multinationals Exon Mobil and Chevron who have shown interest in the past? In response to such questions, the Chairman of Petrobangla said, we are moving towards competitive rates. Here the company whose proposal is good and those who are considered qualified will get the job.

According to Petrobangla sources, PSC has been made attractive to attract multinational companies. The price of gas has been fixed in the previous PSCs, but this time the price of gas has not been fixed. The price of gas will rise with the international market price of Brent Crude. The price of gas per thousand cubic feet is equal to 10 percent of Brent crude. That is, if the price of Brent crude is 80 dollars, the price of gas will be 8 dollars which in the existing PSC had a fixed rate of 5.6 dollars and 7.25 dollars in shallow and deep sea respectively. Brent crude prices will be averaged over the entire month.

Along with the price, the share ratio of the government has also been lowered. According to Model PSC-2019, the proportion of Bangladesh will continue to increase with the increase in gas production. And the shares of multinational companies continue to decrease. Bangladesh's share will rise from 35 to 60 percent in the deep sea and 40 to 65 percent in the shallow sea. However, if the contractor does not get gas by digging a well within two years of the stipulated time or if it is not commercially extractable, there is an opportunity to increase the share by 1 and 2 percent respectively. In case of gas sale, the first proposal should be given to Petrobangla, if Petrobangla does not want to take it, the foreign company will get the opportunity to sell gas to a third party. With the update of PSC, many giant companies including US companies Chevron, Exxon Mobil have become interested in investing in offshore oil and gas exploration. They have already held several meetings with Bangladesh.

On Tuesday (February 20), the delegation of Exxon Mobil met with the Minister of State for Power, Energy and Mineral Resources Nasrul Hamid.

When the State Minister was asked about the meeting, he said that Exxon Mobil had first written a letter asking for a block lease in sea. A few days later he expressed his interest in doing a 2D seismic survey. Asked whether they are interested in participating in the bidding round. The Exxon Mobil delegation wanted to speak.

After settling the maritime boundary disputes with Myanmar in 2012 and India in 2014 in the international court, the ownership of a total of 1 lakh 18 thousand 813 square kilometers of sea area was established by Bangladesh. A decade later, the success of the sea border did not come to fruition, especially in terms of mineral resources. Energy experts believe that the solution to the dire energy crisis of the country is hidden under this huge body of water because Myanmar has got huge gas reserves next to the block of Bangladesh. It is believed that the doors of possibilities are going to open through the new tender.

On the other hand, the Energy and Mineral Resources Division decided to conduct a comprehensive multi-dimensional survey in the vast sea area. The Norwegian company TGS and France's Schlumberger Consortium prepared their report. Eric M. Walker, managing director and CEO of Chevron Bangladesh recently told the media that Chevron is checking all that information.

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Govt, S Alam Group partnering up to build $4 billion oil refinery in Chattogram



Staff Correspondent
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In a bid to continue the country’s development, the Government of Bangladesh is partnering with S Alam Group to build an oil refinery in Chattogram.

Under the partnership, the state-owned Eastern Refinery (ERL) will team up with the Chattogram-based conglomerate to build its long-planned second unit.

The development comes after S Alam Group in October last year sent in a proposal to the Prime Minister's Office to build the refinery on an 80-20 equity basis on the land owned by ERL in Chattogram.

On 5 February this year, the energy division wrote to the Bangladesh Petroleum Corporation (BPC), the parent company of ERL, informing it about the potential joint venture with the S Alam Group.

"It's still at a very primary stage," BPC Chairman ABM Azad said.

"We have submitted the proposal and the roadmap to set up the refinery. The government has agreed as well and constituted a committee," he added.

ERL Managing Director Md Lokman said, "We sent our final proposal to the energy division long ago for it to place before the Ecnec."

About $4 billion (over Tk 40,000 crore) of investment will be needed to build the refinery, said Subrata Kumar Bhowmick, an executive director of S Alam Group.

Meanwhile, a seven-member negotiation committee, headed by BPC Director (Operations) Md Khalid Ahmed, was formed on 14 February and was given a month to complete the negotiation.

The committee also includes three BPC officials, three ERL officials and the managing director of Padma Oil.

According to the ministry, negotiations will be completed after completing the technical and financial analysis, the modality of the joint venture, the management strategy and the equity portion.

At present, Bangladesh has a demand for around 70 lakh tonnes of petroleum products; of this, 80% are imported in refined forms owing to inadequate refining facilities.

Bangladesh has to pay huge amounts of foreign currency to import petroleum products.

Previous attempts to expand the country's oil refining capacity fell through because of a lack of financing.

ERL's bid to build the second unit in keeping with the growing demand for petroleum products as a result of stable economic growth was conceived in 2012.

The second unit was supposed to have the capacity to refine 30 lakh tonnes of oil, according to the initial proposal by the ERL; the estimated cost for the project was Tk 13,000 crore then.

However, the project has been in limbo since then due to funding issues.

The government had tried to secure foreign loans for the project but its attempts did not succeed.

It prompted the government to decide to build the refinery on its own, with 70% of the project cost coming from the ministry in the form of loans to the BPC.

The rest of the amount will come from BPC.

Following the subsequent revisions, the cost went up to Tk23,736 crore last year.

According to the latest development project proposal, the finance division had agreed to spend Tk16,142 crore and the BPC agreed to spend Tk7,100 crore.

It was yet to be decided how the rest of Tk493 crore would be mobilised.

S Alam Group said the refinery will have the capacity to refine up to 50 lakh tonnes of oil.

Although ERL's original plan has not been abandoned yet, sources said the government is considering S Alam Group's proposal of implementing the project under the joint venture.

It comes on the heels of its decision in November last year to open the fuel oil market to the private sector.

Another Bangladeshi conglomerate, Bashundhara Group has expressed interest in becoming the first private refinery owner.

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