Only 5pc fund for the $20b projects released since 2016
Rejaul Karim Byron
A joint working group has been formed to 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.
China has so far disbursed only $981.36 million—less than 5 percent of the amount promised—since the preliminary agreements were signed between the two countries more than two and a half years ago.
During Prime Minister Sheikh Hasina’s visit to China earlier this month, 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.
A similar working group was formed with India when the projects the neighbouring country had agreed to finance was not picking up steam. And the move is slowly but surely bearing fruit.
Bureaucratic red tape in both China and Bangladesh is largely at fault for the snail’s pace of progress in the projects, said a finance ministry official.
In Bangladesh, the projects must get approval from several committees, which is a long-drawn-out exercise.
The situation is almost similar in case of China. For instance, if they 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 the official.
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.
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 modernisation of telecommunication network for digital connectivity.
The loan agreements for all five projects involving $3.9 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 thus 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 modernisation 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.
Now, the working committee, which will include officials from Bangladesh’s Economic Relations Division (ERD) and China’s commerce ministry, will pinpoint the problems on their respective sides and then work towards removing the holdups.
It will review the projects, and weigh whether the projects for which loan agreements are yet to be signed still need Chinese funding.
The committee will also look to channel and coordinate private sector investment in Bangladesh.
Both sides had agreed to sign the loan agreements for $20 billion by 2020. But as things stand, the deadline will not be met, opening the window to reassess the necessity of the projects, said another finance ministry official.
During the PM’s China tour, loan agreements involving $1.76 billion for three projects were signed. Of the amount, $1.2 billion is for a project to expand and strengthen the power supply network under Dhaka Power Distribution Company.
Another loan agreement involving $280.49-million was struck as part of the $1.12 billion project to strengthen the power grid network under the Power Grid Company of Bangladesh (PGCB).
There was another Chinese grant of $72.71 million for economic and technical cooperation between the two governments.
In total, three loan agreements involving $3.86 billion will be signed by this year.
Those include the remaining loan agreements for the PGCB projects and also that for the construction of Dhaka Ashulia Elevated Expressway involving $1.15 billion.