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The Padma Bridge Project
The Padma Bridge is a multipurpose road-rail bridge across the Padma River to be constructed in Bangladesh. When completed it will be the largest bridge in Bangladesh and the first fixed river crossing for road traffic. It will connect Louhajong, Munshiganj to Shariatpur and Madaripur, linking the south-west of the country, to northern and eastern regions. The project covers three districts — Munshiganj (Mawa Point/North bank), Shariatpur and Madaripur (Janjira/South bank). The total area of land to be acquired and required for its components is 918 hectares. The requisition of land for the construction yard will be for six years on a rental basis. As per the new design, an additional 144.04 ha has been identified for acquisition, bringing the total to 1062.14 hectares. This additional land is required because project site lost significant land due to erosion, for transition structures and due to a change in railway alignment. The two-level steel truss bridge will carry a four-lane highway on the upper level and a single track railway on a lower level. The project will include 6.15 km long and 21.10 m wide bridge, 15.1 km of approach roads, toll plazas and service areas. The proposed Padma Multipurpose Bridge Project will provide direct connectivity between the central and southwestern part of the country through a fixed link on the Padma River at Mawa-Janjira points. The bridge will contribute significantly towards facilitating the social, economic and industrial development of this relatively underdeveloped region with a population of over 30 million. The area of influence of the direct benefit of the project is about 44,000 km2 or 29% of the total area of Bangladesh. Therefore, the project is viewed as very important infrastructure towards improving the transportation network and regional economic development of the country. The bridge has provisions for rail, gas, electric line and fibre optic cable for future expansion.
The Bangladesh Bridge Authority (BBA) invited the pre-qualification tender for the project in April 2010. Construction of the bridge was expected to commence by early 2011 and be
the government will provide $660 m while the rest will come in the form of project aid. In the light of loan cancellation by the lead financer World Bank. Japan International Cooperation Agency ($300 m) and Islamic Development Bank ($140 m). Project cost is estimated to be US$3. Financing Criticalities On Jun 29. the Japan International Cooperation Agency (JICA) and the Islamic Development Bank.00 billion.ready for major completion in 2013 (and complete all sections by late 2015). Of the total amount. The Islamic Development Bank (IDB) is still interested to fund the mega project. In the previous financing structure.2 billion). expressing a hope that the government of Bangladesh will deal with the current issues in a constructive way.2 billion loan pledged for the Padma Bridge project saying that they had credible evidence for corruption in the Padma project. . funding for the project was provided by the Asian Development Bank ($615 m). Previously. the Asian Development Bank. the World Bank ($1. the Asian Development Bank (ADB) also withdrew its fund from the project on July 2. 2012. the World Bank. Another co-financier Japan International Cooperation Agency (JICA) does not yet cancel its funding to the project. the project would have co-financed by the government of Bangladesh. The Bangladesh Bridge Authority is the executing agency of the project. 2012 the World Bank cancelled its $1.
Apart from levying surcharge.1 billion for the Mawa link road. Another amount of Tk 240 billion could be gathered through savings from the annual development programme (ADP) of the current fiscal. The US economy is still reeling from the Great Recession that began in early 2008 with fragile . initial work of the project could get started with Tk 30 billion earmarked as public-private partnership (PPP) in the budget for the current fiscal. Tk 150 billion would be required for construction of the main bridge. no one can be assured about sustained export earnings from readymade garments and expatriate remittances – country’s two most exclusive sources of FER. Ambassador Dan Mozena has already raised the specter of uncertainty about the US consumers’ possible rejection of Bangladeshi made garments for various reasons. The government already outlined plans for mobilization of national resources for the construction of the bridge. But some other economist showed deep concerns about this idea.5 for construction of Jajira link road. Tk 72 billion for river administration. These two categories are described in following sections. and another amount of Tk 3. apart from the government’s proposed plan.Alternative Financing Sources After the cancellation of World Bank and ADB loan. Giving a break-up of the expenditure. Suggestions were also given for levying 25 paisa surcharge on each cellular phone call to generate fund for the project. Tk 13. it became essential to look for alternative financing sources. there are some other financing sources that can be considered. These can be categorized in two parts: National Financing means financing from the country’s internal sources and International Financing means looking for financing sources outside the country. the government could issue sovereign bonds to the tune of $750 million. Some economist argued that the idea to invest $1 billion out of the country’s foreign currency reserve every year seems reasonable provided there is some degree of certainty that the country’s FER can be maintained at its current level of $10 billion plus. Now. Forex Reserve & Remittance: One possible financing source can be the country’s foreign exchange reserve (FER). According to them. National Financing 1. the Prime Minister said. As per the proposed plan.
One study shows that. So it will be really tough to arrange large portion of funding from these sources. 4.2 per cent. further additional tax can be planned to be charged on tobacco products. Banks & Financial Institutions: Financing can also be managed from local banks and financial institutions. an amount of Tk 240 billion could be gathered through savings from the annual development programme (ADP) of the current fiscal. So. 2. no questions will be asked for the sources of money if it is invested in Padma Bridge Bond. Bond and IPO: These are also within the current government plan.000. This initiative can be diverted specifically for the Padma Bridge financing. bringing all these people under the shed of income tax will be largely helpful. Though tax on tobacco products is already high. the number of people who pay Tk 1 crore as taxes is only 46 now. Unutilized Funds of ADB: An important source of financing is the unutilized funds of ADB. For example. 5. Moreover. 6. Such initiatives will attract various undisclosed money to be invested for the Padma Bridge financing. Individual Income Tax: This is an important source of financing. According to the proposed plan. but their actual number will be 50. government can declare that. the governments take many initiatives to inject undisclosed money from several sources into the country’s economy. . The government is also planning for issuing IPO. but as these are socially undesirable products. Undisclosed Money: Every year. The proposed plan includes floating pension funds and Padma bridge bond at an interest rate higher than the savings rate offered by banks in advanced economies. 7. Bangladesh Government already expressed their intention to go for such plan. it may boost up market interest rate which may create extra burden for general people. In this uncertain environment. Additional Tax on Tobacco Products: This is also included in current government plan.growth and unacceptable persistent unemployment rate of 8. Government already declared their ambitious plan of levying surcharges and issuing sovereign bonds worth at least $750m. The government initiatives of strengthening current individual income tax base can contribute significantly for the Padma Bridge financing. But the government is already in debt largely to the local banks and financial institutions. 3. Levy. The global economy is still at a risk of double-dip recession. Surcharge. having sufficient FER can only act as a cushion against any unanticipated external shocks.
The Malaysian government on January 30 formally offered financing for the construction of Padma bridge project. The Chinese company. other nation’s financing should be considered greatly for the Padma Bridge financing. Bonds and IPO in the International Market: Government has outlined its plan for offering bonds and issuing IPO in the local market.9 billion while the remaining 30 per cent would be Bangladesh’s share of the cost. But the Government can go with the same plan in the international market. For example . Also.8. According to the Finance Minister of Bangladesh. If government applies appropriate strategies then financing can also be possible from international market by issuing bonds and IPO. So.19 billion (RM 6.European Bank for Reconstruction and Development (EBRD).9 billion using the existing design in three years. Inter-American Development Bank (IADB) etc. Malaysian official news agency Bernama reported that a consortium comprising experienced Malaysian construction companies will be set up to undertake the $2. Looking for Other Nation’s Investments: Government can look for investments from other countries. He said there was already a budgetary allocation of Tk 800 crore for the project and another of Tk 500 crore might be made through budget revision. which has been welcomed by Bangladesh government. – proposed to the Bangladesh Bridge Authority (BBA) to build the bridge on the ‘build-own-transfer (BOT)’ basis. International Development Enterprises. Looking for Alternative Development Partners: Government can look for alternative development partners after the withdrawal of WB and ADB.6 billion). Indian officials hinted that New Delhi would be willing to divert its $1 billion credit line for PBB. it will require Tk 1300 crore in the current fiscal year if the government is to implement the project with its own resources. 3. Abul Maal Abdul Muhith. Already several proposals came. China has proposed to build the muchcoveted Bridge at the estimated cost of $2.0 billion of the total projected cost of $2. Budgetary Provision: The Padma Bridge financing can be attained from the yearly budgetary provision. The government may float fresh tender and the successful bidders will have to finance a part of the project. China Railway Bridge Bureau Group (CRBG) Ltd. . International Financing 1. Mr. 2. The company proposed to invest 70 per cent or $2.
According to them. Specially. The current account balance. fund accumulation from non-residents may not be steady because of downtrend in the current account balance. On the other hand. Rather than going for international financing looks more feasible like looking for other development partners or looking for other nations investments. increased outflow of foreign currency for import of materials for the construction of the proposed Padma Bridge will raise the price of dollar for which the estimated cost of Tk 230 billion is expected to jump to around Tk 300 billion.Conclusion So far. there is a possibility that. Moreover. But many have questioned these initiatives.7 per cent of GDP (gross domestic product) in 2009-10 has already decreased to 0. In addition. looks impressive as the company has experience in the similar field. . So. possible depreciation of domestic currency may raise price of imported products and contribute to inflation.3 per cent of GDP. China Railway Bridge Bureau Group (CRBG) Ltd. the proposal from the Chinese company. which was 3. mobilization of domestic resources for the Padma Bridge project may lead to additional tax-burden on the taxpayers. going for complete internal financing may prove to be a huge burden for the whole country. Though detail analysis is still required on the proposal but if every other financial and economical aspect approves such proposal then this can be very important financial source for financing the Padma Bridge project. the Government’s plan seems to be completely focusing on financing the Padma Bridge project from internal sources.
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