The Financial Express

Hard bargain holds back another mega PPP project

WB sticks to counter-guarantee from government before confirming IDA funding of Dhaka Bypass

| Updated: November 11, 2017 10:27:16

Picture used only for representation. Picture used only for representation.

A hard bargain by a foreign donor held back Bangladesh's another public- private partnership (PPP) project as it made the funding of Dhaka Bypass conditional to government counter-guarantee.

The project on the long-cherished bypass road kept struggling for years for delays in government approval process in the absence of expected guarantee from the World Bank, officials said Wednesday.

"The approval process of the viability gap fund (VGF) takes some time. Now the confirmation of guarantee from the World Bank (WB) has been added as another reason for the delay in the 48km road construction," said one official.

The WB has made it clear that if the government gives its counter-guarantee, then IDA or International Development Association-the Bank's soft-lending arm--could consider the proposal for according guarantee, they said.

Another official said the Ministry of Finance (MoF) is unwilling to offer the counter-guarantee as the existing government rules do not permit so.

Even so, he added, the MoF has assured the PPP authority of offering the counter-guarantee to the WB for funding the long-cherished Dhaka Bypass if the Washington-based lender was ready to furnish its own guarantee.

Earlier in September 2012, the cabinet committee on economic affairs of the government endorsed the Dhaka Bypass road-building project under PPP (public-private partnership) initiative.

Director of the PPP Authority Md Abul Bashar said they had been evaluating the final bids from four selected private partners to upgrade the 48-kilometre Joydevpur-Debogram-Bhulta-Madanpur road (Dhaka Bypass) to a four-lane one with the collaboration of the government.
The road will connect the proposed Joydebpur-Elenga-Rangpur four-lane highway with the Dhaka-Chittagong 4-lane highway bypassing the capital city, Dhaka, he added.

Mr Bashar said they would give 36 months to the private partner for building the 48km road.
The PPPA has requested the Economic Relations Division (ERD) to get the guarantee from the IDA in favour of the selected private partner for building the road.

PPPA officials said they had sought guarantee for US$400 million worth of funds from the IDA to attract the private partner to the road-development works.

Meanwhile, the government is going to make the Dhaka Bypass use costlier for the commuters as it is set to appoint a road builder under PPP with unusually higher bid price, insiders said.

They said the PPPA has estimated a bloated Tk 28.10 billion (US$361 million) cost of upgrading the existing two-lane 48-kilometre road to a four-lane roadway.

If the government spends the money, each kilometre of the Joydevpur-Debogram-Bhulta-Madanpur road (Dhaka Bypass) upgrading cost will stand at Tk 360 million, project-insiders said.

Officials said the developer will operate the road for 25 years and charge tolls from different modes of freight transport and passenger cars.

Under the PPP arrangement, the private firm is proposed to invest nearly Tk 25.78 billion ($330 million) while the government nearly Tk 2.37 billion ($30 million) worth of funds.

Meanwhile, the government has already approved the Roads and Highways Department (RHD)'s Tk 2.37 billion supporting project for the construction of the Dhaka Bypass through PPP.

According to the PPPA, the road will be handed over to a selected firm for next 25 years under a 'design-build-finance-operate-maintain' arrangement.

Officials said each kilometre of the Dhaka-Chittagong highway to 4-lane one cost nearly Tk 170 million for upgrading.

Another top PC official said not only the government will have to spend more money for the Dhaka Bypass PPP road project but the commuters also have to pay tolls for travelling on the road every day.

Under the main road-construction project, the RHD and its private partner will improve the two-lane road to a four-lane one, 4.8-metre-wide two service roads on both sides of the main road, a railway overpass at Dhirasram, another railway-cum-road overpass at Mirerbazar, two U-tern underpass at Bhulta and also expand the Kanchan Bridge and another 780- metre bridge existing there.

The service roads on two sides of the four-lane main road will be maintained by RHD itself.

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