Not all projects taken up by Bangladesh are good
Once the economy of Sri Lanka was pretty robust. They are much developed than us in terms of different social indices and infrastructures. Among the South Asian nations, they are in a better position in terms of per capita income. For a long time, the country was locked in a civil war, which has ended a long time ago though. Even in those days, they did not plunge into a dire straits like at present. But there is a long-term effect of war. Their current problem is, they have invested a huge amount of credit money in several large projects which are not really profitable.
There is no problem with taking loans. But if that is invested in projects from where the money would not return, those projects turn into a burden for the country. This is what happened with Sri Lanka. At the same time, the government also could not reduce its expenses. They were holding IMF (International Monetary Fund) responsible for this. But they are now going to seek help of the IMF taking the country to the brink of collapse though they once bragged that they won’t go to the IMF. Now they don’t have such luxury. Taking well thought out steps instead of showing cheap nationalism is more important. The incumbent government has invited more problems by doing that.
The question is what lesson can Bangladesh take from this. We are in a better position now but the situation has started to weaken. The macro economy is not as strong as before. There is a huge deficit in the current account in the country. Sri Lanka also has that. The deficit that is going to be recorded is going to be the highest in the history of Bangladesh. The country did not even record half of such deficit before. That means, there are some matters of concern.
Certain preparation needs to be taken and some policies need to be coordinated. For example, the exchange rate should have been adjusted but that was not done properly. As per the latest calculation, import has increased by 54 per cent. If it increases at this rate, the amount of import would be around US $100 billion (10,000 crore) at the end of current fiscal, which is extremely high. We never imported products worth US $60 billion (6,000 crore) in a fiscal year. That’s why it would tough to bear the pressure of so much import. And, if this trend continues for another year, our forex reserve will also decline significantly.
Now, one of the important questions is, have we taken up good projects? I think that was not done. Despite the increase in expenses, Padma Bridge is a good project. But, the project to install a railway line on Padma Bridge is an extremely expensive project. The cost of Padma Bridge is Tk 32,000 crore (320 billion) but installing the railway line will take Tk 50,000 crore (500 billion). The expenditure will increase. There was a river route to transport the cargo that will be carried along this railway track. That means, actually, there is no justification for such a huge expense.
Another project is Rooppur Nuclear Power Plant. I haven’t heard of any feasibility, profitability or environment-related assessment reports. But that is the country’s largest project. Credit has been taken from only one source for this project worth more than Tk 1 trillion (Tk 100,000 crore). What is the alternative if Russia does not take radioactive materials from the project? And, dealing has become tougher because of the war. Nobody knows when the problems will be resolved. There is no possibility of the project being profitable. We have to bear it. The amount of credit for the project is huge, US $13 billion (1,300 crore). When the credit was taken, the amount was one-fourth of the total amount of Bangladesh’s foreign loan. This is not acceptable for a country like Bangladesh.
There are some unprofitable projects of the railway department as well. For example, the setting the railway track between Cox’s Bazar and Ramu. What would be carried here? We do not have that much trade with Myanmar. But we have been constructing the track at a cost of Tk 12,000 crore. The government has taken up some good initiatives though. The government has rejected two railway projects as the Chinese contractors demanded extra money. At the same time, though setting up railway tracks on Padma Bridge would not be economically profitable, constructing double lane railway tracks on Jamuna river is a very good project. This would be profitable and at the same time, it is not so costly. We could bring goods from India swiftly through this way.
That means we must remain cautious while choosing projects. Unprofitable projects could be scrapped even after starting. For example, Payra port was never a profitable project. It was scrapped ever after spending several thousand crores of taka. I think that was a right decision. But it would have been better if the realisation had come earlier. For example, it would have been better if Rampal Power Plant project were rejected at the outset.
It’s not that we do not need mega projects. It would be more profitable if all the highways in the country are transformed into four-lane ones. In those cases, we have to think about land acquisition though as this is a huge source of corruption in all of our projects. This has been increasing costs of projects. Through this the government has been increasing land prices across the country.
That’s why we have to take up economically viable projects to avoid falling in a position like that of Sri Lanka. Return on investment has to be profitable. Sri Lanka is providing us that lesson.
* Ahsan H Mansur is the Chairman of Brac Bank and Executive Director of Policy Research Institute (PRI)
** The op-ed, originally published in the print and online editions of Prothom Alo, has been rewritten in English by Shameem Reza