There will be a bridge over Padma river, this much is certain but who will finance it and when have become a multi-billion dollar question. The usual lenders of such projects were lined up soon after the present government came to power. According to agreement reached in January 2009 the World Bank was to provide US$ 1.2 billion, the ADB $615 million, JICA $415 million and IDB $140 million.
Things were moving as per schedule and provisions of the agreement with lenders and construction work was to start in October 2011. But things did not move smoothly and thereby hangs a tale, as Shakespeare would have put it.
The problem that suddenly surfaced was more than a hiccup, rather it has turned out to be an intractable obstacle. Based on a case filed by Canadian police against the Canadian firm SNC Lavalin for giving kickback to a firm belonging to the former communication minister of Bangladesh the World Bank promptly suspended the loan that had already become effective and was being used by Bangladesh government for preparatory works.
The other lenders in the project soon followed suit and the work on Padma bridge ground to a halt. It was alleged that the Canadian firm had given bribe to the Bangladesh minister’s firm to win pre-qualification as a bidder in the tender for works in the Padma river bridge project.
Knee-jerk reaction: World Bank’s sudden and almost knee-jerk reaction to the news about Canadian police’s corruption case against a firm of that country and abrupt suspension of loan committed to Bangladesh was brazen and lacked propriety. The allegation of corruption against the Canadian and the Bangladeshi firms had not yet been proved in court and taking a decision on submission of the case was premature.More importantly, the allegation of graft did not lead to any independent investigation by World Bank which has a department for this.
Allegation of corruption both within World Bank and inside member countries is not new for World Bank and it has a standard procedure to handle such cases. Strangely the Bank did not institute its own enquiry and thought it proper to rely on the investigation of an agency belonging to a member country other than the loan recipient country. This is what must have irked the government of Bangladesh most. The fact that the allegation was made public by the Bank even before a judgement was given by the concerned court aggravated the ire of the Bangladesh government.
The World Bank behaved as if the parties (the two firms) were guilty as charged and put the government of Bangladesh as a whole on the dock. It was small wonder that having been offended by the blanket accusation by the Bank the government of Bangladesh refused to take any action in response to the allegation at first. Any self-respecting government would have done the same in the face of such humiliating gesture and highhandedness from a lending agency of which it is a member. Having made its point the government removed the controversial minister to pave the way for resumption of work on the project.
At the same time a formal enquiry was ordered to be conducted by the Anti-Corruption Commission (ACC) of the country. By that time the World Bank should have instituted its own enquiry rather than harping on the same tune borrowed from the Canadian police. The Bank’s failure in this regard has not only been astonishing but also smacks of amateurish approach in such a serious matter.
The enquiry into the allegation against the former communication minister’s firm has been completed by the ACC. Nothing incriminating has been found to substantiate the charges of graft. The Bangladesh government has called upon the Bank to prove its allegation but there has been no move on the part of the Bank in this regard which can only be interpreted as its obstinacy and lack of finesse in dealing with member countries like Bangladesh.
Meanwhile, the suspension of loan by World Bank led to the expiry of the deadline for the effectiveness of loan. After keeping the government of Bangladesh in suspense for some time the deadline was extended by another six months only after the government made formal request for the purpose whereas this should have been done automatically.
Looking for alternative sources for funding: The request from the government of Bangladesh showed that it had not turned its back on the Bank for financing the Padma bridge project. But in view of the uncertainty caused by the suspension of the loan and the inscrutable attitude of the Bank the government had to look for alternative sources for funding the project. Soon a formal offer came from Malaysian government which showed interest in constructing the bridge under public-private-partnership. An emissary of the Malaysian Prime Minister came to Dhaka to hold preliminary discussion.
Soon after the ministry of communication expressed declaration of intent and informed that a memorandum would be signed with the Malaysian authorities. Even a date for this was announced even though the loan agreement to the Bank had not been cancelled. This showed lack of co-ordination between the ministry of finance and communication. But allowances can be made for this confusion because of the extraordinary circumstances. Meanwhile, some interest was also shown by China, though no formal proposal was made in this regard.
While exploring alternative means of financing Padma bridge project the government of Bangladesh had not cancelled the loan agreement with the World Bank and other co-financiers. The overture made to other financiers was merely to explore other sources of finance in case the Bank and other lenders continued to dither. Having already used some portions of the loan money from the Bank for acquisition of land and re-settlement of displaced persons the government of Bangladesh would naturally prefer to avail of the loan amounting to US$ 2.97 billion that have been committed for the project.
But it could not wait indefinitely for the lenders to resume lending after withdrawal of suspension of loan. Surprisingly, after removal of the communication minister and the completion of enquiry by ACC no new proposal had come from the World Bank to normalise the situation. The government must be at a loss as to what else does the Bank require from it for their satisfaction.
According to newspaper reports, having been exasperated by the nonchalant attitude of the Bank the government has now decided to set the process for cancellation of the loan in motion. A proposal has been sent by ERD to the PMO’s office for the annulment of the loan agreement. Unless the Bank wakes up and takes a quick decision for resumption of the loan the government will be compelled to cancel the agreement. This will be both to preserve its prestige and to save valuable time for the construction of the bridge.
No one can blame the government if the agreement is finally cancelled. It has done everything that it was required to do though the actions taken were delayed somewhat. But this, too, can be justified when looked at from the government’s perspective. How can a sovereign government be expected to dance attendance to the whim and unreasonable demands of a lender without asserting its position at first? But it is not the government of Bangladesh which has been obstinate, the blame should be laid at the World Bank.
Even after all the actions taken by the government the Bank has not budged an inch and change its position and the suspension continues. There is still time for it to salvage the insalubrious situation by resuming disbursement of fund for Padma bridge project. If the agreement ultimately falls through it will be mainly because of its rigid stand and negative attitude. Even the hardened critics of the government will be hard put to blame the government for this unprecedented event.
For the government of the Bangladesh the World Bank and other lenders with whom the loan agreement has been signed should still be the preferred choice and first priority. Before canceling the agreement the government should make a last-ditch attempt to remove the sticking point, if there is any. For this purpose a high-level meeting should be held immediately.
While cancellation of the loan will not be to the benefit of Bangladesh it will also not be to the credit of the Bank which will be seen as rigid and uncompromising in dealing with its member countries, particularly smaller ones. Cancellation of the loan will entail higher costs for the construction of the bridge which cannot be desirable for resource-poor country like Bangladesh. On the other hand, it will show the Bank in an unfavourable light as a lender driven more by ego than by reason.
Bangladesh should be careful: If the worse comes to the worst and the agreement with the World Bank and the other lenders has to be cancelled, Bangladesh should be careful about choosing the alternative financier. From what has appeared in newspaper there are quite a few aspects of the Malaysian offer that does not make it very attractive.
The involvement of many private firms in a consortium make it ambiguous whether agreement will be between the two governments or between GoB and a consortium of firms having the support of the Malaysian government. That there is a basic difference between these two positions need not be overemphasised. News about lack of experience of the consortium in constructing such a big bridge is also not very assuring.
Reportedly it will hire a third party for construction purpose and in that event the government of Bangladesh will have no say over this. Even the mobilisation of fund has raised many questions as to its legal status. The rate of interest ranging from 5 to 7 per cent as reported in newspapers will be much higher than 0.5 per cent charged by the World Bank.
The period of 50 years over which the consortium will have control over the bridge appear to be very long while the proposed recoupment of investment money through collection of toll leaves room for an exorbitant rate. The condition that no other bridge can be constructed over Padma elsewhere is not in the interest of Bangladesh. The requirement that the GOB will have to pay subsidy in case toll collection is less than expected is also too demanding. Floating bond for the project by the government of Bangladesh to help the consortium is also an undesirable condition.
Compared to these conditions and aspects a proposal from China will be much better, judged by their past record. If an alternative source has at all to be utilised for the Padma bridge, GoB should make a serious approach to China. Sitting over a vast amount of foreign exchange reserve China is looking for new avenues for investment. Padma river project may be just the type that fits their bill.
As a lender China has proved to be generous and considerate. Besides, it has vast experience in building infrastructures in developing countries. Padma bridge will be in safe hands if given to China after due negotiation. But before that government should give the World Bank a last chance to change its mind. It should not be given an excuse that GoB moved precipitately.