Special Report :
The United States is set to engage in high-level economic discussions with Bangladesh’s interim government, led by Nobel laureate Muhammad Yunus, as part of a broader effort to support economic recovery and promote stability in South Asia.
These talks, scheduled for September 14-15 in Dhaka, mark a significant diplomatic move by the US following the ousting of former Prime Minister Sheikh Hasina, reflecting Washington’s increased focus on economic cooperation in the Indo-Pacific region.
The visit is part of a larger diplomatic effort by the US to strengthen partnerships in the region. Assistant Secretary of State for the Bureau of South and Central Asian Affairs, Donald Lu, will travel to Bangladesh between September 10-16, reaffirming the United States’ commitment to fostering economic growth and promoting stability. This trip underscores the strategic importance of Bangladesh, particularly as it undergoes a leadership transition under Yunus.
A crucial component of the US-Bangladesh relationship is economic cooperation, with the United States being Bangladesh’s largest source of foreign direct investment (FDI) and its largest market for garment exports. According to the US Embassy in Dhaka, the US has invested over $4.3 billion in Bangladesh, making it the country’s leading foreign investor.
This investment forms part of a broader US strategy in the Indo-Pacific region, where it has invested nearly $1 trillion as of 2021. The US’s financial commitment to Bangladesh underscores the critical role it plays in supporting the country’s economic infrastructure, especially through industries like energy, manufacturing, and telecommunications.
In addition to being Bangladesh’s largest source of FDI, the US is also the country’s biggest importer of garments, a key driver of Bangladesh’s economy. The garment industry, which employs millions of workers-many of whom are women-constitutes Bangladesh’s most vital export sector.
The US is also the largest contributor to the IMF. Top US companies such as Chevron that extract gas and generate condensate from three fields in Sylhet, Excelerate that runs several LNG terminals in the Bay of Bengal, Coke that operate bottling plants, GE that has invested in the power stations and supplied gas turbines and Texas Pacific Group that owns and operates the Evercare Hospitals in Dhaka and Chittagong are among a long list of such have been serving the nation for decades.
Expected to be included in these talks is the topic of GSP. The US market, a critical destination for Bangladeshi garments, imposes tariffs of around 15-30% on apparel imports, which places a significant burden on Bangladeshi exporters.
If the GSP program were extended to cover garments, tariff-free access would reduce costs for Bangladeshi manufacturers, making them more competitive against countries that currently enjoy duty-free access under trade agreements, such as those from Vietnam (under the CPTPP) or African countries (under AGOA).
Key to these discussions will be labor reforms in the garment industry, a sector that employs nearly four million and is crucial for the country’s economic recovery. The US is expected to advocate for the decriminalization of trade unions and other measures that will improve labor rights, helping Bangladesh’s garment producers secure more international orders.
Muhammad Yunus, who holds a PhD in economics from Vanderbilt University of USA, assumed leadership of Bangladesh’s interim government following the ouster of Sheikh Hasina by a student-led mass uprising. His leadership comes at a crucial time as Bangladesh seeks to recover from economic challenges exacerbated by rampant corruption, out-of-bound money laundering, and state terrorism by the Hasina regime.
The US talks will focus on fiscal reforms, monetary policy, and labor issues, particularly in the garment sector, one of the country’s largest industries and key to its economy.
As the US seeks to bolster economic ties with Bangladesh, these discussions also expose the unraveling of a false narrative that India has long used to justify its influence over its neighbor. For decades, India claimed that an electoral victory by the Bangladesh Nationalist Party (BNP) could turn Bangladesh into a base for Islamist extremism, threatening regional stability.
This narrative has been strategically used by India’s leadership, particularly under Prime Minister Narendra Modi, to frame Islamist terrorism as a persistent threat, enabling India to consolidate its influence in South Asia while discouraging Bangladesh from engaging with other countries like US, Pakistan or China.
However, this narrative is increasingly shown to be baseless. Bangladesh, far from being a hotbed of extremism, has made considerable strides in women’s empowerment, education, and economic growth. The country’s female literacy rate now exceeds 76%, and women make up the bulk of the workforce in the garment industry, which is Bangladesh’s largest export sector. Additionally, Bangladesh has been led by female heads of state for most of its post-independence history, showcasing a society that values female participation and leadership, contrary to the extremism India claims to fear.
India’s argument that Bangladesh is heavily influenced by Islamist forces from Pakistan is also geographically and politically unfounded. Pakistan, which India’s ruling Bharatiya Janata Party (BJP) often portrays as an Islamist state with undue influence over Bangladesh, is over 2000 kilometers away, separated by India itself. This distance-both literal and ideological-makes India’s claims implausible.
While the military regime in Pakistan was responsible for significant human rights violations during the liberation war, the narrative Hasina perpetuated overlooks the reconciliatory efforts made afterward.For instance, Zulfikar Ali Bhutto, Pakistan’s civilian leader following the war, visited Bangladesh in 1974 in an attempt to mend ties between the two nations. In the same year, Sheikh Mujibur Rahman, the founding father of Bangladesh, attended the Organization of Islamic Cooperation (OIC) summit in Lahore.
As Bangladesh transitions under Yunus’s leadership, the US economic talks provide an opportunity for the country to reset its political and economic trajectory.Bangladesh, which sought a $4.5 billion bailout from the International Monetary Fund (IMF) in 2022 to stabilize its economy, is now looking to rebuild after years of political turmoil and economic disruption.
Bangladesh has sought additional $3 billion in loans from the International Monetary Fund (IMF), according to Finance Advisor Salehuddin Ahmed. US is the largest single shareholder of the IMF with considerable influence in the institution’s fund utilization decisions.