China may commit more than $23 billion for the next five years under an agreement to boost investment in Bangladesh and strengthen production capacity cooperation.

The Bangladesh finance minister and the Chinese commerce minister are likely to sign the agreement today during Chinese President Xi Jinping's landmark visit.

The draft of the agreement on strengthening investment and production capacity cooperation was approved by the cabinet on Monday.

 

According to the draft Memorandum of Understanding, both sides would encourage organisations and enterprises of the two countries to cooperate in the fields of infrastructure construction, energy and power, transportation, communication and establishment of economic and industrial zones and other fields.

Seeking anonymity, a finance ministry official said the MoU initially contains the names of 28 projects without mentioning the amount of Chinese funds. More projects would be included in it upon consultations between both sides.

Some of the projects have already been approved by the Executive Committee of the National Economic Council (ECNEC) and the Cabinet Committee on Economic Affairs, said the official.

According to an initial estimate by the government, Chinese financing would be around $23 billion, and there would be five cooperation approaches, added the official.

These are: Investment, both direct and indirect; infrastructure construction and operation, planning, design, supply, construction, operation and technical cooperation; construction of economic and industrial zone, scientific park, process zone, development zones and special economic zones; technology communication and transfer; personal  exchange and training; and labour service cooperation.

If needed, the two sides would jointly formulate medium and long-term development plans on investment and capacity cooperation, and adjust the list of the key projects mentioned in the MoU.

According to the draft, in case of projects supported by Chinese concessional funds, Bangladesh would select Chinese enterprises for their implementation in line with the country's existing laws and China's relevant policies.

Under the MoU, Bangladesh's Economic Relations Division and China's Department of Outward Investment and Economic Cooperation would work together so that the commitments are implemented properly.

If necessary, they would hold meetings from time to time and solve the problems.

The official said the tenure of the MoU would be two years, and it would be automatically renewed for two more years unless any of the two sides writes to the other for terminating it six months prior to its expiry date.

The tenure of the MoU may be extended further if both the countries want so.

Since Sheikh Hasina assumed the office of the prime minister in 2009, she visited China twice -- in March 2010 and in June 2014.

After her 2014 visit, Bangladesh sent lists of dozens of projects to the Chinese government for soft loans.

The ministry official said Bangladesh expects big pledges from the Chinese president during his two-day visit.

According to a primary estimate by Bangladesh government, China would finance $5.52 billion for eight projects in the power and energy sector.

The Asian giant has also shown interest in funding five projects involving $6.64 billion in the rail sector. The projects include the 172km Padma rail link.

Beijing may offer $6.65 billion for four projects under the Roads and Bridges Division. The projects include Dhaka-Ashulia elevated expressway, Dhaka-Sylhet four-lane highway and Sitakunda-Cox's Bazar marine drive expressway.

China is expected to provide $1.31 billion for five livelihood projects and $1.15 billion for four projects in the ICT sector.

To attract Chinese investment, Bangladesh government has already allocated two economic zones to Chinese investors in Gazaria and Anwara of Chittagong.

China may offer soft loans for developing these zones, another finance ministry official told this correspondent on condition of anonymity.

Apart from the MoU, a loan framework agreement may be signed for three projects that involve purchase of six ships from China with a loan of $184 million and setting up of Dasherkandi Water Treatment Plant with a loan of $280 million.

Since Bangladesh's independence, China has provided it with $1,519 million in soft loans and grants. Of the sum, $916 million came in seven years from fiscal year 2010 to 2016. The amount was $303 million in the preceding seven years from FY 2002 to FY 2009.

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