A feasibility check on development cost in Bangladesh

Development is closely interlinked with investment. A country like Bangladesh requires huge investment for developing its infrastructure alongside socioeconomic condition. Bangladesh is raising its investments every year to upgrade infrastructure and social conditions, for that matter, people's lifestyle.

However, the development here compared to the investment made is virtually not up to the mark as most of the large- and mega-projects are struggling for implementation delays. Now, Bangladesh's ballooning Annual Development Programme (ADP) outlay and slow progress in new infrastructure development are a matter to be pondered upon. The government over the last one decade has increased public investment manifold. But people are not convinced about the outcome of the growing investments. They feel that the development is much slower than the fast-growing development budget.

In last five years, the development budget has jumped manifold. The ADP outlay in the current financial year (FY) 2017-18 has picked up to Tk 1.64 trillion from only Tk 525.10 billion in FY2013. If we compare the public-investment scenario with that 10 years ago, we will see that it has jumped nearly 7.3 times from the allocation of Tk 225 billion in FY2008.

But many think that the country's infrastructure development is not progressing in proportion to the investment. Some development analysts are shouting over the years that the government should bring a visible outcome in infrastructure and social development to remove poverty and hunger from the country. They feel that development is far off to catch up with the hefty public investment.

If we analyse the issue, we can see that the government agencies are busy taking up projects with bloated costs. Nowadays, taking projects with inflated cost almost poses to be a culture.

For example, the state-owned road developer -- Roads and Highways Department (RHD) -- would upgrade the 54km Comilla (Moinamati)-Brahmanbaria (Darkar) road to a four-lane one in the country's north-eastern frontier to facilitate neighbouring India's transit through Bangladesh. The cost of the project is estimated at Tk 29.80 billion. It means the construction cost for each kilometre will come to Tk 551.85 million.

On the other hand, the RHD has upgraded the country's busiest and important 192km Dhaka-Chittagong highway into a 4-lane one at a cost of Tk 38.17 billion. It takes Tk 198.80 million for building one-kilometre road. So, the cost for upgrading the Comilla (Moinamati)-Brahmanbaria (Darkar) road is nearly three times higher than that of Dhaka-Chittagong road.

Similarly, the Bangladesh Railway (BR) has undertaken the Padma Bridge rail-link project at Tk 349.89 billion. It will construct the 172km railway on Dhaka-Mawa-Bhanga-Jessore route through the Padma Bridge by the year 2021. The Chinese government will provide the lion's share of the cost as loan.

The Railway has contracted out the installation work to a Chinese company. The construction cost for each of the kilometres will be Tk 2.03 billion. Development experts dub it is the highest construction cost per kilometre not only in Bangladesh but also outside the country.

The RHD has recently revised the project on Lebukhali Bridge on the Pyra River by jacking up the cost by 206 per cent despite its "faulty feasibility study and design", people familiar with the project said. They said not only cost of the bridge project is going to escalate, its timeline for completing the works of the 1.47-kilometre bridge would also be extended by four and a half years to April 2021.

As per the proposed schedule, the bridge construction on the Pyra River will take nine years. The Project Evaluation Committee (PEC) of the Planning Commission has recently recommended revising the project despite its huge cost escalation with lot of changes in the design and project proposal, said one official involved.

The RHD sought 206 per cent higher funds worth Tk 8.60 billion from the original cost of Tk 4.13 billion for building the bridge on the Barisal-Patukhali highway. The Department has also sought nearly four and a half years more up to April 2021 to complete its works, started in April 2012.

Such examples are appalenty in Bangladesh. The costs of scores of projects in Bangladesh are somehow 'inflated' or 'overestimated'. It was learnt that the agencies are busy submitting the Development Project Proposal (DPP) with higher or overestimated costs to their line ministry for getting approval. After scrutiny, the line ministries usually send the project proposals to the Planning Commission (PC) for getting approval from the government's highest economic policy-making body, the Executive Committee of the National Economic Council (ECNEC).

Like the public sector, the private sector does not lag far behind. They also submit bids to the government with inflated costs. These cases are also being observed in the projects under private-public partnership (PPP). Recently, the government authority estimated a cost of Tk 28.10 billion for upgrading the 48-kilometre Joydevpur-Debogram-Bhulta-Madanpur road (Dhaka Bypass) to a four-lane one under a PPP initiative.

The PPP Authority has estimated the bloated cost at Tk 28.10 billion (US$361 million) of upgrading the existing two-lane 48-kilometre road to a four-lane roadway. If the government spends the money, cost of each kilometre of the Joydevpur-Debogram-Bhulta-Madanpur road (Dhaka Bypass) upgrading will stand at Tk 585.42 million, project-insiders said.

Meanwhile, the RHD is also investing there an additional amount of Tk 2.37 billion (as supporting project) for developing the Dhaka Bypass site to attract private investors. If we add the cost to the main investment, a kilometre of the road will cost Tk 635 million for upgradation.

The government in May 2016 approved the costly Dhaka-Mawa four-lane-road project with a bloated cost of Tk 1.12 billion for each kilometre. The Bangladesh Army on behalf of RHD will construct the 53-kilometre Dhaka-Mawa and Pacchor-Bhanga road at Tk 59.63 billion. Some development experts feel that this is the record-highest expense in the world for road building.

In most of the cases, the PC raises its reservations on the inflated or overestimated costs of DPPs. In Many cases, the Commission, after scrutiny of a DPP, asks the line ministries and agencies to cut the costs or to rationalise those. Sometimes, the PC requests the Implementation Monitoring and Evaluation Division (IMED) to assess the proposed cost of those projects.

In addition, at the end of the day, the costs of the projects do not remain unchanged. The project-implementing agencies at a certain stage of their execution process seek revision with both cost and time escalation. In many cases, it was seen that the project cost more than doubled from the preliminary estimates. The revision of the projects with bloated costs has now become a common phenomenon in the country. Now it has become part of culture in the country's development activities. It is hardly seen in Bangladesh that a project has been completed without the revision and within the earmarked timeframe, set at its initial stages.

For example, the RHD has failed to construct the 3rd Karnaphuli Bridge in Chittagong in fourteen years. It will take two more years to complete. In addition, 82 per cent more funds than the original estimation will be required to build the bridge. The construction started in the financial year FY2003.

The project-implementing agency, RHD, has sought revision of the long-delayed project for the fourth time with 82 per cent hike in cost and one more year beyond the current deadline, December 2018. According to the Ministry of Road Transport and Bridges (MoRT&B) officials, the design of the bridge has been changed and some works of the bridge still remained incomplete, forcing the RHD to revise the project for the fourth time.

"Since the project work has been facing a long delay, it will require more funds than the previous estimation. The prices of construction materials and labour costs have also gone up," an official said.

Sources said the RHD has sought revision of nearly 35 components of DPP of the 950-metre-bridge project. If a feasibility study is conducted properly before taking up a project, how revision of nearly 35 components is required, a senior PC official questioned.

The ECNEC approved the 3rd Karnaphuli Bridge Construction project in FY2003 with a cost of Tk 4.39 billion which now stands at Tk 8.34 billion. The project was scheduled to be completed by FY 2006.

If the government overlooks these types of culture of preparing DPP with 'inflated' cost, revision of the projects and extension of the execution deadline, development in Bangladesh will be the costliest one in the world. It will not be feasible and sustainable. There will be scope of draining public tax-money out of the country.

The writer is senior reporter of The Financial Express.

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