The funding for the Dhaka Elevated Expressway project remains in limbo months after Chinese lenders halted financing in January 2024.
Contractors for the project, whose alleged violation of contracts led to the Chinese funding drying up, say they began searching for alternative funding sources in early 2024. However, the project's future appears uncertain.
Further complicating matters, a legal dispute between a contractor and the Chinese financiers regarding project share distribution is ongoing. This suggests that construction of the elevated expressway could face further delays.
Barrister Imtiaz Farooq, counsel for the project's main contractor Italian-Thai Development Public Company Limited (ITD), confirmed the search for new lenders to The Financial Express.
Mr Farooq alleged that the Chinese lenders, Export-Import Bank of China (CEXIM) and Industrial and Commercial Bank of China (ICBC), have shown "antagonistic behaviour" since the project's inception.
CEXIM and ICBC committed a total loan of $861 million, of which $427.76 million has been disbursed across 12 instalments. However, new disbursements were halted in January, as confirmed by Citicorp International Limited, the lenders' regional agent, in a January 24 email to borrowers.
The lenders halted loan disbursements, citing ITD's alleged non-compliance with loan terms.
Consequently, the project authority applied to the government for a one-year extension, pushing the completion deadline to June 2025 from the previous target of June 2024.
According to the lenders, ITD holds a 51 per cent stake in the project, while Chinese companies -- China Shandong International Economic and Technical Cooperation Group (CSI) and Sinohydro Corporation -- hold the remaining shares.
CSI and Sinohydro met their payment obligations, while ITD consistently failed to comply with payment requirements, show documents filed with the High Court (HC).
According to the court documents, ITD's outstanding dues as of January 2024 amounted to $10.11 million.
The loan agreement stipulated that any guarantor failing to pay timely interest would have the other two guarantors cover the shortfall. In exchange, the defaulting guarantor would be required to adjust its shareholding with the other two companies within five business days.
However, ITD allegedly breached this provision and launched an arbitration proceedings against the lenders before the Singapore International Arbitration Centre (SIAC) without adjusting its shareholding.
It also sought a status quo order from the High Court regarding share transfer. On January 29 this year, a HC granted a temporary stay on share transfer based on ITD's request.
However, the HC bench lifted the stay on May 12, rejecting ITD's plea.
Still, a swift resolution remains elusive, as ITD says it would appeal against the HC decision to the Appellate Division, while the SIAC arbitration case is ongoing.
Lawyer Imtiaz Farooq said Chinese shareholders, colluded with the Chinese lenders, tactfully stopped the loan disbursement to acquire the ITD stake.
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