Muhammad Bashirul Haque :
The Bangladesh government is thinking of alternative source for funding of its huge infrastructure projects as the promised funds by China during the visit of Chinese President to Bangladesh in September 2016 is not forthcoming. Though the Chinese gave tall promises and signed MoUs for twenty-seven major projects in Bangladesh including the Padma Rail Link Project (2667.94 million US Dollars), Power Grid Network Strengthening Project (970.02 million USD), Establishing Digital Connectivity (837 million USD), Construction of Double Line between Joydebpur-Ishurdi section (1045.59 million USD), Construction of Marine Drive Expressway and Coastal Protection Works from Shitakunda-Chittagong-Cox’s Bazaar ( 2856.56 million USD), Conversion of Meter Gauge Railway Track into Broad-gauge in Akhaura- Sylhet Section (1272.93 million USD) etc. however, these promises remained just in shelf and real term money flow from China to Bangladesh has been a small fraction of what was promised.
2. During the visit of Chinese President to Bangladesh in 2016 an MoU was signed titled ‘Strengthening and Production Capacity Cooperation’ comprising twenty seven investment projects worth about USD20 Billion to be implemented during 2016-2020. However, out of these twenty seven projects loan agreements for only five projects have so far been signed which include the Padma Bridge Rail Link Project, Single Point Mooring Terminal, Construction of Tunnel Under the Karnaphuli River, Info. Sarker-3 and Modernization of Telecommunication Network (MoTN) worth USD4.26 Billion. However, interestingly, the actual inflow of money despite signing MoU ‘Strengthening and Production Capacity Cooperation’ in 2016 is just paltry 981.36 million USD so far which less than five percent of the amount promised. The Chinese are learnt to be applying various pressure tactics including pressurizing the local partners to buy Chinese equipments and Chinese manpower. In a recent case ZTE Corporation of China has arm-twisted Ministry of Post and Telecommunication into buying additional switch boards for implementation of MoTN Project despite the fact that these switch boards are substandard and useless. The Chinese practice of nomination for Chinese funded projects is largely to be blamed for substandard inventories and price escalation. Chinese compel the borrower countries to follow nomination basis for tendering of items where as other countries follow the system of competitive bidding process which involves healthier competition between bidders and advantageous for the borrower countries.
Formation of Joint Working Group
3. In order to fast track the Chinese infrastructure assistance to Bangladesh a joint working group has been formed recently with representatives of Chinese Commerce Ministry and Finance Ministry (Economic Relations Department-ERD) of Bangladesh. This JWG would probe the slow progress of the 27 projects involving around $20 billion that China had agreed to provide during President Xi Jinping’s Dhaka visit in October 2016.
4. During Prime Minister Sheikh Hasina’s visit to China in July 2019, the two sides signed an agreement to form a working committee to identify the reasons for the delay and eliminate those. The development can be viewed as one of the important takeaways from the tour. Preliminary agreements for large sums of loans are invariably signed on foreign tours or when heads of state or government visit Bangladesh but most of the projects are not implemented in due time.
5. For instance, if Chinese do not agree to or fail to understand even a particular word in the project documents, they send the file back to Bangladesh for the process to start anew, mentioned an ERD official who did not want to be identified. Besides, China’s Exim Bank has some limitations: only a few officials of the bank deal with foreign loans. Also, Chinese firms lobby hard in both the countries to get contracts, causing further delay, the official pointed out. Furthermore, even after loan agreements are signed, which is the last step for projects bankrolled by China, funds are released slowly.
6. For example, of the 27 projects that China agreed to finance, five are at the implementation stage: the Padma Bridge Rail Link, Karnaphuli river tunnel, phase-III of the Info-Sarkar project, installation of a single-point mooring with double pipeline in Maheshkhali and modernization of telecommunication network for digital connectivity. The loan agreements for all five projects involving $4.26 billion were signed between October 2016 and April last year, but so far there has been little disbursement of funds. The signing of the loan agreement for the $689.35 million-Karnaphuli river tunnel project took place in October 2016, and so far only $194.81 million has been released. Besides, in November 2017, the loan agreement for the $550.67 million-single point mooring project was signed and only $82.73 million has been disbursed so far. Only $44.94 million was released for the $224.96 million project on modernization of telecommunication network for digital connectivity. The loan agreement on it was signed in April last year.
In the same month, a loan agreement for the $2.67 billion-Padma Bridge rail project was struck. And so far $533.58 million has been disbursed. One project which saw fast disbursement is the phase-III of the Info-Sarkar project. As of now, $125.50 million of the agreed $151.64 million has been released since the signing of the loan agreement in October 2017. Another major concern of Bangladesh is that Chinese loans carry heavy rate of interest comparing with concessional loans from other countries. According to a top official of Finance Ministry China’s concessional loans carry interest rate of 2% per annum for a period of twenty years including moratorium period of five years as against 1% offered by countries like Japan and India. The recent loan agreements comprising of USD One billion concluded during the visit of Prime Minister Sheikh Hasina in July 2019 even carry more than 2% interest rate, according to the official. [Second part of the article will be published tomorrow]
(Muhammad Bashirul Haque, freelance journalist, [email protected])
