Modi announces $2-billion line of credit to Bangladesh

[UKBengali]

I don't think it's the perfect time to sign an FTA. However, I suggest both the countries should remove the non-tariff barriers which would significantly boost up the bilateral trade.

BD should not rush into any FTA with whole of India but start with smaller steps.

@UKBengali I was going through some recent news and found out some Indian companies are investing heavily in Bangladesh, like Hero Motocorp, Tata Motors, Reliance power, Adani power, Airtel Bharati etc.

Most recent news :
Reliance Power, Adani Power to Build $4.5-Billion Bangladesh Plants

Hero MotoCorp forms joint venture in Bangladesh, to set up manufacturing plant


Do you know about the Bangladeshi companies that are going to/planning to invest in West Bengal/India ? I am drawing a blank there.

Sorry I do not have any specifics.

 

[Bangla25]

In the modern world we live in there is no need for entering into any such agreements. Look at the UK, it is feeling restricted because it cannot trade freely as it wants wth the rest of the world because it has somewhat decided to throw in its lot with the EU. There is huge regret in Westminster about this. Bangladesh should export its good by tendering products on the open market and whoever pays the best price (after taking into account associated transportation costs) it is they who shall become the partner in the deal. Remember folks, we live in a global market where data communication for the flow of information and air cargo for shipping are vital and more cost effective, not roads. Interlinking roads within nation states are very important but not with other nations. Seriously, how long does it take kill Hasina off? It can't be all that difficult.

 

[zip]

Good intension should be there ..If good relation materialise then its well and good or we should move on ..We are a big country and can have a self sustained system ..All that matters is science and technology ..If you do good in this field then you are followed or you will be begging for support..

 

[monitor]

12:00 AM, June 06, 2015 / LAST MODIFIED: 04:05 AM, June 06, 2015
Loans must not be tied
Analysts on fresh Indian credit line


Sajjadur Rahman
Bangladesh's move to borrow $2 billion from India in tied loans will do little good to the country, experts believe.

Instead, the government should go for loans that don't limit the investment scopes, especially in infrastructure development with pressing needs.

"Loans tied with import are harmful," said Dr Debapriya Bhattacharya, distinguished fellow of the Centre for Policy Dialogue (CPD).

A tied loan is the credit that a government makes to a foreign borrower on the condition that the borrower will use the loan to purchase goods from the lender country.

Dhaka and New Delhi are expected to sign an agreement for the loan during Indian Prime Minister Narendra Modi's two-day Dhaka visit that begins today.

Debapriya said Bangladesh needs huge investment to make its infrastructure fit for regional connectivity. But with the previous $1 billion tied loan, Bangladesh had to buy buses and train wagons from India.

In 2010, India lent $1 billion to Bangladesh. Of this, $200 million was earmarked for the Padma bridge construction and the rest was allocated for different projects.

The loan came with the condition that some 75 percent of the overall procurement for the projects would have to be made from India. In case of civil procurement, it would be 65 percent.

The terms and conditions for the new $2 billion are likely to be the same as those for the 2010 one.

"A tied loan is like suppliers' credit. Prices of the products or services to be procured from the lender country are shown higher than the market rates," said Ahsan H Mansur, executive director of the Policy Research Institute (PRI).

There has to be an open tendering system like in case of the loans from the World Bank and the Asian Development Bank, he said.

He also criticised the government for purchasing buses and trucks for loss-making Bangladesh Road Transport Corporation (BRTC), saying the private sector can do the business if the government feels that the country needs more buses. The BRTC incurred a loss of over Tk 62 crore in FY 2014-15, according to the finance ministry.

"We should invest the loan money for developing railways, roads and other infrastructure," said the former top official of the International Monetary Fund.

"Instead of tied loans, we have to ask for low-cost long-term loan from India for our infrastructure, including roads," said Prof Mustafizur Rahman, CPD executive director.

 

[nForce]

12:00 AM, June 06, 2015 / LAST MODIFIED: 04:05 AM, June 06, 2015
Loans must not be tied
Analysts on fresh Indian credit line


Sajjadur Rahman
Bangladesh's move to borrow $2 billion from India in tied loans will do little good to the country, experts believe.

Instead, the government should go for loans that don't limit the investment scopes, especially in infrastructure development with pressing needs.

"Loans tied with import are harmful," said Dr Debapriya Bhattacharya, distinguished fellow of the Centre for Policy Dialogue (CPD).

A tied loan is the credit that a government makes to a foreign borrower on the condition that the borrower will use the loan to purchase goods from the lender country.

Dhaka and New Delhi are expected to sign an agreement for the loan during Indian Prime Minister Narendra Modi's two-day Dhaka visit that begins today.

Debapriya said Bangladesh needs huge investment to make its infrastructure fit for regional connectivity. But with the previous $1 billion tied loan, Bangladesh had to buy buses and train wagons from India.

In 2010, India lent $1 billion to Bangladesh. Of this, $200 million was earmarked for the Padma bridge construction and the rest was allocated for different projects.

The loan came with the condition that some 75 percent of the overall procurement for the projects would have to be made from India. In case of civil procurement, it would be 65 percent.

The terms and conditions for the new $2 billion are likely to be the same as those for the 2010 one.

"A tied loan is like suppliers' credit. Prices of the products or services to be procured from the lender country are shown higher than the market rates," said Ahsan H Mansur, executive director of the Policy Research Institute (PRI).

There has to be an open tendering system like in case of the loans from the World Bank and the Asian Development Bank, he said.

He also criticised the government for purchasing buses and trucks for loss-making Bangladesh Road Transport Corporation (BRTC), saying the private sector can do the business if the government feels that the country needs more buses. The BRTC incurred a loss of over Tk 62 crore in FY 2014-15, according to the finance ministry.

"We should invest the loan money for developing railways, roads and other infrastructure," said the former top official of the International Monetary Fund.

"Instead of tied loans, we have to ask for low-cost long-term loan from India for our infrastructure, including roads," said Prof Mustafizur Rahman, CPD executive director.

I think instead of criticizing the lender for providing loans, the borrower should go through the terms and conditions first, think about it and then decide whether he wants the loan or not.

If the criteria for taking loan does not match, then by all means, one should reject it. Bangladesh govt. has decided to take the loan, which is indicative of the fact that they agree to the terms and conditions.

 

[UKBengali]

Bro i think you are really underestimating yourself and selling way sort of potential, Malaysia is hardly growing and Indonesia let say it has put his foot on the axe by itself, with a President who is more focus on his personal image than on country economy , and its not my own word there was paper on Muslim country economic in next 3 decade by IIM Ahmadabad (i am trying to find the link) and BD was no.1 bet for them, there are many positive stated by them i will give you some, first Radicalization is very less compare to any Muslim majority country. second large population a key ingredient for being a major manufacturing powerhouse and third some risk taking entrepreneurship people and if managed properly for next 3 decade it will 2 to 4 trillion dollar economy easily (depends on various parameter). But firstly BD will have to keep mullah in check how it is doing now and must not resort to petty politics on these, rest i am sure will fell into the place on its own and with India it will major powerhouse in south Asia.

Thank you for your confidence in BD.

As long as we have sensible leaders for next 2-3 decades them all of S Asia will prosper.

With prosperity and tolerance, S Asia will be a beautiful place.

 

[Bilal9]

Bro i think you are really underestimating yourself and selling way sort of potential, Malaysia is hardly growing and Indonesia let say it has put his foot on the axe by itself, with a President who is more focus on his personal image than on country economy , and its not my own word

I'd agree on Malaysia. But the point here is I think "room to grow", meaning Indonesia still has plenty of "growth headroom" left and Bangladesh of course has it in droves. After growth reaches a certain plateau - rate of growth peters off because growth opportunities stop presenting themselves within a country's industrialization, export, import and general internal commerce portfolio which includes services (the US and first world scenario). I will not agree as readily with Indonesia not having room to grow for that reason - which although having a GDP three times that of Bangladesh and being in the 2nd world status, still has tons of natural resources (hydrocarbon, mineral as well as forestry) left to exploit, unlike in Bangladesh where we only have maybe gas.

there was paper on Muslim country economic in next 3 decade by IIM Ahmadabad (i am trying to find the link) and BD was no.1 bet for them, there are many positive stated by them i will give you some, first Radicalization is very less compare to any Muslim majority country.

Radicalization is actually much lower on the ground than it is publicly shown in the media (especially Western Media). The humongous market and appetite for such sensational terrorist news in the West means associating a Muslim nation with terrorism activity (no matter how moderate and modern a la Malaysia/Indonesia) will always be there. That may only be a perception in the West which hampers foreign investment only superficially. And Bangladesh is not isolated like North Korea so the situation on the ground is pretty much known to everyone globally - as well as the amount/percentage of hyperbole with which radicalism is reported.

second large population a key ingredient for being a major manufacturing powerhouse

This I agree with - because a low-cost manufacturing force is essential to industrialization. Bangladesh has one third the labor cost of India or Pakistan for low-skill industries and that is actually a gold-mine for low-margin manufacturing. There is plentiful supply of low and semi-skilled young labor.

That is why it made sense for Pawan Munjal of Hero Honda and others like Bajaj to set up value-added manufacturing (and not just assembly) in Bangladesh for motorbikes which may become an export source.

I personally predict that in five more years Bangladesh will become an export hub for motorbikes and value-added home electrics/electronics. The ball has already started rolling because,

1. Like I said labor cost is quite low (lowest in South Asia even).
2. There are about three large-scale local manufacturer's (Hero/Bajaj competitors) who are manufacturing bikes
3. Almost fifteen or so local companies locally assembling bikes from Chinese CKD kits. These assemblers will turn manufacturer fairly soon if export market expands.
4. There are almost fifteen brands of home electrics as well and half of them are exporting.
5. Since Garments industry got relocated from China already because subsidies evaporated, basic home-electrics and basic motorbikes are next to relocate to Bangladesh since margins are also razor thin (like garments) in these two high-volume, high value-addition and high-demand markets.

On top of these items, high labor component engineering ventures like shipbuilding have also started gathering steam.

and third some risk taking entrepreneurship people and if managed properly for next 3 decade it will 2 to 4 trillion dollar economy easily (depends on various parameter).

This I also agree with. Bangladesh has seen unprecedented growth of scores of local companies that have grown out of very humble beginnings. As an example - Akij Group (which paid taxes of 1000 crore last year) used to be a bidi (handmade cigarette) manufacturer. Now they are a huge conglomerate with interests in cement, textile, you name it. Such examples are happily - legion.

But firstly BD will have to keep mullah in check how it is doing now and must not resort to petty politics on these, rest i am sure will fell into the place on its own and with India it will major powerhouse in south Asia.

I don't think the Mullah factor or petty politics is as big a problem as reported in Indian media. When a bus is set ablaze - that attracts a lot of media attention. But actual effect on the economy is imperceptible - and most of it caused by people panicking.

And there is another facet of the Bangladesh society away from the economy, the social development part. Bangladesh is already at par or ahead of India on most social development indicators such as child mortality as well as womens empowerment. So the base conditions exist for building a healthy economy.

 

[Jaat Rock]

I am not saying lets only focus on knowledge economy because manufacturing of goods is still a very important constituent of our overall economy and markets like India with 1.5bn is still important to us. However, to serve that market we must do so through air cargo. If you build road connections you could literally pave the way for dangerous incursions.

India with 1.5 billion population?? Are you counting Bangladesh in India too??

BTW I am happy to see relations between Bangladesh and India are improving and dispute are resolving. Looking forward to see a great economic partnership between India and Bangladesh
But @BDforever you still have to leave India

 

[Sam.]

Thank you India. Keep giving us more money.

1971 YAAD AA GAYA. You Indians ruined the relationship by not helping Bangladesh in last 43 years.

DilseNaMo ‏@DilseNaMo 9m9 minutes ago
1971 :: Celebrations at Comilla in Bangladesh after the Town was freed by Indian Army (Photo: The Hindu )

we couldn't help our self so how could we help you in economy ?

Now we can

 

[24 Hours]

I must say, that was an good speech by Modi. His foreign policy is very impressive, and if he keeps this up, India through economic prosperity can be a potential leader in South Asia without aggression. I can see now why India picked him over Rahul.

 

[Hyperion]

It's for a supercharged electric fence between India and Bangladesh!

Would be interested in seeing the details of this line of credit.

 

[nForce]

Bangladesh does not want a connection to Kolkata or any Indian city. Hasina's days are numbered. We will have a good trade and business relationship with Sri Lanka, okay one with Pakistan, a cautiously okay one with China, but nothing with India.

When you say Bangladesh, who exactly do you mean by that ? And who is constructing the roads then ?

 

[Yogijaat]

It's for a supercharged electric fence between India and Bangladesh!

no.. there is a separate investment for that
Anil Ambani's Reliance Power to invest $3 billion in power plant in Bangladesh - The Times of India

 

[Mustang06]

Small gestures like this would go a long way in developing a new and a stronger relation with Bangladesh!
As Modi himself stated India and Bangladesh are united by religion, culture and cricket!

 

[Homo Sapiens]

We should not get too excited about this loan money.I will only believe when Indian release that 2 billion.After all we all know that squeezing money from selfish Baniya is not easy.