Bangladesh Navy to negotiate for Chinese $1 Billion Credit

Dhaka will soon engage in negotiations with Beijing to secure one billion US dollar credit line which will be spent on purchase of Chinese naval equipment, new naval platforms and construction of naval bases.
The proposed defense purchase will be the highest ever single deal Bangladesh is expected to ink with the world’s second largest economy, a top official in the Prime Minister’s Office said on Monday.
The PMO last week asked both the defense ministry and finance ministry to finalize the terms and conditions of the Chinese credit line to modernize Bangladesh Navy.
The purchase from China will be the second such huge defense deal struck by the incumbent government after January last year when an agreement with Russia to procure US$ 1 billion worth of Russian-made arms, including armored vehicles and infantry weapons, air defense systems and Mi-17 transport helicopters was signed in Moscow.
‘The move to procure China-made naval equipment and modernize naval bases suggest a strong commitment of the government to empower its security regime and protect its maritime frontiers,’ a senior PMO official told New Age, preferring anonymity.
He said the Bay of Bengal has become a center of attention for regional as well as extra-regional powers because of substantial discovery of natural gas off the Indian and Myanmar coasts.
In 2002, China and Bangladesh signed defense cooperation agreement which covers military training and defense procurements.
A director general of PMO in his written directives asked the ministries concerned to go ahead with the expression of interest submitted by the Chinese state-owned enterprise—Poly Technologies Inc.
The EoI, seen by New Age, said Poly technologies Inc. is willing to provide a credit package up to one billion US dollar to Bangladesh ‘to facilitate the naval equipment development and modernisation, including acquisition of new naval platforms with related equipment and construction of naval bases.’
‘The repayment period will be eight years including two years grace period. The credit package will also incorporate the best terms and conditions that Poly Technologies Inc. can offer, which can be discussed/negotiated in due course,’ reads the EoI.
When contacted, officials at the defense ministry declined to comment on the ongoing procurement plan, saying, ‘We have little role on the proposed Chinese credit line and procurement of naval equipment from China as the entire issue is being dealt by the PMO.’
An official, however, said that in recent years Poly Technologies Inc. supplied Bangladesh navy off-the-shelf 053H2 frigates and 035G submarine.
The officials at the economic relations division of the finance ministry, which is mandated to negotiate foreign credit or supplier’s credit or foreign concessional loans for the government, said the proposed Chinese credit line of US$ 1 billion could be either commercial loan or a supplier’s credit.
‘We will soon initiate the process of negotiation with Chinese authorities as the PMO signaled a go-ahead,’ a senior ERD official said.
‘The terms and conditions, or modes of the credit will be finalized at the discussions.’
The defense officials said they needed more naval bases as the existing only 22 bases were not enough.
They said Bangladesh Navy has got Chinese frigates and missile boats.
Bangladesh emerged as a major buyer of weapons made in China from 2006. China sold 65 large caliber artillery systems, 16 combat aircraft and 114 missiles and related equipment to Bangladesh in 2005. In 2008, Bangladesh set up an anti-ship missile launch pad near the Chittagong Port with assistance from China.