Financing plan not yet finalised for bridge project

Dhaka: The financing strategy for the Padma Bridge project has not been finalised even four years after the feasibility study mainly due to a set of do’s and don’ts specified by major lenders, sources in the government said.

The World Bank, the Asian Development Bank and the Japan Bank for International Cooperation have so far pledged $850 million for the project, whose cost could go up to $2 billion from the initial estimate of $1.2 billion due to delay in funding plan.

However, the JBIC at a recent meeting with government officials concerned made it clear that it would lend $200 million to the project if it got prior assurance that the job would be awarded to Japanese contractors, finance ministry sources said.
Other major lender to the project, the WB that pledged $300 million in loans for the bridge, opposed the government’s plan to invest from annual development programme, they added.

‘The ADB has not yet set any pre-condition,’ a high official at the Bangladesh Bridge Authority told New Age.

The Manila-based lender pledged $350 million for the project whose feasibility was first studied in 2004, estimating the cost at $1.2 billion for constructing the 6.2 km bridge.

The BBA revised the estimate to $1.6 billion in 2006. The estimated cost can go up further when design consultants appointed by BBA will
complete their assessment, sources said.

‘We can assume that the cost will be between $1.9 billion and $2 billion,’ a BBA high official told New Age.

The government is now planning to arrange about $1 billion through securitization or build-operate-transfer basis, sources said.

Earlier, the government planned to allocate $500 million from annual development budget and special levies and charges, but the plan was opposed by the WB.

‘First, a large allocation for the Padma Bridge from limited government resources may mean that funds are diverted from other high priority
investments. The donors want that the proposed allocation fits within a prudent fiscal framework,’ reads a WB memo given after a lender’s mission visited the country in late April.

‘Second, the proposal for special levies and charges needs to be worked out in a more detailed way, and tested for economic and political feasibility. This has not been done and may prove very difficult given the current situation of high food and fuel prices.’

The WB memo also referred to the JBIC’s desire to get the construction work reserved for Japanese contractors, sources said, pointing out that any prior signal to award a job to a particular company or country contradicts the public procurement regulations.

An inter-ministerial meeting is likely to be held soon to finalise the financing strategy, official sources said.