EAST Asia has been the most dynamic economic region in the world for over half a century. It was first Japan that showed a spectacular economic growth eventually becoming the 2nd largest economy in the world, the rank the country lost to its neighbor China a few years back. Then the rise of a number of Tiger economies- Hong Kong, Singapore, South Korea and Taiwan- in the region stretching from Northeast to Southeast Asia showed that income gap between advanced and lagged economies could be bridged to a large extent within a few decades. The re-emergence of China with a billion plus population after centuries of decline and humiliation has changed the economic and political geography of Asia for ever. Behold the Chinese Empire, Napoleon Bonaparte is reported to have warned. Let it sleep, for when this dragon wakes the world will tremble.
China has awakened following Deng Xiaoping's initiation of economic reforms following the demise of Mighty Mao in 1976. With a persistent near double digit growth for a long period, China is about to become the world's largest economy overtaking the United States in purchasing power parity terms and in terms of real exchange rate sometime by the end of this decade.
The rise of East Asia and steady economic growth in a host of Southeast nations made them the top trading and investment partners of almost all parts of the world. South Asia too has seen a rapid rise of trade with China and other east and Southeast Asian economies. India has pursued comprehensive trade, investment and other economic policies and geo-political strategies, known as the Look East Policy, to draw maximum economic benefits as well minimizing its geo-political risks in engaging with the region. Bangladesh too has witnessed rapid rise in trade with East Asia. China has become the top official trading partner of the country.
Nevertheless, structural change in the Chinese economy and the region's geo-political imperatives have forced Beijing to revisit its economic and foreign policies in the neighborhood. Following the America's 'Asia pivot' that aims to contain the rise of China, the growing tensions in the South China Sea on maritime boundary disputes, not to mention historical animosities with Japan, and to secure its energy routes, China has adopted the 'Silk Route' diplomacy. Under the new leadership of President Xi Jinping and Premier Li Keqiang, the proposal of rebuilding the 'Maritime Silk Road' and 'Silk Road Economic Belt' are manifestations of Beijing's 'two-wheel' approach: development and security.
This whole new approach intends to connect history with the future. That China is reemerging as a regional as well as a global power after centuries of decline, signals an intent to revive both the land and sea silk routes connecting its immediate neighbourhood, namely Central Asia, Southeast Asia, South Asia as well as Middle East and Africa. Moreover, the new policy, according to some Sinologists, is also in line with the 'Chinese dream' that underscores shared prosperity.
China is developing ports and other maritime infrastructure across Asia. China also plans to develop a number of economic belts from the Central Asia to South Asia. In South Asia, there is some progress with regard to the development of the BCIM, an Economic Corridor that intends to connect China with India, Bangladesh and Myanmar physically.
Historically, Bangladesh was part of both land and maritime silk routes. Thus, as far as Dhaka is concerned, Beijing's plan offers a host of new possibilities that could change the economic geography of the country. While Bangladesh has maintained good ties with China, never in history has the Middle Kingdom emerged as an indispensable economic partner of the country as it stands today. Dhaka now realizes that it is a comprehensive economic partnership with Beijing that could change its physical infrastructure and could help Bangladesh become a manufacturing nation, encouraging China and other East Asian economies to invest and relocate their manufacturing units in Chittagong and other coastal belts of the country. These economic engagements are critical for Bangladesh to develop a modern urban economy taking its growth to a new trajectory.
For Prime Minister Sheikh Hasina, China matters for other imperatives as well. Her government has been less than successful in improving the governance structure of the country. World Bank and other multilateral agencies withdrew from the Padma Bridge and other projects on corruption charges. Political uncertainties in recent years discouraged private investors to commit fresh investment.
Sheikh Hasina and her party have not been in a comfortable situation internationally, particularly in managing relations with the West, following the controversial elections of 5 January. However, China and other countries of East Asia that do not have track records in meddling in other countries' internal matters- be it governance or be it election- came to her rescue agreeing to work with her government closely.
It is in this changing perspective that Prime Minister Sheikh Hasina's visit to Japan and China is very important for Bangladesh. Given the changing economic scenarios in the West and the political imperatives at home, Bangladesh has to ensure that aid and other assistance that it receives does not dry down suddenly. The Prime Ministers' Japan trip was a success as she was assured by Tokyo of channeling a loan of $1.18 billion in the next fiscal for five projects, mostly in the energy and city development sectors.
Prime Minister's China visit that starts from today might see the signing of a number of high profile projects, including development of a deep sea port in Sonadia, Chittagong, with Chinese assistance. If the deal is finally signed, it could change the economic geography of Bangladesh. That Bangladesh has settled its maritime boundary disputes with Myanmar and is likely to do the same with India sometime this year, it stands to develop an ocean economy (also know as Blue Economy) in the Bay of Bengal, opening new economic opportunities in the world's largest Bay. From China's perspective, this project is a priority as it is in line with Beijing's maritime silk route development strategy in the region.
Dhaka-Beijing breakthrough pertaining to the deep-sea project could largely determine the future flow of Chinese investment in Bangladesh's infrastructure projects. The government has already sought Chinese help to develop a large number of infrastructure projects. China has emerged as a leading source of FDI - outflows from China continue to grow, reaching $84 billion in 2012 (a record level), this excludes Hong Kong that also invested $84 billion overseas in 2012.
Like what Bangladesh has promised to Japan, it should also attract Chinese investment in the manufacturing sector. Manufacturing is important- without developing a modern manufacturing sector, Bangladesh will face increasing difficulties to absorb millions of youth in the labour market and will not be able to see fast rise in its per capita income growth.
Looking forward, Prime Minister Sheikh Hasina's trip to China and Japan signifies that Bangladesh has to look towards its Eastern neighborhood for its future sources of economic development. That will largely depend on how fast it develops its fragile infrastructure and develop a modern manufacturing sector attracting Chinese and other East Asian investment.
The write is a research fellow at the BRAC Institute of Governance and Development (BIGD), BRAC University.