Bangladesh Cancels Naval Shipbuilding Contract with India

 

Bangladesh has reportedly canceled a $21 million shipbuilding contract with India’s state-run Garden Reach Shipbuilders and Engineers (GRSE). The deal was signed last year between Bangladesh Navy and GRSE, and it involved construction of an 800-ton ocean-going tug, financed with a $500 million credit extended to Bangladesh by India for purchase of defense equipment.

However, following the ouster of Bangladeshi Prime Minister Sheikh Hasina last August, the country’s ties with India are in the doldrums. A week ago, India limited imports of ready-made garments from Bangladesh, blocking 11 traditional land routes for the trade. Earlier, India had also canceled a transshipment agreement that allowed exports of goods from Bangladesh to third countries. These trade restrictions are seen as a tit-for-tat move after Bangladesh banned imports of yarn from India by land routes.

Further, the withdrawal of the naval contract has been interpreted as another escalation in the deteriorating trade ties between the two countries. The cancellation of the tug order was made public through a stock exchange filing by GRSE.

“In line with the Disclosure Requirements provision of the Securities and Exchange Board of India, we wish to inform you that the government of Bangladesh has cancelled the order,” said GRSE.

During the reign of Prime Minister Hasina, India had been eyeing Bangladesh as a key market for its military exports. At the signing of the tug contract, it was hailed as a first major shipbuilding deal opening up Bangladesh market to Indian shipbuilders. GRSE had also signed a contract with the Bangladesh Inland Waterways Authority to build a trailing suction hopper dredger valued at $16.6 million.

China remains the largest supplier of naval equipment to Bangladesh. This defense cooperation has become even stronger under the leadership of Mohammad Yunus, the Bangladeshi interim leader, whose foreign policy appears to favor China.