China to become biggest investor in Bangladesh with Chevron acquisition

Dhaka,  Wed,  28 June 2017
Published : 18 May 2017, 00:33:23 | Updated : 18 May 2017, 09:56:45
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China to become biggest investor in Bangladesh with Chevron acquisition

Its envoy says their funds also flowing in here via Singapore, Hong Kong or USA
China to become biggest investor in Bangladesh with Chevron acquisition
FE Report


China is poised to become the biggest source of foreign direct investment (FDI) in Bangladesh with an imminent acquisition of US company Chevron's local assets.

Chinese envoy in Dhaka Ma Mingqiang made this observation Wednesday, adding that China's overflowing funds are also already pouring into Bangladesh via different other offshore sources.            

"Chinese investment in Bangladesh is already higher than what the official figures suggest," he said at a function of the Foreign Investors' Chamber of Commerce and Industry (FICCI) in the city.

"This is because a lot of Chinese investment in Bangladesh is coming via Singapore, Hong Kong or the US," he told his business audience.

According to the figures of the Chinese ministry of commerce, a total of US$ 34.3 million was channelled from China into Bangladesh as foreign direct investment in 2016 while, according to Bangladesh government statistics, this figure amounted to US$ 61 million.  

The Chinese envoy noted that even if the official figures are taken into account, the Chinese investment in Bangladesh had experienced very high annual growth in recent years.

"With a total investment of around US$ 3.3 billion, the US is still the largest source of FDI in Bangladesh. However, more than US$2.0 billion of that investment comes from Chevron alone," Ma Mingqiang said.  

"However, with Chevron selling its local assets to a Chinese company, China is poised to become the largest source of FDI in Bangladesh," he projected.

In April, US energy giant Chevron announced that it had signed a preliminary deal with Zhenhua Oil, a subsidiary of China's defence industry conglomerate Norinco, to sell its shares in the three gas fields in Bangladesh reportedly valued around $2.0 billion.

The deal, if completed, would mark China's first major energy investment in the South Asian country.  

The Chinese Ambassador noted that even without the Chevron takeover, China would have eventually become largest source of FDI for Bangladesh due to the large Chinese investments that are due to come in the power and infrastructure sectors.

"For example, one Chinese company is going to invest around US$ 2 billion in the coal-based mega-power plant in Payra and the deal is going to be signed very soon," said the diplomat from the rising economic superpower that splurges billions of its surplus dollars for economic and development activities under its 'One Belt, One Road' flagship.

He noted that there are two factors that can drive Chinese investment into Bangladesh.

"One factor is that the labour cost in China is getting higher and the Chinese companies are looking at overseas destinations with lower labour cost to stay competitive.

"Secondly, we see a lot of untapped opportunities of investing here in power and infrastructure, including rails, roads and bridges."

The Chinese Ambassador, however, pointed out that there are several challenges for Chinese companies to invest in Bangladesh.

"For example, the Chinese companies face difficulties in the acquisition of land while there are lots of ambiguities in the ownership of land as well. At the same time, the land price is also quite high," Ma Mingqiang told the function of foreign investors.

"While investing in the economic zones, we found that a lot of those lands are low-lying and located in haor areas," he added.

The diplomat also identified inadequate infrastructure, frequent power outage and delay in gas connection as major hurdles.

"The import duty on necessary raw materials is also quite high while receiving the necessary customs clearance is also quite time- consuming," the Chinese envoy said.  

"Although, a good number of banks are operational in the country, most of them do not offer adequate volume of credit," he added.

About a yawning trade gap between the two countries in favour of China, the envoy said there is scope for bringing Chinese investment in export-oriented manufacturing where Chinese companies will manufacture their products in Bangladesh for shipping back home.

Speaking on the occasion, FICCI President Rupali Chowdhury said Chinese companies can undertake joint ventures with the local companies while investing in Bangladesh as this would decrease their costs while also providing them with local knowledge.     

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