Dhaka Elevated Expressway: Halt in loan disbursal spurs conflict over shares

Two Chinese lenders have suspended loan disbursal for the Dhaka Elevated Expressway against the backdrop that the project would not complete by the stipulated deadline, 30 March, 2024.

They took the initiative on 17 January and it triggered a significant conflict among the three overseas investors of the project in the following weeks.

The public-private partnership (PPP) project involves three foreign companies – Italian-Thai Development Public Company Limited of Thailand, China Shandong Economic and Technical Cooperation Group, and SINOHYDRO Corporation of China.

The Italian-Thai company, in collaboration with the others, formed a company called the First Dhaka Elevated Expressway (FDEE) Company Limited, to construct and operate the expressway.

The Italian-Thai company holds a majority share of 51 per cent in the project, while Shandong and SINOHYDRO hold 34 per cent and 15 per cent shares, respectively. The Bangladesh Bridge Authority is the executing entity of the project.

Kazi Md Ferdous, chief engineer of the Bangladesh Bridge Authority, told Prothom Alo on 12 February that there are arrangements for alternative funds under the agreement. The project is being implemented under a collective initiative. If the loan disbursal halts, or an investor fails to finance for any reasons, others will manage the funds. So the work will not stop and the project will be completed fully by next December.

While talking to Prothom Alo at his office on 17 February, FDEE Managing Director (MD) Bhaskon Khannabha said as an alternative, they are considering short-term loans from local banks and multinational lenders for the project. It may delay the project by a maximum of six months.

There is a growing conflict among the foreign partners. A number of officials from two Chinese partners said on the condition of anonymity that there were some other factors at play behind the suspension of loan disbursal.

In addition to non-compliance with the project deadline, the Italian-Thai company also failed to pay its share of loan interests to the bank due to a fund crisis. In response, the bank warned that the FDEE must pay interests within the next six months, and in failure, the Italian-Thai company will have to offload 99 per cent of their share.

In a counter move, the Italian-Thai company lodged a complaint at the international arbitration court in Singapore against the Chinese bank. 

However, Sharina Mujahid Chowdhury, legal advisor of FDEE and lawyer of the Italian-Thai company, denied the allegation of the two Chinese companies. She told Prothom Alo that the three companies were supposed to pay Tk 2.19 billion in interest to the bank on 22 January. The Italian-Thai company asked the bank to deduct its (the company) share of interest from the next tranche of loan and disburse the remaining amount. But the bank suspended loan disbursal on 17 January.  

She also said extending loan repayment periods and project deadlines is a common practice in mega-projects. The lending agencies are behaving irrationally here.

Sharian further alleged that the two Chinese partners in FDEE are more interested in acquiring the other shares than solving the crisis. They took the issue to the High Court and sought an interim ban on share acquisition. In a countermeasure, a Chinese investor filed an appeal with the Appellate Division against the legal move, but only to get dismissed.

Despite all the challenges, FDEE remains committed to completing the project in time. Its MD Bhaskon Khannabha assured that the project will come to a halt under no circumstances. The Italian-Thai company will neither leave their shares nor will pull out from the project.

He alleged that the other two are trying to grab their shares in an unjust and unethical way.

The Dhaka Elevated Expressway project was undertaken in 2009, while an agreement for its execution was signed in 2011. But things did not progress as per the stipulated time frame.

The construction work began formally on 1 January, 2020. Prime Minister Sheikh Hasina inaugurated an 11-kilometer stretch of the expressway -- from Kawla to Tejgaon -- on 2 September last year. The project cost totaled at Tk 138.57 billion.