Bangladesh, whose defence budget was around $1.6 billion for the ongoing fiscal year 2011-12, has had a consistent defence budget during the previous fiscal year also -- around $ 1.52 billion.
The country has been focussing on modernisation of its defence ever since the stalemate at Bay of Bengal with Myanmar in November 2008. The Bay of Bengal has been perceived as a potential source for hydrocarbons ever since India discovered 100 trillion cubic feet of gas in 2005-06 and Myanmar discovered 7 trillion cubic feet of gas in the bay. India has also discovered oil.
Bangladesh and Myanmar had both claimed 150,000 sq km of the bay since 1974, when the first talks for delineating the maritime boundary was initiated between the two nations. This came to a halt in 1986 and began again in November 2007, after, over 20 years.
In October 2008, while visiting Dhaka, Myanmar Energy Minister Brigadier General Lun Thi had assured his Bangladeshi counterpart that they "would not conduct gas exploratory work in the disputed maritime boundary area until the issue was settled" between the two nations.
However, on November 1, 2008, four drilling ships from Myanmar, escorted by two naval ships, initiated exploration for hydrocarbon reserves within 50 nautical miles, south west of St Martins Island of Bangladesh, a disputed maritime territory at the time.
According to media reports, when three naval ships of Bangladesh went to challenge the Myanmar vessels, the Myanmar navy alleged that the Bangladesh naval ships were trespassing. This aggravated the dispute as Myanmar vowed to continue with the exploration despite the dispute with Bangladesh. The Bangladesh government warned the Myanmar envoy in Bangladesh to suspend all activities within the declared maritime zones of Bangladesh according to the Territorial Waters and Maritime Zones Act 1974 of Bangladesh.
Ties between the two countries have been tense ever since, with Myanmar, from time to time, increasing forces near its borders with Bangladesh. Bangladesh also set up a naval base and an air base in Cox's Bazar and army base at Ramu near the borders.
China has been one of Bangladesh's top sources for arms in the past few years. Bdnews24.com in Bangladesh, in a report on the multibillion-dollar revamp of the Bangladesh air force, quoted from a report of the parliamentary standing committee that "Bangladesh installed short range air defence system in December last year. It signed agreements last year to buy one squadron (16) of F-7 BGI fighter planes, three MI-171 helicopters and two AD radars". The total cost of all this can be between $600-$800 million.
The same report also mentioned, "Bangladesh will also procure one squadron of MRCA (multi-role combat aircraft) advanced jet trainers and high-powered radar under long-term loan protocol from Russia", the total amount of which is estimated to be around $850 million.
Earlier, last year, the Bangladesh army announced the procurement of 44 Main Battle Tanks, three armoured recovery vehicles from China at a total cost of $164 million. The army was also procuring two new helicopters from France at $21 million. Also, in process, at the time was the procurement of buying 18 new cannons.
The arms deal between China and Bangladesh is also facilitated by strengthening ties between the two countries and Bangladesh's continuous pressure to China on closing the trade deficit that Bangladesh faces with China.
During the last fiscal year of 2010-2011 that ended June last year, Bangladesh imported around $7 billion worth of goods from China, thus accounting for 21 per cent of Bangladesh's total imports last year at $33 billion. On the other hand, China imported around $400 million worth of goods from Bangladesh.
Hence, Bangladesh has pressed China to invest and provide more aid into Bangladesh's infrastructure, energy and other sectors.
China is scheduled to provide $486.01 million, out of the total cost of $659.3 million, for the construction of Shahjalal Fertilizer factory in Sylhet of Bangladesh. The remaining funds will be provided by Bangladesh.
The project is the "second-largest foreign investment" in Bangladesh, after only India's investment to build a US$1.5 billion coal-fired power plant in Bagerhaat district of Bangladesh in January of this year, confirmed a senior official of the industries ministry of Bangladesh to rediff.com recently.
Another Chinese investment which will be important for Bangladesh is the installation of a centralised effluent treatment plant at the under-construction Savar Leather Industrial Park in Savar, around 20 kilometres northwest of Dhaka.
The Chinese joint venture of JLEPCL-DCL was awarded the project of setting up the plant at a cost of $ 58.34 million within 15 months through a deal that was signed between the company and Bangladesh Small and Cottage Industries Corporation on March 11.
While talking to reporters of the Independent in Dhaka, Bangladesh on April 26, Chinese ambassador Li Jun mentioned that there will be a "new wave" in relations between Bangladesh and China. He also predicted an upsurge in Chinese investments in Bangladesh in the coming days in "for machinery building and light industries as labour cost has become higher in China".
"Since I came here about two months ago, more than 20 Chinese companies came to Bangladesh to inquire about investment in Bangladesh. There is a huge opportunity of cooperation and I will do my very best to make that happen," he said.
However, India is warily monitoring the China-Bangladesh relations. The cautious attitude of India's officials can be realised from a recent comment by Veena Sikri, former Indian high commissioner to Bangladesh.
"China has no people-to-people relations with any countries, not even with Pakistan," IANS quoted Sikri as saying on April 27. "China has been developing its relations in its own way. It (China) has only strategic, administrative, diplomatic relations with many nations," she added.
Sikri was one of numerous experts from India and Bangladesh at a two-day long seminar titled 'Northeast India in Transition: Tripura - the Commerce and Connectivity Corridor between India and Bangladesh', organised by Kolkata-based Maulana Abul Kalam Azad Institute of Asian Studies, an institution under the central government's Ministry of Culture, at Agartala.