Bangladesh's Deep Sea Port Problem
China, Japan, and India are all competing to build Dhaka’s first deep sea port.
By Wade Shepard
June 07, 2016
Bangladesh needs a deep sea port. The country has one of world’s fastest growing economies, which is expected to rise at a 7.1 percent clip this year. It is on Goldman Sachs’s list of the “Next 11” emerging economic powerhouses of the 21st century. On the strength of the second-most dynamic textile industry on the planet, Bangladesh’s export sector is booming, and is expected to eclipse $50 billion per year in value by 2021. This is all in a country without adequate maritime infrastructure.
In its 45-year history as an independent state, Bangladesh has never built a new port. While $60 billion of annual trade currently pours through the country’s two existing seaports, Chittagong and Mongla, both are too shallow for large container ships and require costly load transfers to smaller vessels to get cargo in and out — an added step that can cost an additional $15,000 per day and severely decreases the ports’ global competitiveness.
However, finding solutions to this problem has proven problematic for Bangladesh. But this isn’t because of a lack of options, a deficit of investors, or even a dearth of international support, but exactly the opposite: too many powerful players are pushing for too many contending plans. This has left Bangladesh geopolitically stalemated, making and breaking deals, going with one project and then changing position and going with another. Ultimately, this plethora of options has pitted China, Japan, and India in direct competition with each other to build Bangladesh’s first deep sea port.
Although a small country, Bangladesh is of clutch geopolitical importance, being located in the armpit of India and right on the Indian Ocean. The Indian Ocean region contains 25 percent of the world’s land, 40 percent of its oil and gas reserves, and a third of the global population. It hosts one of the world’s busiest and most important shipping lanes, which supplies East Asia with the bulk of its Middle Eastern crude oil. Dhaka is still politically and economically pliable–like a ball of clay–and has become one of the preeminent global staging grounds of interests from east and west, which are trying to mold the country to be what they want it to be and not get pushed out of the game. Bangladesh is a keystone nation in the region, balancing together the contending influences of India, China, the United States, and Japan.
The Belt and Road initiative is the formalization of China’s strategy for securing and bolstering their commercial trade routes, and Bangladesh is a major part of its maritime agenda. China has been establishing a network of ports, dubbed the 21st Century Maritime Silk Road, extending from their own coastlines through Southeast Asia, the Indian Ocean, the east coast of Africa, and up through the Mediterranean to Greece. Although designed as a commercial project, this endeavor has instilled a sense of trepidation in the other actors in the South Asian theater, who perceive it as potentially having militaristic ramifications — or at least leveraging this reasoning to push their own competing agendas. This trepidation was brought up by consulting firm Booz Allen Hamilton in a 2005 internal report prepared for the U.S. Department of Defense, which first dubbed this plan the “String of Pearls” — a label that has been used ever since to denigrate China’s ambitions in the watery parts of South Asia.
This geopolitical competition has risen to an apex when it comes to selecting the site and the financier of Bangladesh’s first deep sea port, with some powers making great financial and political strides to secure their own interests and to keep those of others at bay. There are currently at least four potential locations for the impending new port: Chittagong, Sonadia, Matarbari, and Payra.
Chittagong
Chittagong, positioned a little way up the Karnaphuli River on the northeast curve of the Bay of Bengal, has always been the largest and by far most important seaport in Bangladesh. Once a major hub on the ancient Maritime Silk Road, Chittagong has a history that stretches back to the fourth century B.C. Ptolemy, the Chinese traveler-monk Faxian, and Ibn Battuta all wrote about the place. Today, this position of relevance still rings true.
“We handle 98 percent of the country’s container cargo, 92 percent of the total cargo volume,” a port development administrator explained. “So you can imagine how important this port is to Bangladesh. If Chittagong port collapsed the whole economy will collapse.”
Ninety-two percent of Bangladesh’s total ocean freight equates to over 30 million tons of bulk cargo and more than 1.8 million TEUs (twenty-foot equivalent units) each year. And these numbers are rising fast. Cargo volume through Chittagong port is rising at a 14 to 15 percent clip annually, and at the present growth rate it is estimated that the port would top out by 2018.
The problem with Chittagong is that the current maximum draft of the port is just 9.2 meters — definitely not deep enough for many modern container ships. This requires a time-consuming and costly transfer operation, as smaller ships must be used to transport cargo to and from big ocean freighters that are anchored out in the bay.
One proposal to remedy this problem is the construction of a new port on a 1,200 acre island in the Bay of Bengal off the coast of Patenga, and in proximity to Chittagong. Dubbed the Bay Terminal, this would not technically be a deep sea port–as its maximum draft would be up to 13 or 14 meters, rather than the 15 needed to be granted this designation–but it would allow for larger ships to come directly into port.
As early as 2010, China was publicly invited to get on board with expanding and modernizing Chittagong port, and at one point the country pledged $9 billion toward the endeavor.
“It will be a great achievement if China agrees to use our Chittagong port, which we want to develop into a regional commercial hub by building a deep seaport in the Bay of Bengal,” Bangladesh’s then Foreign Minister Dipu Moni told Reuters.
This plan bode well for China’s broader ambitions of building an overland corridor from Yunnan province to a port on the Bay of Bengal. The plan would essentially provide China with a link to the sea that, aside from transiting Myanmar, could bypass Southeast Asia and the snake pit of potentially volatile interests there. This prompted international commentators to quickly brand the Chittagong deep sea port proposal as one of China’s “pearls,” which put Bangladesh in a rather precarious geopolitical position. So much so that in June 2015 Bangladesh granted Indian cargo ships permission to use Chittagong port.
Sonadia
Realizing that Chittagong may fall through, China had a contingency plan for another deep sea port in Bangladesh all cued up and ready to go. A few years following a 2009 Japanese survey in Sonadia, an island near Cox’s Bazar in the south of the country, which determined it a suitable location for a deep-draft port, China jumped in and offered its financial assistance.
China Harbor Engineering Company, a subsidiary of the state-owned China Communications Construction Company–the same enterprise that is building Colombo Port City in Sri Lanka, and which also happens to be blacklisted by the World Bank on allegations of corruption–was chosen as the developer, and Bangladesh appeared to have given China the green light. During Prime Minister Sheikh Hasina’s 2014 visit to Beijing it was widely assumed that a deal for Sonadia was going to be formally signed, but then it wasn’t.
It was widely assumed that political pressure was put on Bangladesh from India and the United States to disallow China to build and operate the Sonadia port. With China already building ports in Sri Lanka, Pakistan, the Maldives, and Myanmar, Bangladesh was the last remaining link on a chain that would leave India completely surrounded.
“India’s not very happy that China and Pakistan are holding a strategic and economic relationship, and part of their objection is the One Belt, One Road and the Pakistan-China economic corridor,” said Shahid Islam, a research fellow at the BRAC Institute of Governance and Development, a Dhaka-based center for policy research.
After a period of being quiet about the prospective port, in February of 2016 Bangladesh made the formal announcement that it had been scrapped.
“The cancellation of Sonadia is clearly a strategic decision by Bangladesh, doubtlessly helped along by India, Japan and the U.S.,” wrote Indrani Bagchi in an article in the Times of India.
Matarbari
Another reason for the potential cancellation of the Sonadia port was that Bangladesh had granted a contract to Japan to build a deep sea port at Matarbari, just 25 kilometers away.
Japan International Cooperation Agency (JICA) is to build the port along with a liquefied natural gas terminal, a series of four 600 MW coal-fed power plants, as well as rail lines, roadways, and electrical systems as part of a monumental infrastructural package deal. The master plan is that the port would be used to receive coal, which could power an entire new industrial zone in the far southeast of the country.
To make this happen, JICA offered a loan to take care of $3.7 billion out of the total $4.6 billion price tag, at 0.1 percent interest for 30 years and a 10 year grace period thrown in on top of that, according to the South China Morning Post.
Payra
Originally seeming like a condolence prize for China, which had been beaten out for a deep sea port in the south of the country by Japan, Bangladesh proposed a deep sea port at Payra, which is located on the northwestern coast of the Bay of Bengal.
The construction of this port, which was being financed on a public-private partnership (PPP) platform, was originally granted to a Chinese company, and it was starting to look like China was finally going to get its deep sea port in Bangladesh. Then the usual chorus of India, Japan, and the United States resounded once again.
However, as a change of pace, India stepped in and stated that they wanted to get in on the action and be one of the port’s big investors. This was a very different strategy than simply trying to prevent China from having their port while offering no other viable alternative, which had previously been the diplomatic model.
The Payra deep sea port was then reconfigured as a cooperative port that many different countries could invest and operate terminals in. It has been reported that Indian companies are now participating and 10 countries have considered jumping in with $15.5 billion of investment, which is felt to be very different than China having a port in Bangladesh all to themselves.
“Bangladesh politics are driven by India, and the U.S. to some extent,” Shahid Islam explained. “Bangladesh can’t move ahead with China in terms of big collaborations, in terms of making the Silk Route or One Belt, One Road or an economic corridor.”
Like many other countries along the Belt and Road, Bangladesh wants to leverage its keystone position between major global powers and be “a friend to everyone.” But at this junction the country finds itself in very turbulent waters as the great game of geopolitics exerts its influence on every horizon.
Wade Shepard is a journalist and author of Ghost Cities of China.
