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The Financial Express

Infrastructure financing through market

| Updated: October 24, 2017 11:55:40


Infrastructure financing through market

The Meghna Bridge was constructed almost three  ago. When it was constructed, its tariff-clearance capacity was alright but now it has turned out to be incapable of clearing increased traffic between Dhaka and Chittagong smoothly. A long queue of buses, trucks and private cars, caught in jams on both sides of the bridge is now a usual sight every day; traffic jam causes 1-2 hour delay for commuters in reaching their destinations. The whole purpose of reaching destinations quickly by using the four-lane highway has thus been put into question.
The authorities put the cart before the horse when things should have been otherwise. Why did the Roads & Highways made so much delay in constructing the second Meghna Bridge? The foundation stone for the second bridge was laid long ago but few signs of construction of the second bridge were noticed while this writer undertook a visit to Feni recently. He fears it may take a few more years to see the new bridge built if things go at the present pace.
Travelling to Feni by using four-lane highway should take 3-3.30 hours at best, but due to traffic jams at the Meghna Bridge, it now takes five hours. What a huge price we are paying for traffic jams!
What has prevented the Roads & Highways from undertaking construction of the second Meghna Bridge as well as the second Gumti Bridge at Daudkandi?
The cause of delays in undertaking these projects, if we understand correctly, is shortage of money. But did the policymakers ever try to collect money from the market? No, never. They are not used to use market for financing the government-owned capital-guzzling infrastructures. But market could easily supply capital needed for such constructions. There are two options open before the fund users for such a purpose.
One is sale of public bonds, as the infrastructures belong to the government, to the people through market. The government can easily sell the project-specific bonds for commercially viable bridges as it does regularly for other purchases or procurements. Public bonds have a demand as it offers almost risk-free return. But we never saw the government floating any public bond for construction of bridges like those over the Meghna and the Gumti Rivers. The present bridge was financed with a Japanese concessionary loan and partly by the government budgetary allocation.
The other source of funding could be selling of equity or ordinary shares to the public. The money that is to be received from equity sale can be spent for capital expenditures on the bridges. For this, a public limited company has to be formed with a management board. Once the shares are sold through IPO and placements to the public from such a company, the company will have to be listed with the bourses. The tolls to be paid by the users of the bridges will form the cash flows of the proposed bridge company. In order to prevent such a company from collecting tolls at will, the government can form an oversight body to oversee  management of the country's roads and highways, including toll collections by the bridge companies.
The government or the Roads & Highways does not need to sell majority shares from such a bridge company. If the government wants, it can retain 51 per cent or more with it while the rest can be sold to the public. If our commercially viable bridges are run by public companies with management boards, the bridges will be run efficiently and the government will receive enough money for building other infrastructures, including new bridges.
The government may learn from the experiences of other countries: how are they running their roads and highways and also the capital-intensive bridges and how do they collect funds for construction of these infrastructures? In Bangladesh, market was never tried for supplying money for construction of infrastructures. Taking money from external sources like the JICA or the ADB has its own limitations. They will come forward for such funding after a long gap if they come at all. Better option for financing capital expenditures for big infrastructural projects is the internal market.
The writer is Professor of Economics University of Dhaka.
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