Mega projects in limbo-II

The first and foremost problem in implementing mega projects is finance. Everyone during last three years of the present government was talking about the Padma bridge project but very few were talking about the huge funding. However, clouds started to loom large since the World Bank decided to cancel its proposed fund for the multipurpose project on grounds of alleged corruption. Later on, the Asian Development Bank, Japan and Islamic Development Bank also decided to suspend their committed fund for the project to render things even worse.
On the corruption debate, Bangladesh has lost at least two to three years in starting the bridge project. But when the WB and other co-financers of the projects cancelled their $2.25 billion worth of committed loans, the project again faced new types of problems. There was the debate on funding -- whether government funding will be economically viable. Some development analysts said since the government borrows huge amount of money from the local banks and non-banking sources with nearly 10 per cent interest rates, the funding from the local resources will be costly. Some other analysts argued that as Bangladesh's foreign exchange reserve has surged remarkably in the last few years, the government could easily supply necessary funds for the project.
Another mega project Dhaka Elevated Expressway was supposed to kick-off in 2011 but the project contractor, Ital-Thai public limited, could not arrange necessary funds on time. And there were conflicting issues that the elevated expressway would clash with other on-going projects. Dhaka Metro Rail project, which is considered as the solution to Dhaka's perennial traffic congestion, has remained stalled for a decade on account of feasibility study, route selection and a host of other technical issues. The Tk 31.90 billion Dhaka-Chittagong four-lane project was also struggling for fund-delay at the initial stage. When the required fund was made available, the RHD could not sped up things as expected. Till August this year, only 56 per cent of the project work has been reportedly completed.
Start-up delay is one of the key reasons for delayed completion of development projects in Bangladesh. In most cases, the line ministry and the Planning Commission (PC) take time to approve the projects. In this context, the line ministry and Planning Commission officials say that in a large majority of the cases, the concerned agencies are so inexperienced that they can not prepare the project proposals with all the required inputs. So, the ministry and the PC send back the proposals many a time for recasting as per the proper guideline of the government. Thus, it takes months and even years before the approval of the Executive Committee of the National Economic Council (ECNEC). Donors' interference sometimes affects project at the start-up stage. In many cases, the donors take time to approve the selected bidder for the specific projects. It also takes time to disburse committed funds against the project works.
COMPLEXITIES IN PPP PROJECTS: Bangladesh is a late entrant in the new investment paradigm, the Public Private Partnership (PPP). On one hand, the government has shortage of funds and on the other, the country's infrastructure is required to be developed a lot. So, the government has taken initiatives to go for attracting private investments from home and abroad. Has the PPP investment initiative been able to attract investors? The new investment paradigm seems failing to become popular among the private investors due to several reasons. If we go in-depth and analyse the PPP management of the government, we can assess the reasons behind its failure to investors.
The $1.20 billion Dhaka Elevated Expressway, one of the Bangladesh's biggest ongoing schemes under the PPP, has been struggling for long. The contractor has not been able to start implementation works. Fund crisis has crippled the Thailand-based firm, the Ital-Thai Development Company, to start the project work. The Bangladesh Bridge Authority (BBA), the project execution agency of the much-awaited 26-kilometre elevated expressway project, has awarded the contract to the Italian-Thai Development Company in January 2011. However, the contractor-cum-investor is yet to start construction due to its failure in mobilising the concessionary loan from international financial institutions. Construction work of Bangladesh's first biggest PPP project, Dhaka Elevated Expressway, was inaugurated by the Prime Minister in April 2011. The project is scheduled to be completed within three and a half years. More than one and a half years has already elapsed; construction work is yet to start. Miss-handling of the bigger projects like the Padma Bridge by the government may affect the PPP projects also.
The key factors impeding the PPP projects are not far to discern. These include: failure in identifying priority projects; lack of proper framework including institutional, legal and administrative set-ups. Added to these is the fear of public fund misappropriation by private parties for the PPP schemes. "Until selecting the potential sectors and priority projects for implementation, the PPP projects are unlikely to be successful", said Dr Zaid Bakht, researcher at the Bangladesh Institute of Development Studies (BIDS).
A research, conducted by former Power Division Secretary and professor of North South University Fouzul Kabir Khan, has identified alleged corruption in bidding process and absence of penalty for reneging on firm commitments as major hurdles to implementation of projects under the PPP in Bangladesh. Improper selection of projects, incompetence of executing bodies and poor quality in delivering outputs are also undermining the PPP projects, the research said. It also said inaccurate specification from the government side due to corruption or lack of capacity is furthermore impeding the PPP projects. Quoting case studies, Khan said, one project out of four taken under the PPP initiative came out successful. "Only Meghnaghat 450mw power project was successful, while Patenga seaport project was cancelled, Jatrabari-Gulistan flyover was distressed, and Sonamasjid landport was unsuccessful", he said, adding, lack of long-term financing instruments in the PPP projects has emerged as a key challenge. Foreign currency risk and lack of hedging instruments are also responsible for failure of many projects.
WAY FORWARD: Project implementation hurdles are not created in a day. The culture of execution delay by the government agencies is a time-old practice. There are many reasons behind it. But with strong political will and commitment, these complexities are not too daunting to overcome. The government should take some realistic steps like strengthening the Planning Commission, Planning Wings of the line ministries, cut the time-consuming approval process and also put in mechanism for finding those responsible for failure of project execution in time.
The capacity and authority of the government's lone project watchdog - the Implementation Monitoring and Evaluation Division (IMED)-- must be strengthened. The IMED should have a link-up with the Anti-corruption Commission (ACC) so that it can request the anticorruption watchdog to investigate the corrupt practices, if any, of the agencies.
Development analysts say as Bangladesh needs to upgrade its rickety infrastructure, taking up large projects is crucially important. The government needs to undertake important projects especially in transport, power and energy sectors for boosting economic growth. They support the government in its goal to extend investment for the mega projects.
According to development analyst Zaid Bakht, Bangladesh's public investment is one of the lowest in this subcontinent. "So the bubble up of the year-on-year public investment is laudable. But quality of the spending has to be ensured," he commented. He has identified some reasons behind the delay in implementing larger projects. "Lack of capacity of the government agencies, coordination problem among the ministries and agencies, land acquisition and political turmoil are the major reasons behind the delay in large project implementation," he said. Sometimes, the donor funded projects also face start-up delays due to complex monitoring and evaluation process of the tenders and project documents by the development partners, Dr Bakht told this writer. In this context, he also said that the government is focusing on a lot of projects simultaneously which is not a mature policy. "It should have less projects and more emphasis on quality execution," he added.
Transport expert Prof. Shamsul Haque said that land acquisition, pressure from the influential quarters and lack of strong commitment of the government are the major reasons behind the negative impact of the larger project implementation. He said, the MRT line-6 project was affected initially due to opposition from the Jatrabari flyover operator and the Bangladesh Air Force in its route alignment. The government eventually agreed to change the route which delayed the project implementation.
About the larger projects, undertaken by the government, Prof Haque said Bangladesh suffers from serious backlog in its infrastructure developments. "The government needs huge investments to overcome its backlog in terms of infrastructure development as the country is still way behind the basic requirements." He too opined that the government should focus more on mega projects instead of spending more time with the small ones to attract the local and foreign investors and boost the business climate in the country.
The writer is senior reporter, FE.
He is also visiting scholar of the Nanyang Tecnological University, Singapore.