Though the second largest economy in Asia, next to Japan, China is the largest investor in teh Bangladeshi economy.  Since 2003 it has far outstripped any other country’s investment.

The Bangladeshi delegation in China needs to pay attention to that fact and maintain that relationship through gentle coaxing and courting, though to strident ears that language might strike one as just so much humble supplication.

Hence we observe Prime Minister Sheikh Hasina Wajed informing Chinese investors that Bangladesh is a market awaiting investment, one imminently happy to work with eager investors seeking willing and flexible labor and contracts.

As the Daily Star reports:

Sheikh Hasina mentioned a “tax holiday, concessionary duty on imported machinery, avoidance of double taxation, remittance of royalty, technical know how, technical assistance fee, allowing 100% foreign equity, unrestricted exit policy and full repatriation facilities of dividend and capital on exit.”

Indeed, she tied previous investment in Bangladesh as a signal of the necessary –and necessarily broadening–continuance of the expected returns to investment. 

“She said to facilitate Chinese investment in Bangladesh, China has already signed Agreement on Investment Promotion and Protection and Agreement for Avoidance of Double Taxation.

“The Bangladesh premier said at present, 55 Chinese enterprises with proposed investment of $292 million has been invested creating job for over 45,000 Bangladeshis.”

This is smart politics, after all.  This may yet prove to be good policy.

There are two ways to look at Bangladesh’s approach to friendlier relations on equal terms with China.  One is to look at the terms of the relationship and say that friendlier relations is hardly in the cards; rather the relationship is one of mere exploitation at the cost of solid footing elsewhere.  The other is to look at the Chinese market and the centripetal force of Chinese investment and then to justify closer ties with China solely on those grounds.

It is to the first argument that I now turn.

The on-going negotiations between Chinese leaders and the Bangladesh delegation have not started on the basis of mutual advantage.  The tone surrounding the conversation still smacks of a supplicant come at the alter of her lord.

The Daily Star reports Sheikh Hasina claimed the following to the Bangladesh-China Business Forum, an association of Chinese investors, while encouraging investment in Bangladesh’s agricultural and textile sectors:

“I would urge you to invest in Bangladesh which would be lucrative as well as strengthen further our two countries’ relation,”   Furthermore claiming that though Bangladesh is China’s third largest trading partner in South Asia the terms of trade resoundingly favor China, she beseeched the Chinese investors as follows:

” I, therefore, invite you to Bangladesh with the assurance of all possible assistance in your investment ventures,” 

“I hope my call to you would receive your favourable response and thus bring greater prosperity to our neighbourly countries and friendly peoples.’

The obvious rebuttal to my claim is: “How could it be otherwise?  Bangladesh is a tiny market compared to all the others at the disposal of Chinese investors.”

The problem, as I see it comes in sideways:  Bangladesh is getting closer to India. India is Bangladesh’s largest single source of imports and also mutually advantageous investment.  But, China is a more important investor.  Is it not likely that Bangladesh’s approach to China will sour India on Bangladesh even as Delhi is preparing language on river water sharing with Bangladesh?  Bangladesh might do well to keep India close to herself, than let that association fall into disrepair.

Bangladesh has been buying stuff from China and China has been happy selling stuff to Bangladesh, without much concern for doing some shopping of its own. That is now about to change.

Prime Minister Sheikh Hasina currently in the middle of a five day visit to China carried with her great hope that China would invest in Bangladesh’s agriculture and infrastructure and support the sagging export market in an attempt to rectify a distortionary trade deficit.  Her hopes have have been realized into promises of policy.

As the Daily Star reports:

“China will allow duty-free access of Bangladeshi products to its markets and increase its support for the country’s efforts to face floods and other natural calamities caused by global warming.”"

Chinese Prime Minister Wen Jiabao gave the assurance during official talks with Bangladesh Premier Sheikh Hasina held at East Hall of Great Hall yesterday afternoon.”

“During the talks, the two leaders discussed various issues of bilateral interest as well as Chinese support and cooperation for Bangladesh’s socio-economic sectors.”

Sheikh Hasina claimed that Bangladesh’s relationship with China began with her father’s visit to the mainland in 1953.   This is a baldly self-serving move to claim a certain historic imprimatur that attaches solely to the current Awami League, nevertheless there is something to the claim. Certainly China’s relationship with Bangladesh–notwithstanding a 1953 visit by a small-time politician traveling from  the eastern wing of the newly independent and enfeebled Pakistan–is stronger and perhaps more obdurate than the budding rapprochment between India and Bangladesh.   Indeed, India might have some to reason to worry .   India’s recent investments in Bangladesh’s power-grid is meant to be welfare increasing for Bangladeshis, though much of the benefits will flow to India.   Now China is investing some of the same industries.  The monetary value of those investments is likely to outstrip India’s promised investment.  One wonders whether China’s investment might yield a negative externality on India promised investment.

China’s Premier Wen Jiabao  congratulated Sheikh Hasina on her recent procedural and substantive policy successes.  Though his congratulatory notes ring hollow as just so many democratic platitudes, to Bangladesh’s business leaders the promises of cash and expertise are sure to come across in undulating, sonorous tones.

The sitting government is making swift and sound moves to shore up the country’s infrastructure.   It now seems like the government has been able to attract private foreign investment to help pay for the infrastructure construction.

The Communications Minister, Syed Abul Hossain has communicated to his fellow parliamentarians that up to nine foreign firms are interested in the governments plan to construct an elevated expressway in the capital city, Dhaka.

The government has a tall order in the works.  Along with new rail tracks that connect Khulna and Mongla port, an elevated roadway between some part of the distance between Dhaka and Chittagong, the government is going ahead with plans to build four lane bridges across the Meghna and Gomti rivers.  The government intends to complete a significant portion of this work within its current tenure in power.

It’ll be interesting to find out the names of these nine firms.  Perhaps, more important might be the revelation of where these firms are incorporated. 

Already Prime Minister Sheikh Hasina has pointed to China as a principal source of development funding and investment.

Sheikh Hasina’s is embarking on her  first state visit to China since assuming office.  Upon Prime Minister Wen Jiabao’s invitation, she has scheduled a five trip.  The Daily Star reports on all that she hopes to negotiate from China.

“The projects include construction of Second Padma Bridge at an estimated cost of $579 million, Karnaphuli Tunnel at a cost of $289 million, single line metre-gauge railway track from Chittagong to Gundum near Myanmar border at a cost of $210 million, Second Meghna-Gomti Bridge at a cost of $125 million, a railway bridge with a dual-gauge double track over the river Jamuna at a cost of $172 million and Kazirtek Bridge over Arialkha river at an estimated cost of $22 million.”

Image: Shahidul Alam, NY Times Lens Blog

Bangladesh has the disreputable distinction of being a democracy that supports a killing squad.  The Rapid Action Battalion, an “anti-crime” paramilitary group that  has killed more that 550 people, under circumstances that are, at best, suspicious.  The smarter bet is that this group has been engaging in extra-judicial executions–killings that, so far, seem to be state sanctioned.   

Brad Adam’s the Asia Director of Human Rights Watch, the  renowned advocacy group has examined RAB activities and has claimed that:

“RAB’s own announcement [on the observation of far too many "cross-fire" killings] makes it clear that this case fits the pattern of execution-style killings that the unit has carried out since its inception….This is a challenge to the government’s promise to end these killings, and the government needs to make clear they will not be tolerated.”  (The interested reader can find an earlier 2006  Human Rights Watch report on RAB activities here.)

Since its inception in 2004, the RAB has been thought responsible for the executions of criminals, drug peddlers, and political opposition leaders.  Indeed, members of the RAB were recently suspected of executing a member of their own group.  The guardians have been killing their own.

In this context, artist, photojournalist and activist Shahidul Alam’s work shines a literal spotlight on RAB activities.  As you can see above, his photographs illuminate those spaces mentioned and silenced in state reports.  There is the glow of life and the smoking hum of spent cartridges.  This work points to all those things that point back to the absurd justifications that the state has hoisted on its people, all that seems to have been expunged from official accounts.  

Please view Shahidul Alam’s work on the New York Times Lens Blog and then go visit the Drik Gallery in Dhaka to find out more about this work, if time and bandwidth capacity– and, perhaps, visa limitations–permit.

Given the milestones that have marked the recent history of the overwhelmingly successful microfinance institution (MFI) business model, it is only appropriate that there be some consideration of retrenching and maintaining some sustainability in the MFI market.  Surely none of us are so secure in the obvious beneficences of micro-finance that we cannot fathom that in even in such a vulnerable market we might observe incidents of  interest rate gouging and other less-than- beneficent practices.

So it is in this spirit that some of the speakers at the conference– appropriately title “Microfinance Regulations: Who Benefits?”–suggested that the microfinance managerial and business practice lags behind MFI market penetration.

Indeed, as the Daily Star reports, the Finance Minister of Bangladesh AMA Muhith claimed that “Microfinance has some problems. To me, these are high interest rates and charges,” he said while inaugurating a three-day international conference on microfinance at Sonargaon Hotel in the city.”

Again, according to the Daily Star “Muhith said the borrowers are getting into “a debt trap” in microfinance. The number of people coming out of poverty level through microfinance is not that much.”

Furthermore, “lamenting that the microfinance is also leading people to low-level technology trap, he said: ‘We have to think how to get out of this trap.’”

The problem is the following: MFI’s serve the poor, but the rates at which the loans are returned are too high to sustain the savings of the poor and therefore investment and growth in any business these entrepreneurs might establish.  Whereas banks serve 44% of the adult population in Bangladesh, MFI’s provide credit to 24% of Bangladesh’s adult population, but at exorbitantly high interest rates. This market though smaller is much more fragile and harder to examine And, of course, this market is constituted only by those individuals who also happen to be among the poorest in the country.  

Though stake holders have long favored establishing non-profit MFI’s or setting a low, flat rate, these ideas have not gained traction.   Given the small amount of credit doled out the high interest rates do not seem to pose a very big risk to firms and the repayment rate remains high because the amounts to be repaid  are fairly small.  Nevertheless the industry has long maintained its own governance structure but as more MFI’s are being overseen by an increasing web of nepotist family connections, the case for regulation has grown stronger.

To that end, the DFID Bangladesh country representative Chris Austin said: “Sound regulation prevents the kind of irresponsible financial practices that we have witnessed in the recent past in developed markets.”

The government of Bangladesh will shortly approve  the first set of regulations governing the operation of MFI’s.   Among other tasks, the Microcredit Regulatory Authority in Bangladesh will be charged to help bring about policies that will increase and keep safe the savings of the poor.

Border skirmishes around Jaintapur and Padua threaten to destabilize the hard won amity that Bangladesh now shares with India.

The Daily Star reports:

“Indian Border Security Force dug 25 bunkers following an overnight intrusion into Bangladesh territory through Padua-Protappur border in Gowainghat upazila of Sylhet and retreated yesterday afternoon after 19 hours.”

“The BSF’s retreat from about 100-yard inside the international border came after an emergency flag meeting with Bangladesh Rifles from 1:30pm to 3:30pm on ‘no man’s land’ at Padua-Protappur amidst tension prevailing since Friday night.”

“Earlier, around 9:00pm on Friday BSF trespassed into Bangladesh territory through border pillars No 1270 and 1271 and dug 25 bunkers while BDR took position in the nearby area and dug eight bunkers.”

So far the moves and exchanges seem, on the whole, quite civil.  Nevertheless, even the smallest eruption could trigger fatalities and the whole house of cards could come crashing down.

There are two new Economist articles that highlight the impact and consequence of micro-credit, or more generally micro finance institutions, that in Bangladesh moved millions of families away from the gaping jaws of extreme poverty, toward  a vision of more sustainable, capability oriented lives. 

The first article deals with innovations that have empowered women. Though the article is principally about a new paper examining 8 innovations that have improved women’s lives the world over, readers of this blog might take notice of things that often go unremarked.

The Economist declares: “Two recent innovations have garnered a lot of attention for the way they empower women. One is microcredit, a system of lending to very poor people, the majority of whom are female microentrepreneurs who are thus helped to climb out of poverty. The other is the mobile phone, which among other things has led to the emergence of an army of “telephone ladies” in countries such as Bangladesh, who earn a decent living by buying a phone and renting it out to other villagers.”  This is the ticket out from extreme poverty for many people, and though it might not make the evening news, attention must be paid.

The second article, published by the Economist deals with the feasibility of establishing micro-savings plans as part of the broader move to build microfinance capacity in many less developed countries.

Again, the Economist:

“That [the extreme poor, those who live on $2 a day] can borrow at all is partly due to the rapid growth of microfinance, which specialises in lending small amounts to poor people. Several big microfinance institutions (MFIs) also offer savings accounts: Grameen Bank in Bangladesh is a prominent example. But the industry remains dominated by credit, and the ability to save through an MFI is often linked to customers’ willingness to borrow from it. Of 166 MFIs surveyed in 2009 by the Microfinance Information Exchange, a think-tank, all offered credit but only 27% offered savings products. Advocates of a greater variety of financial services for the poor argue for more balance.”

“This may be on the horizon. More MFIs are becoming interested in the potential of savings, thanks partly to the global financial crisis. A majority of more than 400 MFI managers surveyed last March by the Consultative Group to Assist the Poor (CGAP), a microfinance group based at the World Bank, said that they had faced liquidity problems during the crisis (see chart). This, together with rising financing costs and exchange-rate fluctuations for those MFIs that rely on external finance, has prompted many “credit-only” MFIs to warm to the idea of funding at least part of their lending activity using local savings.”

The discussion has only just begun.

Bangladeshi entrepreneurs are ahead of the curve again.  This time its innovations in agricultural development and production.  The good news at issue is: using 40% less nitrogen fertiizer, farmers have increased rice yield by 20%.

And why is this a significant achievement?  The NY Times blog Green Inc has some answers:

“Chemical fertilizers  are critical to raising crop yields, but their cost has been prohibitive for many subsistence farmers, particularly those in Africa.”

“The inefficiency of fertilizer application is also a major problem. By some estimates, as much as 70 percent of nitrogen fertilizer applied to crops in developing nations is lost to runoff or released into the atmosphere, contributing to coastal “dead zones,” global warming, ozone layer depletion and other problems.”

Given these staggeringly difficult problems, along cames the following new way of applying nitrogen fertilizer to crops.  ”The new technology is fairly simple. Rather than applying urea, a nitrogen fertilizer, to the soil surface in tiny granules, the urea is compacted into briquettes and placed several inches below ground.”

“These briquettes release nitrogen slowly, dramatically reducing the amount of fertilizer washed away by rain or absorbed by the air. The technique has raised rice yields while limiting the amount of the nitrogen available to weeds, curbing herbicide use.”

The U.S. based NGO International Fertilizer Development Center helped put out these new nitrogen briquettes.  There work could not have come sooner: while  global commodities prices have risen, the price of  chemical fertilizers has grown three-fold.  Hence, not only is the new technology socially and ecological more efficient, it is also more cost-effective and as such, nearly 2 million acres of farming land are now employing the” urea deeply placement” technology.  Indeed, more than a million enrollees are expected to join.

Finally, “the success in Bangladesh has generated interest internationally, particularly among nations in sub-Saharan Africa where fertilizer use has long been cost-prohibitive for subsistence farmers. So far, four delegations from Africa — with representatives from Malawi, Uganda, Nigeria, Togo, Mali, Burkina Faso, Niger, Madagascar, Senegal, Rwanda, Burundi, Congo and Kenya — have visited Bangladeshi farms and briquette factories.”

The High Court in Dhaka quashed all the corruption charges brought against sitting Prime Minister Sheikh Hasina for her involvement in purchasing Russian MIG-29 planes during her previous term in office.   The charges, brought by a group that was associated with the BNP-led coalition were dropped declared the Court because the charges were meant to tarnish Sheikh Hasina’s repuation and there was evidence that she or her government had engaged in any irregular activity during the proceedings. 

Germany’s DPA reports the news:

“The case was lodged by Bangladesh Nationalist Party (BNP)-led alliance government of Khaleda Zia immediately after Hasina lost power in the 2001 elections. Hasina and six others were accused of incurring financial losses to the state of 129 million US dollars in the purchase of eight Russian MiG-29 fighter planes. The former Bureau of Anti-Corruption, the predecessor of the current Anti-Corruption Commission, had lodged the corruption case.”

Interestingly, just today, Sheikh Hasina revealed her defense purchase plans on the occasion of the Bangladesh Air Force annual exercise.

The Daily Star reports:

“Prime Minister Sheikh Hasina yesterday unveiled her government’s big defence purchase plan to procure fighter aircraft, surface-to-air missile system, helicopters, air-defence radars and armaments for [the]Bangladesh Air Force soon.”

Promising the largest defense budget in the history of the Air Force, Sheikh Hasina reassured her audience that she would also pay attention to the social welfare of the members of the Air Force.  At the top of her list of priorities, she claimed is to ensure the financial solvency of the members of the Air Force.

It is noteworthy, then,  that along with her commitment to a knowledge based Air Force, she insisted that she would increase the number the participation of the Air Force in United Nations Peacekeeping Missions.