Govt slaps tough conditions on expressway financing
June 03, 2011 00:00:00
Nazmul Ahsan
The government will bear Tk 22.59 billion or 27 per cent project cost of the Elevated Expressway, but its foreign contractor must spend the money in procuring goods and services from local sources, officials said Thursday.
Officials said the condition has been slapped in a bid to boost capacity of local construction firms and help save precious foreign exchange at a time when the balance of payment is under intense pressure and Taka is depreciating fast against dollar.
Prime minister Sheikh Hasina laid the foundation-stone of the Tk 87.03 billion Dhaka Elevated Expressway in April this year, aimed at easing the capital's worsening traffic jams.
Italian-Thai Development Public Company Ltd, a Bangkok-based joint venture won the contract of the 26-kilometre Expressway that will connect southern parts of the capital with its rapid expanding northern suburbs.
The ministry of communications signed the concession agreement with the company in January, setting a three-and-a-half-year deadline for the Italian-Thai company to build the expressway -- set to be Dhaka's costliest infrastructure.
Under the deal, the Italian-Thai company will bear 73 per cent of the project cost and the government will do the rest. But details of the government funding were yet to be worked out.
The ministry of finance last week finalised the financing particulars, imposing a number of the conditions as to how the government would pay the money and what the contractor must do to secure the fund in time.
Officials said the government would pay its part through the Viability Gap Funding (VGF) under its Public Private Partnership (PPP) window.
According to the ministry of communications, the government will pay Tk 22.59 billion in six equal installments -- three of which will be disbursed during the construction period and the rest within three years after completion of the project.
In both cases, the contractor will get the money in the Bangladeshi currency, it said, adding it must buy key construction materials like rod, cement and stones from domestic sources.
Under the contract, the Italian-Thai company will build the expressway from Hazrat Shahjalal International Airport near Uttara to Kutubkhali on Dhaka-Chittagong highway.
"We are confident that the expressway will be built in time, because if the contractor fails to complete the work within the stipulated time, it will have to pay damage worth US$50,000 a day," an official of the ministry of comminications said.
The government also faces some stringment conditions of its own. It must hand over 30 per cent of the project land to the company within a maximum period of six months and 35 per cent each in the next two years.
"Failing to hand over the land timely will be costly for the government. It will have to pay the company a compensation of US$ 10,000 a day for the failures," the official added.