What Is the Present Situation of the Loan of Padma Bridge

Experts feel it will never be easy to bridge the mighty Padma without World Bank funding, now that the Asian Development Bank has also backed off from funding the project. The ruling Awami League will have to pay a ‘political price’ if it cannot execute the project, what with the parliament election barely a year away.

The Padma bridge project was one of its key electoral commitments. No wonder, the Hasina government is desperate to start work on the project with whatever resources it can manage. While Finance Minister AMA Muhith on Saturday said that the government wanted to start the construction work within two months, economists and engineers alike doubt whether that will be possible.

Two years of uncertainty over World Bank funding came to an end on Thursday when the Bangladesh government formally withdrew its request to the World Bank for financing the country’s biggest-ever infrastructure development project. The World Bank in a media statement on Friday confirmed that it had received a letter from the government regarding the withdrawal of the funding request. Out of the $2.9 billion required to build the 6.15-kilometre bridge along with railway track at current prices, the World Bank had committed $1.2 billion. The Asian Development Bank which had committed $ 600 million backed out soon after.

The government says it will mobilize its own funds and look out for alternative sources of funding. Hints have been dropped about possible commitments from India, China and Malaysia. While it is entirely possible that either of the two Asian giants, India or China, can mobilize the kind of funds that would be needed to fill in the void left by the World Bank and ADB’s departure, there is no information that either of them have made any definite commitments. Nor is there any information of a commitment from Malaysia. At best, negotiations may be at a preliminary stage.

It is unlikely that both India and China will agree to fund the project together, which would be ideal if that was possible. Bangladesh also risks incurring the wrath of one if the other to fund the project, an inevitable fallout of the Sino-Indian competition for influence in Asia. Negotiating the financial and technical details of such a huge project takes time and unless backroom parleys are at an advanced stage with any one or two of the possible funding agencies, it is unlikely that alternative sources of funding can be finalized within the next six months.

By then, the monsoon sets in, making the engineering part of the work difficult to execute. Two former Bangladesh Bank governors, Mohammed Farashuddin and Salehuddin Ahmed, have said that it would be a huge challenge for the government to begin the construction work by doing up the project all over again, Research Director of Bangladesh Institute of Development Studies (BIDS) Dr. Zaid Bakht expressed similar concerns and doubted whether the construction work would begin within the tenure of the present government. Former Advisor to the caretaker government Akbar Ali Khan says that he is waiting to see what plans the government has to get the project going against all odds.

They all agree on one point – an alternative to the World Bank will not be easy to find and if found, not easy to deal with. Farashuddin, who was the central bank governor during the last Awami League government, told bdnews24.com on Saturday that the government would need to start the construction work right away. “It should not wait for the World Bank decision for renewing its financing,” he said. He said that building the bridge was one of the most important electoral pledges of the government. “It will cost the government politically to a great extent in the next parliamentary election if it fails to begin the construction work of the bridge. That’s why the government wants to begin the work.

But all the experts feel there is very little time that the government has to get such a huge project off the ground. “The government does not have much time in hand. Now it’s a big question whether it can make new design, invite tenders and complete other related proceedings to begin the construction work within the timeframe,” said Farashuddin. After the government withdrew its request to the World Bank for loan, it has been talking of building the bridge with its own funds.

Prime Minister Sheikh Hasina has said that the government had proposals from China, Malaysia and India for the project. Farashuddin said, “Malaysia’s proposal was that they want to operate the bridge for 30 years. And they didn’t give any money to Bangladesh government till 30 years and also if their estimated number of vehicles not passing everyday over the bridge then government have to paid the money. That means they want to do business.”

“Terms of the Indian government’s $1 billion loan offer are also questionable. Their loan proposal should be reviewed in the global perspective.” Defending the Chinese loan proposal, the former central bank governor said its interest rate was two percent and it was payable within 20 years with a five-year grace period.

“But it should be looked into whether this offer covers the project cost.” About own funding, he said the consulting firm would not feel confident in that case. “It’s indeed possible to start the construction work of the Padma bridge with a portion of our present foreign currency reserves, but there has been an apprehension whether globally well-known contractors will participate in the tender.” Farashuddin added, “I would again say that it would be better if the bridge is built with the funds of the World Bank and other development partners. Since that option is closed, now we’ll have to proceed with alternative options. And now the main task is to determine the best out of the alternative options soon.”

http://www.bdtoday.net/english/newsdetail/detail/200/3090Padma bridge with own fund25 Feb, 2013Finance Minister AMA Muhith yesterday said the government will construct the Padma bridge with its own resources and form a steering committee for the project’s implementation.

Hours before leaving for Washington to meet the World Bank president, Muhith told journalists at his residence that a foreign currency account with $1.8 billion will be opened to pay the international bidders.

Muhith also hinted that the government may not accept Malaysia’s fresh proposal for financing the bridge due to a big difference between the estimated cost in the proposal and the government estimate.

“We will construct the bridge with our own resources,” said the finance minister.

The government said several times that the project would be implemented with its own resources, but initiatives were also taken to get funds from other sources, said the minister.

He said Bangladesh has not yet received any proposal from China. However, a private Chinese firm gave the government a proposal for constructing the bridge.

Muhith said a decision on Malaysia’s proposal will be made by this month.

There have been differences of opinion between Malaysia and Bangladesh over the project’s financing. Initially, Malaysia said $2.9 billion would be required to complete the project but now it says $3.8 billion will be needed to build the bridge, he said.

“Apart from it, there are even bigger differences which I will disclose after the government makes its decision on the proposal.”

The minister said the government will resume the project’s work from where it stopped in September 2011. Of the five pre-qualified bidders, one will be dropped for being blacklisted and the remaining four will be offered the job of the bridge’s construction.

Muhith said some people doubt whether the pre-qualified bidders will take the job if the project is implemented with the government’s own resources. A foreign currency account will be opened to dispel the doubt.

“There is no doubt about the availability of funds”.

He said the country’s image abroad will be brightened if the bridge is constructed with the government’s own resources.

The World Bank and other donors will be informed about the process of the project’s implementation, said the minister.

Asked whether the government will ask any donor to participate in the project, Muhith said the government would welcome investments from any development partner. But they have to join the project by August, as the bidders will be awarded contracts by that time.

On the project’s financing, Muhith said the size of the country’s annual budget is around Tk 2 lakh crore and it will not be difficult to set aside Tk 5,000 crore a year for the next five years.

Muhith said he will hold talks with WB President Jim Yong Kim in Washington on February 27 to strengthen the country’s relations with the WB, Bangladesh’s largest development partner, following the snags over the Padma bridge funding.