India-BD deals on investment protection, $4.5b LoC tomorrow

Dhaka signs a deal with Delhi tomorrow (Wednesday) on a US$4.5 billion third line of credit (LoC) tagged with stringent conditions, officials said Monday.

Besides, they said, the two sides will enter into another deal on investment promotion and protection the same day, in presence of the Indian finance minister, Arun Jaitley.

Mr Jaitley is arriving in Dhaka today (Oct 3) for a three-day visit to Bangladesh.

About the terms and conditions binding the use of the LoC funds officials at the Ministry of Finance (MoF) in Dhaka said Bangladesh will have to purchase 65 to 75 per cent of the services, goods or works from the Indian market with the money from the $4.5 billion LoC-III.

Some $2.93 billion to $3.37 billion of the funds out of the total $4.5 billion worth of credits will go for such purchases, they said.

The loan-signing ceremony is likely to be held at the Bangladesh secretariat with Bangladesh Finance Minister AMA Muhith and his Indian counterpart, Mr Jaitley, witnessing.

India offered Bangladesh $4.5 billion in loan through signing a Memorandum of Understanding (MoU) in April this year in New Delhi in the presence of Prime Minister Sheikh Hasina when she was on a visit.

According to the MoF, some government agencies have already undertaken 17 development projects to be implemented with the upcoming $4.5-billion loan.

A senior MoF official said they had tried to get the terms and conditions for the LoC-III simplified compared to the current $2.0 billion LoC-II. "But the Indian side has not simplified the conditions rather imposed almost similar conditions in line with its ongoing loans to Bangladesh," he said.

Since the ongoing two LoCs have been facing different complexities due to the limited tendering system inside the Indian market, Dhaka had tried to simplify the provisions, he said, requesting anonymity.

"We requested them to relax conditions relating to procurement of goods, services and works from the Indian market. But the Indian side will not relax the terms," the official added.

The Economic Relations Division (ERD) completed negotiations with a visiting Indian delegation for the proposed $4.5 billion loan on September 27 in Dhaka on draft terms and conditions sent by New Delhi last month.

According to the provisos on the ongoing $2.0 billion LoC-II, the project- executing agencies will have to procure minimum 75 per cent of goods/services/works from India while they could procure the remainder from any country.

For procurement of the civil works-or construction-related projects, the Bangladeshi agencies must procure minimum 65 per cent of goods/services/works from the Indian market.

The MoF official said since Bangladesh needs huge investment for infrastructure and social-sector development, it is going to finalise the loan in presence of the Indian finance minister during his three-day visit.

Earlier, government agencies concerned had expressed reservations on some of the terms and conditions on the US$4.5 billion LoC-III and suggested that the government go for tough negotiations at a preparation meeting early last month.

Government officials said some projects under the first and second LoCs had been facing difficulties in the way of their execution due to limited tendering system within the Indian market.

Some projects under the $862 million LoC-I are still struggling for implementation delays while the physical works of the 14 projects under the $2.0 billion LoC-II are yet to start.

Firstly, in August 2010, India confirmed $862 million worth of LoC-I under which the government had implemented nearly 15 projects.

Bangladesh and India signed the $2.0 billion LoC deal in March 2016. Under the LoC-II, the government agencies are executing 14 projects.

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