Chinese loan commitments: Only 14pc released

China made a commitment of providing 24 billion US dollars to implement 27 projects including construction of the Padma Bridge rail link, tunnel under the Karnaphuli River, development of communication infrastructure and information and communication technology.    

During Chinese president Xi Jinping's visit to Bangladesh six years ago, he made this commitment, taking Dhaka-Beijing relations to a new height.

Although six years have elapsed since Xi Jinping's visit, loan agreements have been signed for eight projects till July. The cost for the implementation of these projects has been estimated at 7.80 billion US dollars, but only around 3.30 billion US dollars have been released so far. 

Only 14 per cent of the total commitment has been released. Of the 27 projects, only 30 per cent of work have been accomplished.

Speaking to Prothom Alo, foreign ministry senior officials said foreign minister AK Abdul Momen laid emphasis on expediting the implementation of projects during a meeting with Chinese foreign minister Wang Yi who paid a short visit to Dhaka in August.

According to Economic Relation Division (ERD) sources, several agreements of 7.80 billion US dollars have been signed on eight projects. These are Padma Bridge rail link, construction of a tunnel under the Karnaphuli river, procurement of six vessels for Bangladesh Shipping Corporation, Dasherkandi Sewage Treatment Plant project, installation of oil pipeline and mooring from Moshekhahi to Chattogram, development of power transmission line, development of national information technology network expansion phase-III, and development of telecommunication network. China has disbursed 3.30 billion US dollars so far.

According to foreign ministry officials, it took two to two-and-a-half years to ink commercial agreements for all the Chinese projects taken up over the last six years.

ERD sources said once a proposal on loan for a project is sent to the Exim Bank of China, the Chinese authorities at first take decision considering economic feasibility of the project. If they decide to provide loans, they then introduce a contractor to communicate with the implementing ministry or agency of the respective project in Bangladesh. Both parties then sit together and finalise the project design and plan, followed by signing a commercial agreement, and the entire process takes two to two-and-a-half years.

Speaking to Prothom Alo, outgoing Chinese ambassador in Dhaka said not only China but also both parties would implement projects of the list. Financing would be by reduced loans of China in several projects and other processes in several other projects. Bangladesh will also have to finance a portion for these projects. One-third of these 27 projects has been completed or are ongoing. Half of the remaining projects are under consideration while the other half remains suspended.

According to ERD sources, previously a contractor secured project work directly under Chinese loan as the Chinese authorities fixed the respective contractor after placing a loan proposal. There was no opportunity to select a contractor through tender.

China changed the rules several months ago. Contractors will now be appointed through limited tender method (LTM) at the proposal of Bangladesh, and Chinese contractors will only join the bid. Finally, a contractor firm will be selected among the firms participating in the bid. No contractor firm has been selected yet since changing the rules.

Bangladesh signed only a loan agreement with China in the last fiscal. ERD and Exim Bank of China signed a deal to construct the 24-kilometer Dhaka-Ashulia elevated expressway on 28 October. China is financing 1 billion US dollars in this project. Bangladesh had negotiated with China on this project for two and a half years.

Negotiations are on with China for a project to procure six vessels for Bangladesh Shipping Corporation. ERD officials expect commercial agreements of a 25 billion US dollar loan is likely to be signed on this project this year and these vessels will arrive in the next four years once the deal is done.

When it comes to taking loans from European countries or multilateral lending agencies like World Bank and ADB, usually it has to be repaid within 32 to 40 years. In case of China, the loan has to be repaid within 15 to 20 years.

Though the interest rates are almost same in both cases, the time period to repay the loan is far less in case of China.

This increases the amount of annual installments to be repaid against Chinese loans. This in turn creates a huge pressure on the economy. And the cost of foreign loan management increases comparatively.

Former secretary and expert on large infrastructure M Fouzul Kabir told Prothom Alo, the financial assistance China promises across the world, surpasses their gross domestic production (GDP). In other words, there’s a huge gap between their promised assistance and disbursement.

Historically, they don’t send contractors who are renowned in their country to the countries of this region including Bangladesh. Usually the projects of this region are linked with politics and corruption. At the beginning they take the projects under low cost development budget. Later, they extend both the time period and the cost by reviewing the projects.