Since Aug. 5, 2024, Bangladesh has closed the door on the exploitation of the country’s financial and economic resources by a corrupt cabal of the ruling Awami League (AL) government through state-perpetrated violence and manipulation of Bangladesh’s electoral and criminal justice system. One uncertain thing in this equation is the incoming U.S. President Donald Trump’s close ties with India’s Prime Minister Narendra Modi, whose country has lost over 15 years of political and economic investment and goodwill in Bangladesh. Trump’s disapproval of the chaos that visited Bangladesh in the popular uprising against the then Prime Minister Sheikh Hasina in November 2024 was the result of sporadic attacks on temples and churches carried out by the supporters of some right-wing groups who had suffered most under Hasina and the fear of reprisals against Christian and other minority communities. But the worst did not happen and Bangladesh survived its reputation as a nation of sensible and tolerant people. The head of the interim government, Mohammad Yunus, who won the Nobel Peace Prize in 2006 for his seminal work on microcredit and microfinance for poor households, has continued to enjoy international support and is trusted by global financial institutions.
How to enhance the economy
Economic instability is a major threat to Bangladesh. Hasina and her cronies left a big mess behind, particularly in the banking sector, which reportedly lost $17 billion in untraceable overseas fund transfers. Besides financial and economic stability, Bangladesh also needs to work on security and judicial reforms, strengthening accountability mechanisms and restoring the credibility of the election commission, which touched the abyss at the January 2024 rigged elections, which were boycotted by Bangladesh National Party (BNP) and Bangladesh Jamaat Islami (BJI).
A scramble to gain influence with the Interim government is evident in Dhaka as international actors and Bangladesh’s trading partners engage with the new government for trade and investment opportunities. This is due to the gap created by India’s loss of dominant position in Bangladesh after the departure of Hasina. The Interim government needs to carefully assess the incoming offers of international assistance and the conditionalities attached to them. Sometimes, poorly negotiated financial and investment agreements cost the receiving country heavily over the long term, even if they appear beneficial at the time of negotiations and seem to meet the urgent needs of the country on tight timelines.
Relations in the global order
Bangladesh needs to decide on its new position in the strategic, financial and economic blocs in the emerging international order. The strategic alliances in this region are led by the U.S. and managed in keeping with India’s sensitivities. These countries control the flow of foreign direct investment (FDI), the Bretton-Woods system and international financial institutions. They will try to prevent Bangladesh from moving closer to China and Russia in defense procurement and finding alternate development options. However, Bangladesh can still benefit from improving economic and trade relations with these countries and build direct trade routes, aviation links and institutional networks with China and Russia, not as a replacement to the West and India, but in parallel with these countries to reduce its dependency on one bloc.
Bangladesh has enjoyed preferential treatment in the EU on textile quotas. It is on its way to becoming a Middle-Income country in November 2026 from the current EU preferential trade status of Least Developed Country and Lower-Middle-Income Country. Bangladesh has less than two years to diversify its economy and reduce its dependence on textile exports, which are currently the mainstay of its exports.
Bangladesh also needs to work out its relations with Myanmar, which went sour following the influx of Rohingya refugees into Chittagong after the racially inspired riots in Myanmar in 2012-13. Since 2017, Bangladesh has hosted 1 million Rohingya refugees, which is a drain on its economy. They must be repatriated to Myanmar under a deal acceptable to all sides.
The U.S. and other Western countries do not have the moral high ground to lecture the Interim Administration in Dhaka about democracy and human rights. At the height of political oppression under Hasina in 2023, French President Emanuel Macron visited Bangladesh and signed a deal for the sale of Airbus passenger aircraft to Bangladesh without uttering a single word about democracy and human rights. The West, as well as India, observed benign neglect when Hasina and her cronies were transferring billions of corrupt Dollars abroad and illegally building their personal real estate empires and offshore investment portfolios.
India’s ending influence
India has always enjoyed a privileged position in Bangladesh, being a supporter of its national liberation movement and the largest trading partner due to its proximity to Bangladesh and market size. But unlike the U.S.-Canada or Australia-New Zealand relations, which are good examples of a big country, small country bilateral relationship, some accuse India of exploiting Bangladesh for its benefit at the expense of the interests of the people of Bangladesh. The unequal and unfair partnership of India with Hasina and her cronies resulted in popular disapproval of India in Bangladesh and reached its crescendo last year during the protests. By granting asylum to Hasina in August 2024, India showed her full support to the ex-leader to extract maximum advantage from Bangladesh while ignoring the interests of the people of Bangladesh.
Both India and AL need to accept the reality that business will not be as usual in the next phase of Bangladesh-India relations. The damage caused by the AL cronies cannot be repaired in a few years. AL should reinvent itself as a political party of the people removed from the shadow of India, Sheikh Mujib and her daughter who have become synonymous with autocratic rule and have remained controversial in Bangladesh’s post-independence history and have left a blemished track record which is hard to defend.
An old and new ally
Pakistan has had a choppy relationship with Bangladesh. It enjoyed periods of good relations with Bangladesh during the military and BNP/JI coalition governments but not under the AL government, including the last government, during which India improved better ties with Bangladesh. The reasons for this swing relationship go as far back as Bangladesh’s liberation conflict and the role played by Gen. Zia-ur-Rahman, as well as Sheikh Mujib.
The interim government of Mohammad Yunus has a much-improved outlook toward Pakistan and its institutions. Islamabad has a good opportunity to convert this newfound opportunity into lasting goodwill, but it should tread carefully and not choose to replace India’s lost influence with its own hallmark. Pakistan should also resist the temptation to cultivate ties with only BNP and JI by ignoring other political parties. It should not ignore the fact that AL, minus Hasina and her corrupt cabal, remains a major political party in Bangladesh and may well be in government in the future.
Pakistan should take steps to deepen professional, business and people-to-people contacts with Bangladesh in the fields of trade, communication, tourism, cottage industry, agriculture, poultry and dairy farming, road building, environment protection, youth networks, nongovernmental organization (NGO) cooperation, journalism, sports and culture. These direct contacts will help the people of both countries break the old barriers of hatred that unfortunately prevented an entire generation from knowing each other and using their strengths to derive mutual advantages. At the government level, military cooperation in defense production and exports, satellite and space technology and infrastructure building should be pursued based on mutual benefits. Both countries also need to increase their consular and trade representation in the big cities.
Pakistan should also stay clear of the ongoing controversy in Bangladesh about the status of Mujib as the father of the nation, despite the temptation to be drawn into it due to his misquoted statement about the death of millions of Bengalis at the hands of the Pakistani military establishment which keeps cropping up in a discussion on the history of Bangladesh even today.
Recently, a video interview of Col. Shariful Haq Dalim, who was accused of collective planning of Mujib’s assassination in 1975 but survived Hasina’s trials of her father’s murderers due to his self-exile abroad, has gone viral in Bangladesh, where he has corrected this misquoted number in his unique capacity as a close associate of Mujib and a freedom fighter. He also received the highest military award in Bangladesh for his services to the freedom movement and establishing the security structure of post-independent Bangladesh. The debate about the father of Bangladesh and the number of freedom fighters killed in the struggle is entirely a matter for Bangladesh to decide with national consensus. Pakistan or India should not attempt to rewrite the history of Bangladesh from their perspective.
Bangladesh’s friends should encourage the interim government to pursue inclusive policies to develop a national consensus on the country’s security and foreign policies, which do not have to be a zero-sum game. The goals of the Interim government may be ambitious, but these are not impossible to attain, provided that regional and international powers do not meddle in Bangladesh’s politics by choosing their favorites for a quid pro quo at a later stage. In counseling Bangladesh about these matters, Pakistan enjoys a unique position due to its own national experience and loss.
