|
INFRASTRUCTURE
INVESTMENT IN BANGLADESH - Introduction
Infrastructure
deficiencies are the primary deterrent to economic growth in
Bangladesh. Long years of under-investment has taken a toll and
resulted in poor access to basic infrastructure for a large part of
Bangladesh's population. Since Bangladesh opened its gas and power
sectors for private investment, there has been a strong response from
international energy developers. Bangladesh is now in the process of
conducting international procurement for large power plants and gas
development concessions. Interest in water, transportation, and
telecommunications projects is also growing and investment
opportunities in the sectors are likely to develop faster in open
economic policy.
The
World Bank provided funding (US$235million) and technical assistance
to promote greater private sector participation in power, gas, water
supply, telecommunications, and transportation under private sector
infrastructure development project. The credit is provided by the
International Development Association, the World Bank's concessionary
lending arm.
Besides
gas pipelines, the sub-projects could include new port facilities,
toll roads such as the Dhaka bypass, and a water treatment plant for
Dhaka.
Sufficient
private commercial financing is not available-primarily due to
non-investment grade rating for Bangladesh debt and the absence of
creditworthy public utilities. Investors, therefore, seek additional
security for mobilizing market-based funding and supplement it with
other sources of long-term financing. The project will address this
constraint by establishing a Private Sector Infrastructure Development
Fund. The fund will provide long-term debt financing for
privately-sponsored infrastructure. The availability of this type of
financing will facilitate better risk-sharing between private sponsors
and the government, and increase the likelihood that projects with a
high economic priority are implemented. The fund will thus have a
catalytic role in attracting other sources of commercial and
institutional finance, such as from export credit agencies and multi-
and bilateral institutions.
Lack
of a well-defined policy, legal and regulatory framework, and the
inability of public agencies to develop and promote sound transactions
for private participation further constrain private investment. The
project provides technical assistance to address these constraints and
to strengthen the government's ability to develop and market
well-structured project opportunities. Technical assistance will also
be provided to bolster transaction development and facilitation,
capacity building, institutional development, and for conducting
feasibility studies. A key feature of this project is the assistance
to the Government for establishing transparent, internationally
competitive bidding processes for selecting private sector sponsors
and awarding concessions.
It
is expected that the total investment in private sector projects will
be nearly US$900 million. Nearly two-thirds of this funding will be
from private sector, commercial, and institutional sources. Besides
the US$235 million provided by this credit, additional financing will
be forthcoming by the British Department for International Development
(US$7.5 million) and the Canadian International Development Agency
(US$3.5 million). The credit will be on standard IDA terms with a
maturity of 40 years including a 10-year grace period
|
General Section
