Bangladesh Turns to China for Loan Under Strict Conditions

Bangladesh is developing a dedicated Chinese Economic Zone in Anwara, Chattogram, to attract Chinese investment. However, fresh debate has emerged over the project's financing structure. Although the economic zone is primarily being established for Chinese investors, Bangladesh is also taking a substantial loan from China to build its infrastructure. A significant portion of that loan comes with conditions that give China direct influence over everything from contractors to technology.

The project, estimated to cost Tk 4,189.45 crore, is scheduled to be presented at the meeting of the Executive Committee of the National Economic Council (ECNEC) today, Tuesday. Of the total amount, nearly Tk 2,467 crore will come as a loan from China. About 85 percent of the loan will be provided under Preferential Buyer’s Credit (PBC), under which a contractor nominated by the Chinese government will implement the project. In addition, Bangladesh will have to procure technology and various equipment from China.

As a result, some experts have raised questions, noting that Bangladesh is providing the land while also taking a conditional loan from China to build the infrastructure. They argue that policymakers need to consider whether the project could ultimately prove more beneficial for China than for Bangladesh.

The government, however, views the matter differently. Planning Secretary SM Shakil Akhtar said that once the economic zone becomes operational, various Chinese companies will invest there, creating new employment opportunities. He said the project would also support the government's goal of increasing employment. According to him, it would not be appropriate to describe the loan as carrying strict conditions; rather, the country's economy would benefit in the long term from the infrastructure facilities created under the project.

Sources said the project is moving forward under a memorandum of understanding signed between China's Ministry of Commerce and the Bangladesh Economic Zones Authority (BEZA). Earlier, in 2016, the two countries signed an agreement titled “Strengthening Investment and Production Capacity Cooperation.” Subsequently, the Bangladesh government acquired nearly 800 acres of land to establish the Chinese Economic and Industrial Zone (CEIZ).

The Planning Commission has reviewed the project several times. Although it initially recommended reducing both the cost and implementation period, those recommendations were not fully reflected in the revised Development Project Proposal (DPP). Following further review, the project's cost was set at Tk 4,189.45 crore, and the implementation period was fixed from January 2027 to December 2031.

Former Planning Secretary Mamun-Al-Rashid believes Bangladesh has limited bargaining power when negotiating foreign loans. However, he said the biggest challenge would be ensuring the quality of the technology and equipment used in the project. In his view, a skilled and specialized committee should carefully examine and verify those materials.

Speaking on condition of anonymity, an additional secretary of the Economic Relations Division (ERD) said buyer’s credit is generally a financing arrangement that requires the borrower to procure contractors, technology, or equipment from the lending country. Although the interest rate and repayment period may be relatively flexible, he said the actual terms and conditions should be reviewed in detail.