CPD recommends fund creation to boost Chinese investment in renewables

The Centre for Policy Dialogue (CPD), a leading private think tank, has urged the interim government to establish a dedicated fund to mitigate foreign currency risks and stimulate investments from China in the country's burgeoning renewable energy sector.

Bangladesh, currently in the early stages of developing its renewable energy sector, could learn valuable lessons from China's success, it said at an event in Dhaka on Thursday (17 October).

The event, moderated by Fahmida Khatun, executive director of the CPD, featured Md Abdur Rahman Khan, chairman of the National Board of Revenue (NBR); Chowdhury Liakat Ali, director of Sustainable Finance Department at Bangladesh Bank; Md Ariful Hoque, director general of Bangladesh Investment Development Authority (BIDA); Syeda Afzalun Nessa, head of sustainability, HSBC; Md Shahidur Rahman, country manager of Jinko Solar Bangladesh; Shafiqul Alam, lead energy analyst at Institute for Energy Economics and Financial Analysis; and Gan Peng, chairman of Chint Solar (Bangladesh) Co Ltd.

In his presentation, "Overseas Investment in the Renewable Energy Sector: How to Attract Chinese Investment in Bangladesh", Khondaker Golam Moazzem, research director at the CPD, stressed the importance of utilising innovative financial instruments like green bonds. These bonds, designed to finance environmentally sustainable projects, could be a critical tool for attracting international investors, particularly those with a focus on sustainable finance, he said. 

Moazzem emphasised that China, a significant player in the green bond market, could serve as a major source of investment for Bangladesh. 

He also noted that public-private partnerships (PPPs) are essential for propelling renewable energy projects forward. By combining government backing with private sector expertise, PPPs could mitigate financial risks and enhance the execution of these projects.

The CPD research director argued that PPP models would enable Bangladesh to unlock new opportunities in the renewable energy space, ultimately helping the country meet its ambitious clean energy targets.

Moazzem also pointed out that Bangladesh's interim government recently "cancelled 37 renewable power plant projects, which had been approved under the previous administration, creating a fresh opportunity for Chinese investment". 

He added, "These projects could now be revived with new investors under improved terms, offering significant potential for collaboration between Bangladesh and China."

The CPD highlighted the country's undergoing an energy transition under the interim government. To meet its renewable energy goals, significant investments are required, with the potential for Chinese financing playing a crucial role, given China's leadership in the global renewable energy market.

The think tank suggested offering financial incentives, such as subsidies for currency swaps, to facilitate transactions between local and foreign investors, particularly given the volatility of exchange rates. 

Additionally, the CPD proposed encouraging local banks to extend loans to foreign investors in taka, reducing their exposure to exchange rate risks.

The CPD further noted that the government is planning to establish 10 grid-connected solar power plants through private sector initiatives, which could serve as a significant test case for Chinese involvement. This opens the door for investors to participate in new projects that align with both Bangladesh's energy goals and China's global leadership in renewable energy, it said.

Bangladesh has set a target of meeting 40% of its energy needs through renewable sources by 2041, a goal that will require an estimated investment of $1.5 to $1.71 billion. With solar, wind, and hydropower as key areas of focus, the CPD stressed that scaling up investments is essential for achieving these ambitious targets.

Citing a Bloomberg report, the CPD said China, the world's largest investor in renewable energy, has already invested approximately $676 billion in clean energy in 2023 alone, accounting for 38% of the global total.

With its unmatched expertise and resources, China is poised to become a crucial partner in helping Bangladesh achieve its renewable energy ambitions, said the think tank. As the top player in solar energy and other green technologies, Chinese involvement could accelerate Bangladesh's progress toward energy sustainability, it said.

Md Abdur Rahman Khan, chairman of NBR, said, "We will do our utmost to rationally reduce taxes. We have already instructed our officials not to change tax policies unless it serves the public interest." 

He added, "I can commit that we will maintain consistency for foreign investment projects, and we will uphold a tax reduction policy in the renewable energy sector. I have already discussed this with the energy adviser."