You are on page 1of 102


Section A
A project is an activity to meet the creation of a unique product or service and thus activities that are undertaken to accomplish routine activities cannot be considered projects. A project in business and science is typically defined as a collaborative enterprise, frequently involving research or design, that is carefully planned to achieve a particular aim. Projects can be further defined as temporary rather than permanent social systems that are constituted by teams within or across organizations to accomplish particular tasks under time constraints. The word project comes from the Latin word projectum from the Latin verb proicere, "before an action" which in turn comes from pro-, which denotes precedence, something that comes before something else in time (paralleling the Greek πρό) and iacere, "to do". The word "project" thus actually originally meant "before an action". When the English language initially adopted the word, it referred to a plan of something, not to the act of actually carrying this plan out. Something performed in accordance with a project became known as an "object".

Project Management
In project management a project consists of a temporary endeavor undertaken to create a unique product, service or result. Another definition is a management environment that is created for the purpose of delivering one or more business products according to a specified business case. Project management is the discipline of planning, organizing, motivating, and controlling resources to achieve specific goals. A project is a temporary endeavor with a defined beginning and end (usually time-constrained, and often constrained by funding or deliverables), undertaken to meet unique goals and objectives, typically to bring about beneficial change or added value. The temporary nature of projects stands in contrast with business as usual (or operations), which are repetitive, permanent, or semi-permanent functional activities to produce products or services. In practice, the management of these two systems is often quite different, and as such requires the development of distinct technical skills and management strategies.



Project management is very important in production of goods and services. Idea generation to final production of product or service, each step can be categorized as individual projects. Any project requires a project manager, who leads the project to its logical conclusion. Project manager is responsible for appointing team members with different background but essential in completion of the project. The primary challenge of project management is to achieve all of the project goals and objectives while honoring the preconceived constraints. The primary constraints are scope, time, quality and budget. The secondary —and more ambitious— challenge is to optimize the allocation of necessary inputs and integrate them to meet pre-defined objectives. Project objectives define target status at the end of the project, reaching of which is considered necessary for the achievement of planned benefits. They can be formulated as SMART criteria: Specific, Measurable (or at least evaluable) achievement, Achievable (recently Agreed-to or Acceptable are used regularly as well), Realistic (given the current state of organizational resources) and Time terminated (bounded). The evaluation (measurement) occurs at the project closure. However a continuous guard on the project progress should be kept by monitoring and evaluating. It is also worth noting that SMART is best applied for incremental type innovation projects. For radical type projects it does not apply as well. Goals for such projects tend to be broad, qualitative, stretch/unrealistic and success driven.

Project Characteristics
A project is not normal day to day activity undertaken by organization rather it is specific, non-routine activity of varying time frame and impact viability of the business in the long run. A typical project has following characteristics:
  

Timeline: A project has a definite timeline with measurable starting and end point. Resources: A project has limited resource of capital and manpower. Tools: Special type of tools and techniques are used for project management (Gantt Charts, etc.)

Team: Project management requires diverse team stretching across departments and functions.



Project Life Cycle
A typical project is divided into following phases. Each phase of the project has its own importance and impact on overall success of the project.

Initiation Phase: In this phase of the project, feedback received from customers is analyzed and brainstorming is done as to develop new product or modify existing product to meet the new demands.

Project Definition Phase: In this phase of the project efforts are made to define the solution for the problem posed by customers.

Feasibility Study: In this phase, planning of the project is made and definite milestones are established.

Project Execution: In this phase all activities and milestones established in the earlier phase are executed in a timely and orderly manner. This phase utilizes maximum of all resources.

Project Conclusion: This is the last phase of the project. In this phase, final product or service is handed over to the operations team for commercial production.

Project Management Activities
Project management activities are mainly divided into three main categories Planning, Scheduling and Controlling. 1. Planning: Planning activities include defining project objective, resource planning, etc. 2. Scheduling: Scheduling activities include developing detailed milestones and guidelines for the project. These activities are performed typically before actual initiation of the project. 3. Controlling: Controlling activities include developing budget and finance control points, measuring of scheduled tasks are performed.



Project Cycle
A project cycle describes the various phases - and their sequencing - that a project must go through from beginning to end in order to realize its objectives. The precise formulation of the cycle varies from one agency to another, but the basic components are very similar. A project cycle enables an agency to track a sequence of actions to develop, implement and evaluate projects that leads in turn into new projects. The aim is to improve the management of projects by ensuring that all relevant issues and conditions are taken into account during design and implementation.



Project Cycle Management
The Project Cycle Management (PCM) is the method employed by international organizations, UN agencies and non-profit organizations to carry out and manage development projects and programmers. PCM provides with a consistent approach to all components of the intervention cycle, ensuring beneficiary-orientation, a comprehensive perspective on interventions (feasibility and sustainability) and effective monitoring and evaluation. It articulates the different phases of a project and, being a cyclical course, it allows constantly verifying, monitoring and eventually reassessing the project logic. The PCM has 6 phases:



Programming: during this phase the main objectives and sector priorities for intervention are identified, and indicative programming and strategy documents drafted. The problem analysis with verification of ideas takes also place at this stage of the project cycle.

Identification: during this phase a pre-feasibility study is carried out and a preliminary project proposal is drafted and the consistency and relevance of the action proposed is assessed against the policy and strategy frameworks programmed.

Formulation: in light of the results of the feasibility study to be carried out at this stage, the project proposal is finalized and equipped with a sound activity and financial plan.

Financing: during this phase the applicant signs the contract and receives the financial resources to start up the project activities.

Implementation: during this phase the project activities are implemented, the results obtained and the project purpose achieved. Process monitoring and evaluation are planned and executed throughout the project life and/or during specific phases.

Evaluation/audit: in this final phase the end-of-project evaluation takes place in order to assess the efficiency, effectiveness, impact, sustainability and relevance of a project in the context of stated objectives. It is usually undertaken as an independent examination with a view to drawing lessons that may guide future decision-making.



The Importance of Project Management in Bangladesh
Project Management is gaining momentum in the business sector. This isn't by accident. It is an increasingly important part of running a successful business, especially in today's harsh economy. In this series, I will highlight the reasons why project management is an important even vital, part of running a business in today's world. Not only does the importance of project management permeate corporations and big business, but it is pivotal to the success of small businesses, consultants and freelancers struggling to get into the competition. Project management is important for the following reasons: Cost-Effectiveness Project management provides a roadmap for the journey of success. It is the greatest resource that allows the manager to understand the available resources and the methods to use them with the demands. Thus, with a plan in hand, it is easy to utilize the resources in the optimum possible way. Project management, prior to launching a project, identifies the irrelevant costs, reduces wastage of resources and thus ensures cost-effectiveness in the longer run. Better Productivity Trustworthy quality of products is a way of retaining the existing clientele and adding to the same. Project management keeps the quality of products in constant check, thus ensuring better productivity in terms of quality and quantity. This not only helps the company in earning goodwill for a lifetime, but also promises customer satisfaction. Several project management plans use tools such as six sigma to improve its processes and eliminate the defects, to enhance their productivity. Minimization of Risks Every business is faced with risks of loses due to various reasons. However, with a strategy in place, gauging the risks is easier and making diversions from the same is easier as well. This maintains stable work in progress. By planning and analyzing, a project manager can mitigate risks and be a part of fair business competition. Project management helps in identification of loopholes and potential threats. Once these are singled out, the management can then take decisions to change strategies to erase risks that can negatively affect the productivity and business interests at large.



Accomplishing Predetermined Goals Every organization sketches its goals and objectives, which is the basis of earning profits and making a way towards growth. Project management is the key tool for achieving predetermined targets in a structured way. It decides the strategies that will be used to reach the goal in the fastest way. It is a structured way of getting to your objectives. Organizational Change Project management is recognized as an effective means to bringing about sudden change within an organization. "Research indicates that 76 percent of C-level executives across the globe attribute successful change management initiatives to effective project management," writes project management consultant Rita Mulcahy in a white paper produced by RMC Project Management, Inc. As a result, executive-level strategic planning within an organization frequently includes project management as a vehicle for achieving business goals. Cost Savings Generally, project teams are working smarter, not harder. Use of the project management discipline provides cost benefits to companies. The focus on a single goal or limited goals provides a compelling process for saving both money and time. Its efficient procedures promote teamwork and communication toward achieving specific, measurable business goals in a short time period. Economic Development Project management as a management discipline underpins much economic activity. In industries as diverse as pharmaceuticals, software and aerospace, projects drive business. And in the public sector, it is effective project management that translates politicians' promises of new roads, schools and hospitals into gleaming new constructions that improve everyday life.



Resource Management In organizational studies, resource management is the efficient and effective deployment of an organization's resources when they are needed. Such resources may include financial resources, inventory, human skills, production resources, or information technology (IT). In the realm of project management, processes, techniques and philosophies as to the best approach for allocating resources have been developed. These include discussions on functional vs. cross-functional resource allocation as well as processes espoused by organizations like the Project Management Institute (PMI) through their Project Management Body of Knowledge (PMBOK) methodology of project management. Resource management is a key element to activity resource estimating and project human resource management. Both are essential components of a comprehensive project management plan to execute and monitor a project successfully. As is the case with the larger discipline of project management, there are resource management software tools available that automate and assist the process of resource allocation to projects and portfolio resource transparency including supply and demand of resources. GDP Growth Economic growth is the increase in the amount of the goods and services produced by an economy over time. It is conventionally measured as the percent rate of increase in real gross domestic product, or real GDP. Growth is usually calculated in real terms, i.e. inflationadjusted terms, in order to obviate the distorting effect of inflation on the price of the goods produced. In economics, "economic growth" or "economic growth theory" typically refers to growth of potential output, i.e., production at "full employment", which is caused by growth in aggregate demand or observed output. As an area of study, economic growth is generally distinguished from development economics. The former is primarily the study of how countries can advance their economies. The latter is the study of the economic aspects of the development process in low-income countries.



Standard of living Economic development generally refers to the sustained, concerted actions of policymakers and communities that promote the standard of living and economic health of a specific area. Economic development can also be referred to as the quantitative and qualitative changes in the economy. Such actions can involve multiple areas including development of human capital, critical infrastructure, regional competitiveness, environmental sustainability, social inclusion, health, safety, literacy, and other initiatives. Economic development differs from economic growth. Whereas economic development is a policy intervention endeavor with aims of economic and social well-being of people, economic growth is a phenomenon of market productivity and rise in GDP. Consequently, as economist Amartya Sen points out: ―economic growth is one aspect of the process of economic development.‖ Optimizing Resource Utilization Effective Resource Management increases profitability by optimizing utilization and minimizing bench time, and generates goodwill and loyalty among your staff that translates to competitive advantages in recruiting and retaining the best talent. Quick Arrow provides professional services organizations with a powerful set of resource management tools that enable project managers and resource managers to quickly search for and assign the right resources to projects based on their job roles, skill sets, bill rates, certifications, location, and availability. Methodologies Project management's assessment and monitoring features have created useful methods for evaluating proposed projects. Project managers are able to quickly determine whether a new project is ill-conceived, in part, based on past project reporting within an organization and insights gained from experienced project teams. Additionally, management literature includes significant benchmark reporting of project management best practices related to issues such as control system for process improvement and selecting effective performance measures.



Others Importance of Project Management in Bangladesh
 Project Management helps to overcome the problems of time and cost overruns.  Project Management leads to optimum use of available resources.  Project Management should commensurate with national development strategies.  Project Management involves substantial outlay.  Cost of prediction error is very high which may lead of bankruptcy and threatens the existence of project.  Project Management increased international competitiveness.  Project Management is the key to cost management of producing goods and services.  Project Management is an essential condition for getting assistance and loan.  Project Management impacts have long term and hence have a temporal spread.  Project Management helps to achieve self-reliance in the country.  Project Management is base to implementing national development strategies.  Project Management is a precondition of transfer of technology.  May lead to balanced growth of agriculture and industry.  Helpful towards exploration of resources, innovations and researchers and discoveries.  Brings not only economic prosperity but also honor and prestige of nation because economic prosperity means economic power.  Economic prosperity of the country will lead to a capacity to render financial assistance to other poor and least developed countries.  Project Management Increases Productivity.  Project Management Keeps Projects on Budget.  Project Management Increases Company Communication.  Project Management Monitors the Status of Milestones and Deliverables.  Project Management Decreases Risk.  Project Management Improves Product Quality.  Project Management Streamlines Decision Making.  Project Management Helps Companies to Meet Strategic Objectives.  Project Management Keeps Clients and Customers Satisfied. Because project management is the best way to ensure that the quality, timeliness and adherence to budget goals of any project are met, it is a vital component of running a successful business.



Vital Role of Project Managers
Some of the prime advantages of having a good project management team for a company are as follows. Excellent product quality Consumers generally look for low cost and high quality, while purchasing a product. Maintaining a high standard of excellence in developing quality products earns the company goodwill amongst its customers. The plans the allocated budget, resources and testing methods that keep the pace of production high, both qualitatively and quantitatively. The project management teams can also undertake six sigma training programs that enhance the quality of the products. So, we can say that project managers indirectly contribute a lot in ensuring that the quality of products is consistently high. In the recent years, a large number of standard corporate training programs have been designed to help project managers understand the intricacies of quality, control and management. Adequate communication Improper communication among employees can lead to misunderstandings and negatively impact the performance of the firm. A project manager can be a bridge among the diversified branches of project undertaking. Stakeholders also form a part of the company. They prefer investing in those companies that deliver projects on time and keep them informed about updates and progress of the projects. If a client is satisfied with the performance of the firm, it is likely that it will return with much bigger projects, not to mention huge investments. A project leader can hold meetings on a daily, weekly or monthly basis and can make sure that everyone is aware about the project plan and his/her responsibilities, both as an individual and as a team. With the help of human resource management department, project managers can be more effective in communicating the expectations of the clients. Reducing risks The probability of getting hit by an unwanted or unexpected event has increased manifold in today's competitive business environment. The project management team can identify the potential risks, take their time to rectify them and help the company save valuable resources. In the case of a worst crisis, this team can opt for change management method to attain the desired goals. Team work is a must, when it comes to visualizing the dangers ahead. Risk management principles can be applied by the project managers to eliminate risks to a larger extent.



Strategic objectives and goals Strategic goals are the blueprint of the task undertaken by a company. For instance, a software company aims to prepare software and related programing codes, whereas an infrastructure company has a target of constructing dams, bridges and other construction works. A project management team helps the company in achieving the strategic goals, as it streamlines the task of a company in taking many important decisions. Strategic planning and strategic thinking are vital management tools for a project management team. Once the task is allotted, the project team is responsible for the goal to be finished in the dedicated time. Innovation is an area in which the project team can invest more and come out with new ideas that can increase the profit margin and also reputation of the firm. Human resource, financial planning, corporate social responsibility and physical resources are other facets of strategic goals.

Crisis Management Crisis in a project can occur because of several reasons like recession, labor strikes, paucity of funds and natural calamities, to just name a few. In such a situation, it is essential for project managers to display maturity and profound administrative and managerial skills to handle the situation. Sometimes, abandoned project and tasks are completed successfully, under the able guidance of project managers. The power inherent in the abilities of an accomplished project manager makes a huge difference in the outcome of the project. It is an essential segment in every organization. Be it the small scale enterprises or corporate giants, project management has the power to transform the market standing of a company and help it soar high in the sky.



14 Key Principles for PM Success
This web-published article by Michael Greer is an excerpt from ―Chapter 6: Planning and Managing Human Performance Technology Projects,‖ Handbook of Human Performance Technology, San Francisco, Jossey-Bass, 1999 1. Project managers must focus on three dimensions of project success. Simply put, project success means completing all project deliverables on time, within budget, and to a level of quality that is acceptable to sponsors and stakeholders. The project manager must keep the team‘s attention focused on achieving these broad goals. 2. Planning is everything — and ongoing. On one thing all PM texts and authorities agree: The single most important activity that project managers engage in is planning — detailed, systematic, team-involved plans are the only foundation for project success. And when real-world events conspire to change the plan, project managers must make a new one to reflect the changes. So planning and replanning must be a way of life for project managers. 3. Project managers must feel, and transmit to their team members, a sense of urgency. Because projects are finite endeavors with limited time, money, and other resources available, they must be kept moving toward completion. Since most team members have lots of other priorities, it‘s up to the project manager to keep their attention on project deliverables and deadlines. Regular status checks, meetings, and reminders are essential. 4. Successful projects use a time-tested, proven project life cycle. We know what works. Models such as the standard ISD model and others described in this text can help ensure that professional standards and best practices are built into our project plans. Not only do these models typically support quality, they help to minimize rework. So when time or budget pressures seem to encourage taking short cuts, it‘s up to the project manager to identify and defend the best project life cycle for the job. 5. All project deliverables and all project activities must be visualized and communicated in vivid detail. In short, the project manager and project team must early on create a tangible picture of the finished deliverables in the minds of everyone involved so that all effort is focused in the same direction. Avoid vague descriptions at all costs; spell it out, picture it, prototype it, and make sure everyone agrees to it.



6. Deliverables must evolve gradually, in successive approximations. It simply costs too much and risks too much time spent in rework to jump in with both feet and begin building all project deliverables. Build a little at a time, obtain incremental reviews and approvals, and maintain a controlled evolution. 7. Projects require clear approvals and sign-off by sponsors. Clear approval points, accompanied by formal sign-off by sponsors, SMEs, and other key stakeholders, should be demarcation points in the evolution of project deliverables. It‘s this simple: anyone who has the power to reject or to demand revision of deliverables after they are complete must be required to examine and approve them as they are being built. 8. Project success is correlated with thorough analyses of the need for project deliverables. Our research has shown that when a project results in deliverables that are designed to meet a thoroughly documented need, then there is a greater likelihood of project success. So managers should insist that there is a documented business need for the project before they agree to consume organizational resources in completing it. 9. Project managers must fight for time to do things right. In our work with project managers we often hear this complaint: ―We always seem to have time to do the project over; I just wish we had taken the time to do it right in the first place!‖ Projects must have available enough time to ―do it right the first time.‖ And project managers must fight for this time by demonstrating to sponsors and top managers why it‘s necessary and how time spent will result in quality deliverables. 10. Project manager responsibility must be matched by equivalent authority. It‘s not enough to be held responsible for project outcomes; project managers must ask for and obtain enough authority to execute their responsibilities. Specifically, managers must have the authority to acquire and coordinate resources, request and receive SME cooperation, and make appropriate, binding decisions which have an impact on the success of the project. 11. Project sponsors and stakeholders must be active participants, not passive customers. Most project sponsors and stakeholders rightfully demand the authority to approve project deliverables, either wholly or in part. Along with this authority comes the responsibility to be an active participant in the early stages of the project (helping to define deliverables), to complete reviews of interim deliverables in a timely fashion (keeping the project moving), and to help expedite the project manager‘s access to SMEs, members of the target audience, and essential documentation.



12. Projects typically must be sold, and resold. There are times when the project manager must function as salesperson to maintain the commitment of stakeholders and sponsors. With project plans in hand, project managers may need to periodically remind people about the business need that is being met and that their contributions are essential to help meet this need. 13. Project managers should acquire the best people they can and then do whatever it takes to keep the garbage out of their way. By acquiring the best people — the most skilled, the most experienced, the best qualified — the project manager can often compensate for too little time or money or other project constraints. Project managers should serve as an advocate for these valuable team members, helping to protect them from outside interruptions and helping them acquire the tools and working conditions necessary to apply their talents. 14. Top management must actively set priorities. In today‘s leaner, self-managing organizations, it is not uncommon for project team members to be expected to play active roles on many project teams at the same time. Ultimately, there comes a time when resources are stretched to their limits and there are simply too many projects to be completed successfully. In response, some organizations have established a Project Office comprised of top managers from all departments to act as a clearinghouse for projects and project requests. The Project Office reviews the organization‘s overall mission and strategies, establishes criteria for project selection and funding, monitors resource workloads, and determines which projects are of high enough priority to be approved. In this way top management provides the leadership necessary to prevent multi-project log jams.



Limitations or Challenges of Project Management
Project management is a special process used to plan, operate and monitor projects. Its aim is to efficiently achieve project goals and objectives or solve a particular problem. It is different from general management, in part, because of its focus on completing well-defined goals within specific constraints relative to time, cost and quality. While it is generally deemed an effective management tool for achieving strategic business goals, it is also noted as having both advantages and disadvantages. Whether you are a new project manager, or an experienced leader, project management will continue to reveal itself as part art, part science, and part major headache! The list below highlights some of the top project management challenges, along with suggested solution ideas to help overcome those challenges: Undefined Goals When goals are not clearly identified, it is impossible for the team to meet them. And, since upper management cannot agree to or support undefined goals, the project in question has little chance of succeeding. The project manager must ask the right questions to establish and communicate clear goals from the outset. Scope Changes Also known as "scope creep," this phenomenon occurs when project management allows the project's scope to extend beyond its original objectives. Certainly, clients and supervisors will ask for changes to a project - but a good project manager will evaluate each request and decide how and if to implement it, while communicating the effects on budget and deadlines to all stakeholders. Solution: There is no anti-scope-creep spray in our PM utility belts, but as with many project management challenges, document what is happening or anticipated to happen. Communicate what is being requested, the challenges related to these changes, and the alternate plans, if any, to the project participants (stakeholders, team, management, and others).



Unrealistic deadlines Some would argue that the majority of projects have "schedule slippage" as a standard feature rather than an anomaly. The challenge of many managers becomes to find alternate approaches to the tasks and schedules in order to complete a project "on time", or to get approval for slipping dates out. An "absolute" time-based deadline such as a government election, externally-scheduled event, or public holiday forces a on-time completion (though perhaps not with 100% of desired deliverables). But, most project timelines do eventually slip due to faulty initial deadlines (and the assumptions that created them). Solution: Manage the stress of "the immovable rock and the irresistible force" (i.e. the project deadline and the project issues) with creative planning, alternatives analysis, and communication of reality to the project participants. Also determine what deadlines are tied to higher level objectives, or have critical links into schedules of other projects in the organization's portfolio. Resource Deprivation In order for a project to be run efficiently and effectively, management must provide sufficient resources - human, time and money. Project management training shows how to define needs and obtain approval up front, and helps project managers assign and prioritize resources throughout the duration of a project. Lack of Stakeholder Engagement A disinterested team member, client, CEO or vendor can destroy a project quickly. It's like having a distracted paddler in a two-person canoe - you might get to the finish line, but not efficiently or on time. And you'll waste a lot of energy in the process! A skilled project manager communicates openly and encourages feedback at every step to create greater engagement among participants. Communication deficit Many project managers and team members do not provide enough information to enough people, along with the lack of an infrastructure or culture for good communication. Solution: Determine proper communication flows for project members and develop a checklist of what information (reports, status, etc.) needs to be conveyed to project participants. The communications checklist should also have an associated schedule of when each information dissemination should occur.



Resource competition Projects usually compete for resources (people, money, time) against other projects and initiatives, putting the project manager in the position of being in competition. Solution: Portfolio Management - ask upper level management to define and set project priority across all projects. Also realize that some projects seemingly are more important only due to the importance and political clout of the project manager, and these may not be aligned with the organization's goals and objectives. Uncertain dependencies As the project manager and the team determine project dependencies, assessing the risk or reliability behind these linkages usually involves trusting someone else's assessment. "My planner didn't think that our area could have a hurricane the day of the wedding, and now we're out of celebration deposits for the hall and the band, and the cost of a honeymoon in Tahiti!" Solution: Have several people - use brainstorming sessions - pick at the plan elements and dependencies, doing "what if?" scenarios. Update the list of project risk items if necessary based on the results. Failure to manage risk A project plan has included in it some risks, simply listed, but no further review happens unless instigated by an event later on. Solution: Once a project team has assessed risks, they can either (1) act to reduce the chance of the risk occurrence or (2) act or plan towards responding to the risk occurrence after it happens. Insufficient team skills The team members for many projects are assigned based on their availability, and some people assigned may be too proud or simply not knowledgeable enough to tell the manager that they are not trained for all of their assigned work. Solution: Starting with the project manager role, document the core set of skills needed to accomplish the expected workload, and honestly bounce each person's skills against the list or matrix. Using this assessment of the team, guide the team towards competency with training, cross-training, additional resources, external advisors, and other methods to close the skills gap.



Customers and end-users are not engaged during the project Project teams can get wound up in their own world of internal deliverables, deadlines, and process, and the people on the outside do not get to give added input during the critical phases. Solution: Discuss and provide status updates to all project participants - keep them informed! Invite (and encourage) stakeholders, customers, end-users, and others to periodic status briefings, and provide an update to those that did not attend. Vision and goals not well-defined The goals of the project (and the reasons for doing it), along with the sub-projects or major tasks involved, are not always clearly defined. Clearly communicating these vague goals to the project participants becomes an impossible task. Some solutions and ideas to thrash vagueness: Determine which parts of a project are not understood by the team and other project participants - ask them or note feedback and questions that come up. Check the project documentation as prepared, and tighten up the stated objectives and goals - an editor has appropriate skills to find vague terms and phrasing. Each project is, hopefully, tied into to the direction, strategic goals, and vision for the whole organization, as part of the portfolio of projects for the organization. Inadequate Skills for the Project A project sometimes requires skills that the project's contributors don't possess. Project management training can help a project leader determine the needed competencies, assess the available workers and recommend training, outsourcing or hiring additional staff. Lack of Accountability A project manager's leadership qualities really shine when each member of the team takes responsibility for his or her role in achieving project success. Conversely, a lack of accountability can bring a project to a complete halt. Finger-pointing and avoiding blame are unproductive - but all-too-common - features of flawed project management. Learning to direct teams toward a common goal is an important aspect of project management training. Solution: Determine and use accountability as part of the project risk profile. These accountability risks will be then identified and managed in a more visible manner.



Improper Risk Management Learning to deal with and plan for risk is an essential piece of project management training. And risk tolerance is a desirable project manager trait - because projects rarely go exactly according to plan. Gathering input, developing trust and knowing which parts of a project are most likely to veer off course are all aspects of the project manager's job. Ambiguous Contingency Plans It's important for project managers to know exactly what direction to take in pre-defined "what-if" scenarios. But if those contingencies are not identified, the entire project can become mired in an unexpected set of problems. Asking others to identify potential problem areas can lead to a much smoother and more successful project. Poor Communication Project managers provide direction at every step of the project, so each team leader knows what's expected. Effective communication to everyone involved in the project is crucial to its successful completion.

Project management training includes an emphasis on written and oral communication skills

Proper communication increases team members' morale by establishing clear expectations

Good project managers keep communication and feedback flowing between upper management and team leaders

Human Element Limitations Your resource management may be at top levels but the human element in any project can harm a project. While change is inevitable they say, humans are not robots or computers and areas of denial, disagreement, and stubbornness do happen. Cure human element limitations by open communication and good listening skills.



Software Limitations Project management software designers may believe if they build it, it will be utilized but that‘s not always the case. Not all software will work for every project nor can all software be adapted immediately to meet project needs – no matter what project management methodology you are using. Speak with designers and offer realistic guides on what you need. Meet often during the design process to see, feel, and touch the design. While you may not be able to rid software of all its limitations you can make the process flow smoother if you communicate throughout the process rather than waiting for the final product. IT Limitations How many times do IT personnel blame the software designer and vice versa? That amusing private war may be relevant to the parties involved, but if the software you need conflicts with your network and it crashes, your IT department isn‘t communicating effectively. Some managers may be guilty of not including IT personnel in stages of software design, wants, and needs. Correct this project management limitation by understanding why software and IT must be interconnected at all times. Vendor and Supplier Limitations The suppliers you utilize can also put limits on project timelines. If they aren‘t getting you what you requested or are backlogged, your project is at their mercy. Utilize a good vendor selection process in advance of projects to ensure timely delivery. Green Limitations Global warming may still be a debate, but the desire for green computing and green offices might affect your bids for new environment-friendly clients. If you face this problem, read some tips from Green Project Management to entice your concerned clients.



Over-spending Projects might also be resource-intensive in terms of its human and financial capital requirements. One of the key problems arises when project budgets are underestimated, resulting in revenue shortfalls in essential areas such as staff wages, operating costs, equipment, supplies, third-party procurement needs and administrative costs. Losing Focus Changes in objectives can ease into project plans that might have significant impacts on its outcomes. This requires project managers to monitor the progress of individual team members and project groups to ensure that activities and tasks are consistent with original project goals and objectives. Here, milestones are an effective tool frequently used in project management to track progress and make sure that original objectives are being observed. Timescale Problems Project can go over schedule when timescales are not properly estimated or team members do not use effective time management techniques in managing their project assignments. Calculating the timescales for milestones, activities and tasks require precise duration estimates for units of work required to complete a project. This is where time management tools, such as PERT diagrams and Gantt charts, are useful to teams to manage timescales and ensure the project stays on schedule. Project leadership is a skill that takes time to develop in a person or organization. Achieving success requires analyzing setbacks and failures in order to improve. Focusing on each project's challenges and learning from them will help to build a more capable and successful project management capability.



Challenges of project management in Bangladesh
Positive factor (Strengths and Opportunities) 1. Adequate industrial base. 2. Growing economy, scope for fresh and new projects, need for infrastructural facilities. 3. Availability of resources. 4. Abundance of manpower. 5. Urge for development. 6. Manpower export. 7. Bangladesh is the 2nd leading exporter after China. 8. Adequacy of capital resource (Specially black money) in stock market and business. 9. Heavy development of real state business. Negative factors (Weakness and Threats) 1. Poor & very inadequate technical bases 2. Inadequacy of research and trained manpower. 3. Serious brain drain. 4. Lack and inadequacy of infra-structural facilities. 5. Corruption (Resource utilization is only 40% effectively) 6. Vary poor project planning. 7. Data bank lacking and highly increased. 8. Dearth of experienced and hard working and honest entrepreneurs. 9. Poor general economic conditions and low per capita income. 10. Size of markets and buying capacity. 11. Uncongenial legal framework. 12. Absence of good governance. 13. Unfriendly administrative machinery. 14. Irrational fiscal policy. 15. Week and ineffective capital market. 16. Inefficient monitoring of banking structure and banking policy. 17. Default culture. 18. Absence of business ethics. 19. Lack of political will.



20. High political risk including instability. 21. Precarious law and order situation. 22. Bangladesh is classified as ―high risk‖ country. 23. Low savings- GDP ratio. 24. Majority of population lives below property level. 25. Low literacy rate and lack of civic sense, patriotism, and sense of belongingness. 26. Unhealthy distribution of income and concentration of most of the wealth of the country in the hand of several thousands. 27. Absence of social values and social justice with its serious erosion. 28. Serious exploitation of society and country by educated people. 29. Inadequacy of physical resources. 30. Growth of population. 31. Wrong conception about religion and week socio cultural institution, of which family is the weakest. 32. Cumbersome custom formalities. 33. Imbalance between direct and indirect tax structure. 34. Very loose boarder and smuggling. 35. Very wide trade gap that is unfavorable balance of trade and balance of payment position (Export earning is about 40% import bills). 36. Ineffective balance of growth of agricultural and industrial sectors. 37. Initial industrial base was planned on the basis of different geographical dispersion and market. 38. Inadequacy of basic heavy and mother industry. 39. Irregular flow of foreign fund. 40. Lack of interdepartmental, inter ministerial coordination and ineffective sectoral adjustment. 41. High frequency of natural climate and disaster. 42. Serious impact of ozone unbalancing, warming up of atmosphere, increase of sea level, probable flood and erosion of landscape. 43. Serious problem of time and cost overruns of project implementation. 44. Lack of motivation in implementation of projects with serious snags. 45. Political unrest impedes projects implementation and absence of network analysis or projects scheduling in hardly pursued. 46. Impact open market economy and formation of regional economic blocs.



47. Ineffective and corrupted banking structure. 48. High degree of propensity to incur unproductive expenses out of project funds both in public and private sectors. 49. Trading mentality of entrepreneurs, lack of business farsightedness resulting into interest toward painstaking industrial projects. 50. High degree of irresponsibility, callousness and indifference on the part of project managers of public sector projects. 51. Discouraging development in the field of agricultural including fisheries. 52. Lack of river management. 53. High degree of river pollution.



Section B

Capital Budgeting
Capital budgeting is a process that involves making of investment decisions by a company as to identify which project is profitable so that the company can invest its capital. The crux of capital budgeting is the allocation of available resources to various proposals. The crucial factor which influences the capital budgeting decision is the profitability of prospective investment. Hence capital budgeting decisions are very vital to any organization. The process in which a business determines whether projects such as building a new plant or investing in a long-term venture are worth pursuing. Oftentimes, a prospective project's lifetime cash inflows and outflows are assessed in order to determine whether the returns generated meet a sufficient target benchmark. The process of determining which potential long-term projects are worth undertaking, by comparing their expected discounted cash flows with their internal rates of return. Capital budgeting (also known as investment appraisal) is the process by which a company determines whether projects (such as investing in R&D, opening a new branch, replacing a machine) are worth pursuing. A project is worth pursuing if it increases the value of the company. A project typically adds value to the company if it earns a rate of return that exceeds the cost of capital. The opportunity cost of capital (also known as the hurdle rate) is the expected return that is forgone by investing in the project rather than in comparable financial securities, such as shares, with the same risk as the project under consideration. While capital budgeting is a fairly straightforward process from a conceptual viewpoint, it can be very challenging in practice. Not only is it difficult to determine the group's appropriate cost of capital, it is often even trickier to accurately forecast the incremental cash flows that result from taking on the project. The term "capital budgeting" is used to describe how managers plan significant outlays on projects that have long-term implications such as the purchase of new equipment and the introduction of new products. Most companies have many more potential projects than can actually be funded. Hence, managers must carefully select those projects that promise the greatest future return. How well managers make these capital budgeting decisions is a critical factor in the long run profitability of the company.



Capital Budgeting Process
Capital budgeting is a complex process as it involves decisions relating to the investment of current funds for the benefit to be achieved in the future but the future is always uncertain. The following procedure is adopted in process of Capital Budgeting.

Importance of Capital Budgeting
The importance of Capital Budgeting can be well understood from the fact that an unsound investment decision may prove to be fatal to the very existence of the concern. The need for Capital budgeting mainly arises due to – 1. Large investments – Capital Budgeting decisions usually involve large investments of funds but mostly the there is a shortage of funds at every firm. Hence the funds and the resources need to be controlled by the firm 2. Irreversible nature – Once the decision for acquiring a permanent asset is taken, it becomes very difficult to dispose of these assets without incurring heavy loss 3. Long term effect on Profitability – Not only the present earnings of the firm is affected but the future growth and profitability also depend upon investment decisions taken today. So a bad decision today can lead to a downfall tomorrow.



Introduction of FDI
Foreign direct investment (FDI) is a measure of foreign ownership of productive assets, such as factories, mines and land. Increasing foreign investment can be used as one measure of growing economic globalization. Maps below show net inflows of foreign direct investment as a percentage of gross domestic products (GDP). The largest flows of foreign investment occur between the industrialized countries (North America, North West Europe and Japan). But flows to non-industrialized countries are increasing.

Foreign Direct Investment (FDI) the acquisition of managerial control by a citizen or corporation of a home nation over a corporation of some other host nation. Corporations that widely engage in FDI are called multinational companies, multinational enterprises, or transnational corporations. FDI traditionally implies export of real capital from home to the host nation, but even when economic investment results from FDI, capital may not be transferred from the home nation to the host one. Rather, multinational corporation may acquire/utilize real capital from local (or a third-nation) sources. On the supply side, FDI in Bangladesh originated in imperfections in its

as well as in its

financial market and its market for technology. Also the 'eclectic theory' of multinational firms applies in its case as FDI is induced here by imperfections in the market of real goods and factors of production. On the demand side, however, Bangladesh invites FDI for industrial growth, in particular welcoming establishment of manufacturing firms and service sector enterprises that would sell their products within the country and also export outside it.

Definition of FDI
FDI stands for Foreign Direct Investment, a component of a country's national financial accounts. Foreign direct investment is investment of foreign assets into domestic structures, equipment, and organizations. It does not include foreign investment into the stock markets. Foreign direct investment is thought to be more useful to a country than investments in the equity of its companies because equity investments are potentially "hot money" which can leave at the first sign of trouble, whereas FDI is durable and generally useful whether things go well or badly.



Objectives of Foreign Direct Investment
1. Sustaining a high level of investment - Since the underdeveloped countries want to industrialized themselves within a short period of time, it becomes necessary to raise the level of investment substantially. This requires, in turn a high level of savings because of general poverty of masses, the savings are often very low. Hence emerges a resource gap between investment and savings. This gap has to be filled through foreign capital.

2. Technological gap - The under developed countries have very low level of technology as compared to the advanced countries. However they possess strong urge for industrialization to develop their economies and to wriggle out of the low level equilibrium trap in which they are caught. This raises the necessity for importing technology from advanced countries. Such technology usually comes with foreign capital when it assumes the form of private foreign investment or foreign collaboration.

3. Exploitation of natural resources - A number of underdeveloped countries possess huge mineral resources, which await exploitation. These countries themselves do not possess the required technical skill and expertise to accomplish this task. As a consequence, they have to depend upon foreign capital to undertake the exploitation of their mineral wealth. 4. Undertaking the initial risk - Many under developed countries suffer from acute private entrepreneurs. This creates obstacles in the programs of industrialization. An argument advanced in favor of the foreign capital is that it undertakes the risk of investment in host countries and thus provides the much-needed impetus to the process of industrialization. Once the programmer of industrialization gets started with the initiative of foreign capital, domestic industrial activity starts picking up as more and more of the host country enter the industrial field.



5. Development of basic economic infrastructure - It has been observed that the domestic capital of the under developed countries is often too inadequate to build up the economic infra structure of its own. Thus these countries require the assistance of foreign capital to undertake this task. In the latter half of the 20th century, especially during the last 3-4 decades, international financial institutions and many governments of advanced countries have made substantial capital available to the under developed countries to develop their system of transport and communications, generation and distribution of electricity, development of irrigation facilities, etc. 6. Improvement in balance of payments position - In the initial phase of the economic development, the under developed countries need much larger imports (in the form of machinery, capital goods, industrial raw materials, spares and components), then they can possibly export. As a result, the balance of payments generally turns adverse. This creates a gap between the earnings and foreign exchange. Foreign capital presents short run solution to the problem. This shows that the economic development of an underdeveloped country should obviously receive a boost as a result of foreign capital Accordingly, if foreign capital is obtained on easy terms and without any ‗strings‘, it should be welcomed. However, as noted by John P. Lewis, ―despite denials, the fact is that all foreign aid carries strings and every foreign aid relationship involves bargaining, however genteel, between aiding and receiving parties.‖

The Importance of Foreign Direct Investment
Foreign direct investment (FDI) provides a major source of capital which brings with it up-todate technology. It would be difficult to generate this capital through domestic savings, and even if it were not, it would still be difficult to import the necessary technology from abroad, since the transfer of technology to firms with no previous experience of using it is difficult, risky, and expensive. Over a long period of time FDI creates many externalities in the form of benefits available to the whole economy which the TNCs cannot appropriate as part of their own income. These include transfers of general knowledge and of specific technologies in production and distribution, industrial upgrading, work experience for the labor force, the introduction of modern management and accounting methods, the establishment of finance related and



trading networks, and the upgrading of telecommunications services. FDI in services affects the host country's competitiveness by raising the productivity of capital and enabling the host country to attract new capital on favorable terms. It also creates services that can be used as strategic inputs in the traditional export sector to expand the volume of trade and to upgrade production through product and process innovation. By altering a country's comparative advantages and improving its competitiveness through technology transfer and the effects of myriad externalities, foreign as well as domestic investment can alter a country's volume and pattern of trade in many income-enhancing directions.

Factors Affecting FDI
Infrastructure Better infrastructure of the host country attracts foreign investors. Inflows of the FDI depend mostly on quality and quantity of physical infrastructure like roads and highways, transport, power, telecommunications and so on. Banking and other financial services also affect the FDI inflows significantly. Good transport facilities-road, rail and air, including developed port systems, energy and water and low cost utilities like telecommunications are important infrastructural factors in attracting FDI. Business has to incur excess cost to collect information in a country with poor infrastructure. But it can be done easily and with minimum cost in a country having good infrastructure that makes FDI financed projects cost efficient and competitive in the global market.

Macro Economic Environment Macroeconomic factors such as fiscal policy, monetary policy and exchange rate policies, political stability and business climate have a serious influence for FDI. Foreign investors choose a location where there is evidence of success and availability of favorable macroeconomic conditions. Investment is generally driven by profit, and foreign investors always prefer a country with a rich business sector measured in terms of GDP growth rate, rate of inflation, level of industrialization etc. than one, where the macro economic environments sluggish.



Governance Governance of a country comprises economic and business policy and regulations such as taxation system and tax rate, interest and Bank rate, drive against corruption etc. All this factors are related with the cost business and profit. Foreign investors very consciously consider the governance of a country to invest. An important aspect of governance is the ease with which investors can enter and exit a market. It is and important determinant of productivity, investment and entrepreneurship. International integration International integration is another determinant that drives investment. Countries that aggressively pursue integration with the global economy grow more quickly than those that did not. The low level of incoming FDI in indicates poor integration with the global economy.(Main. M. E 2006). Political stability Political factors like change of government, attitude of opposition group, transparency in bureaucracy, degree of nationalism, corruption, terrorism etc. are seriously considered by the investors in pre-investment decision making. (Main. M. E 2006) For example, in case of Bangladesh the most sensitive issue for discouragement of the FDI is political unrest and corruption and red-tapism. Human resources Skilled workforce leaves a country at an ease to attract investment. Development programs financed by the FDI may be interrupted for the absence of skills and adequate knowledge infrastructure. Low growth that takes place in trade and investment is the result of the use of unskilled cheap labor. Bangladesh is a country where there is ample scope for development of human resources. It is a shame for the planners that thousands of Indians and other foreign nationals are employed in the top positions of most of the multinational and national corporations. Technology infrastructure Economic growth of a country largely depends on technological progress, which stimulates FDI. It includes more modest advances, implementation of better business processes, and involves the adoption of new technologies (Main. M. E 2006). In this area, again, Bangladesh lags behind in comparison to its competitors.



Factors to be considered while having Foreign direct Investment (FDI)
1. Selection of country. 2. Measurement of political and country risk. 3. Exploration of natural and other resources. 4. Availability of skill and unskilled manpower. 5. Use of technology. 6. Adequate infrastructure facilities. 7. Political stability and law of order situation. 8. Tax advantage or heaven or holiday. 9. Taking advantages of other factors of production. 10. Size of market and demand of goods and services. 11. Annex potentialities that are prospects for growth. 12. Efficient banking system. 13. Effective money and banking system. 14. General economic condition of the selected country. 15. Attitude of host Government. 16. Use of political leverage in favor of FDI. 17. Legal system. 18. Adaptability and transfer of technology. 19. Strength of currency. 20. Balance of trade and balance of payment situation. 21. Possibility of handing over project to local entrepreneur. 22. Participation by local entrepreneur in FDI. 23. Ease of remittance of fund. 24. Foreign exchange reserve and frequency devaluation. 25. Size of investment. 26. Nature of business. 27. Tax regulation relative to depreciation and investment in marketable securities. 28. Degree of corruption. 29. Geo-political location and importance. 30. Rate of interest. 31. Protection of foreign interest. 32. Manipulation through transfer pricing.



33. Foreign exchange market. 34. Market condition and monopoly. 35. Transfer of managerial knowhow. 36. Interest of joint venture partners. 37. Inflation. 38. Advantages of economic of scale. 39. Geographical diversification of business through FDI. 40. Patent trade mark and franchising and licensing facilities. 41. Exploration of brand name and loyalty. 42. Potentiality of cost management.

Facilities and Incentives for Foreign Investors
FDI has been allowed in all sector of the economy except five industries - defense equipment, nuclear energy, forest plantation, security printing and railways. The investors enjoy the following incentives for investing in Bangladesh – a) 5 to 7 years corporate tax holiday for selected sectors. b) Private power companies enjoy corporate income tax exemption for a period of 15 years. c) Tax exemption on royalties, technical knowhow and technical assistance fees and facilities for their repatriation. d) Tax exemption on foreign loans regarding interest. e) Tax exemptions on capital gains from transfer of shares by the investing company. f) Remittances of up to 50% of salaries of the foreigners employed in Bangladesh and facilities for repatriation of their savings and retirement benefits at the time of their return. g) No restrictions on issuance of work permits to project related foreign nationals and employees. h) Facilities for repatriation of invested capital, profits and dividends. i) Provision of transfer of shares held by foreign shareholders to local investors. j) Reinvestment of remittable dividends would be treated as new investment. k) An investor can wind up on investment either through a decision of the AGM. Once a foreign investor completes the related formalities to exit the country, he or she can repatriate the sales proceeds after securing proper authorization from the Central bank.



Bangladesh makes no difference between foreign private investors and domestic investrs regarding investment incentives or export and import policies. In Bangladesh foreign investors enjoy the access to domestic capital markets for working capital in the form of loans sanctioned from the commercial banks and development financial institutions. The foreign investors have been given the opportunity to have access to the services of the country's stock exchanges. Some export-oriented industries of the thrust sector are provided with the benefit of cash incentives, venture capital, and other investment friendly facilities. The Board of Investment (BoI) of Bangladesh provides registration and other services. They also provide the procedures for FDI those have been simplified to attract FDI. Bangladesh Bank has prepared a sovereign and highly effective credit rating report. This should help to attract FDI as well as boost short-term borrowings for the country's private and public sectors. Country‘s image will be enhanced by this sound and sovereign credit rating report. It will certainly help local financial organizations to tap low-cost borrowings from foreign sources. The dependence on the London inter-bank offer rate will be definitely reduced. It also helps to obtain low-cost funds from foreign sources.

Problems of FDI
Although Bangladesh is trying to be as friendly as possible to FDI, she is facing some problems regarding investment from foreign sector. The FDI friendly policies of the government and a culture of hospitality to foreigners are very much positive to welcome FDI in Bangladesh. But it is a matter of concern that FDI records in the country in terms of the number of projects implemented as compared to those officially registered is frustrating. Only 72 FDI projects went into production in end of 1999 and 27 were in process of implementation of the 365 FDI projects registered during the year of 1996 - 1998, while the remaining 266 projects languished only as the file-cases.



The problems that have restricted FDI potentials in the country are as follows:  Bureaucratic interference  Irregularities in processing papers  Overlapping administrative procedures  Absence of a transparent system of formalities  Continuity and prevent timely implementation of strategic, procedural, and even routine duties  Frequent power failures
 Poor infrastructure support  Labor unrest  Political unrest  Lack of professional personnel  lack of commitment on the part of local investors  Unexpected delays in selecting projects in studying feasibility  Frequent changes in policies on import duties for raw materials, machinery and equipment etc.

Impediments of FDI in Bangladesh
The FDI plays an important role in the economic development of Bangladesh inters of capital formation, output growth, technological progress, exports and employment. But the inflow of FDI is not smooth at all in Bangladesh. The factors which are blocking foreign investment in Bangladesh would be as follows:

Complicated Bureaucracy The country has a bureaucratic system that is not at all compatible with an investment environment. The concrete implementation of investment related policies are prolonged to obstruct both local and foreign investors. An inefficient and dishonest bureaucratic system is extensively responsible for the absence of FDI in the country.



Political Unrest The political situation in Bangladesh is extremely vulnerable because of the continuous hostility among the political parties, which in turn pollutes the entire investment environment. It is unfortunate that Bangladesh is an exception where most of the political violence centered on industries. Even EPZs are not exempted by any means. However, the situation has been apparently improved since the present interim government has takeover.

Corruption Culture and society have become corrupted through sick politics. The bureaucrats and regulatory bodies are steeped in corruption. For business enterprise, corruption works as taxation or lubrication cost. Many companies regard bribery as just one of the costs of doing business (‗Lubrication Cost‘) and show these payments as legitimate business expenses. However the current situation in this regard is as gloomy as it was in the past.

High Inefficiency Cost Government control and management has been extremely ineffective and inefficient. The country is suffering from inefficiency of state-owned entities in telecommunication, energy, ports, aviation, railways, banking and many other sectors. All these sect oral inefficiencies push the total cost of local and foreign businesses extensively high.

Absence of Autonomous Regulatory Bodies The politically influenced government agencies are functioning as regulatory bodies without any operational autonomy. So an effective and rapid response towards providing the necessary services to investors is apparently absent in Bangladesh.

Differential Treatment Though are regulations to provide equal treatment of local and foreign investors, certain inequitable conventions are practiced with the foreign investors. Such inequalities are evident in cases of authorization necessities for foreign investment, barriers against capacity expansion, supplier‘s credit, etc.



Insufficient Power Supply Bangladesh faces a system loss often more than 40% of the gross power generation probing with the lowest per capita power consumption and network coverage of electrification among developing countries. This creates immense discouragement for investment in the power intensive industries.

Inconsistent Policy Implementation Bangladesh provides various favorable investment facilities and incentives under liberalized industrial policy. Bodies like the Export Processing Zones are there to promote export orientation and privatization based growth strategy. However, in reality, none of these favorable policies and strategies are implemented, thus foreign investors are being discouraged. Tax Authority’s Discretion The government of Bangladesh has given its tax administrators discretionary authority and they unduly apply it to bother businessmen and investors. This authority has made many of the officials highly corrupt. At present Bangladesh is trying to get red of from this scandal.

Lack of effective cooperation of Board of Investment (BOI) The BOI of Bangladesh has a One Stop Service cell to serve and assist with various investment facilities, mostly FDI. But, materializing the service in reality is still an illusion. The least capable and least productive government personnel working for the cell naturally fail to improve the situation.

Legal Absurdity The system of legal suits and actions prolonged over the years puts business investors in a dilemma about placing their precious capital in businesses in Bangladesh.

Disrupting Fiscal Policy Each year the government declares Fiscal Policy that quite often goes adverse to the investors and disrupts their regular business and operations plans and strategies both in short and long run.



Administrative coordination problem Policies and the implementation processes are not materialized simultaneously because of lack of administrative communication and coordination among the government agencies. This situation results in high business costs and hassles for investors.

Time wasting customs processing The inefficient and corrupt customs system quite often takes more than twenty signatories to discharge a shipment along with physical inspection by the authorized personnel. There are many other problems such as poor leadership quality, ignorant labor forces, and unorganized financial or capital markets that damage the national image of the country to the foreign investors.

Bangladesh receives highest FDI in 2011
The country received foreign direct investment (FDI) worth US$ 1.13 billion (US$ 1136.38 million) in 2011, the highest in its history, showing a 24.42 per cent rise compared to the FDI received in 2010.

"The FDI will exceed US$ 1.5 billion this year," chairman of the Board of Investment (BoI) Dr SA Samad told UNB over phone Thursday. Replying to a question, Dr Samad said simplification of investment procedures and reducing the cost of doing business are the two basic reasons behind the increased FDI inflow into the country. The actual FDI inflow was US$ 913.32 million in 2010 against US$ 1136.38 million received in 2011, according to the BoI officials. The FDI inflows mostly comprise fresh equity amounting to US$ 431.85 million while US$ 489.63 million came from reinvested earnings. The major sectors that attracted FDI include textile (US$ 272.04 million), banking (US$ 249.37 million), power, gas and petroleum (US$ 238.21), telecommunications (US$ 180.99) million and cement (US$ 51.65 million).

The countries that invested substantially in 2011 includes Egypt (US$ 152.30 million), the USA (US$ 117.74 million), the Netherlands (US$ 116.75), the UK (US$ 116.32 million), South Korea (US$ 113.06 million), Hong Kong (104.84 million), Japan (US$ 46.55 million), Sri Lanka (US$ 31.58 million), India (US$ 25.74 million) and Norway (US$ 24.26 million).



Foreign Direct Investment in Bangladesh
Foreign Direct Investment (FDI) has played a key role in the modernization of the Bangladesh economy for the last 15 years. Inflows of Foreign Direct Investment There was an inflow of $666m foreign direct investment in 2007 which raised significantly in 2008 to $1086m. As of 2011, inflows of foreign direct investment recorded to $1136.38m. Inflows of foreign direct investment during 2007-2011



Private Investment Statistics
Year Proposed Local Investment Project 2005-2006 2006-2007 2007-2008 2008-2009 2009-2010 2010-2011 2011-2012 * March, 2012 Source: Bangladesh Economic Review-2011 (Bangla version), Ministry of Finance 1754 1930 1615 1336 1470 1298 1604 Proposed Foreign Investment Total Proposed Investment
Growth %

BDT 18370 19658 19553 17117 27414 39976 497078

Project 135 191 143 132 160 148 209

BDT 24986 11925 5433 14749 6261 26935 338910

Project 1889 2121 1758 1468 1630 1446 1813

BDT 43356 31583 24986 31867 33678 66912 835989
124.62 -27.15 -20.89 27.54 5.67 98.71 212

Foreign and Joint Venture Investment
In the year 2009-10 (February), there were 89 new foreign and joint venture investment projects registered to BOI which amount to $590m. The projects were invested to mainly in the service, engineering, clothing and agricultural sectors.



Sector wise foreign and joint venture investment during 2010-2011*

* As of March, 2011 Source: Bangladesh Economic Review-2011 (Bangla version), Ministry of Finance Country wise foreign and joint venture investment during 2009-2010*

Country Saudi Arabia Australia USA Finland India South Korea Malaysia Netherlands China United Kingdom

No. of Projects 3 4 5 2 9 12 3 5 12 5

Proposed Investment (US$ m) 478.652 2.036 2.990 3.023 8.451 33.768 3.056 8.544 21.000 3.507



Pakistan Japan Denmark Sri Lanka Canada Taiwan Singapore Turkey Greece Italy Hong Kong Total

2 8 1 2 2 1 4 1 1 2 5 89

0.990 2.624 1.217 0.646 1.017 0.502 1.929 0.150 0.156 1.039 14.805 590.102

Bangladesh at a Glance
Bangladesh emerged as an independent and sovereign country in 1971 following a nine month war of liberation. It is one of the largest deltas of the world with a total area of 147,570 sq. km. With a unique communal harmony, Bangladesh has a population of about 152.51 million, making it one of the densely populated countries of the world. The majority (over 88%) of the people are Muslim. Over 98% of the people speak in Bangla. English, however, is widely spoken. The country is covered with a network of rivers and canals forming a maze of interconnecting channels. Being an active partner, Bangladesh plays vital role in the international and regional forum, particularly in the UN, Commonwealth and South Asian Association of Regional Cooperation (SAARC).



Economy Overview GDP total: GDP per capita: $105.00 bn (at current prices 2010-11) $775 (at current prices 2010-11)

GDP growth rate (%): 6.32 (at constant prices 2011-12) Total exports: Total imports: Total FDI: Foreign reserves: Currency: $24.231 bn (July, 2011-June, 12) $30.93 bn (July, 2011-May, 2012) $1.136 bn (2011) $9.953 bn (17th June, 2012) BDT (1 BDT=$0.0125) (avg 2011-12)

Source: Bangladesh Economic Review-2012 (Bangla version), Ministry of Finance

Export Promotion Bureau
Percentage of sector wise contribution to GDP during (2010-2011)

Source: Bangladesh Economic Review-2010 (Bangla version), Ministry of Finance



Contribution of industries to GDP during 2010-11 (m US$)

Source: Bangladesh Economic Review-2010 (Bangla version), Ministry of Finance Investment statistics during FY 2005-2009 (m US$)

Sector: Bangladesh Economic Review-2010 (Bangla version), Ministry of Finance



Foreign trade
Export Import trend during the financial year (2005-11*) (in m US$)

* Import figure up to February, 2011 & export figure up to March, 2011 Source: Ministry of Commerce, GOB; Bangladesh Economic Review 2011(Bangla Version) Bangladesh export by major products (2010-2011)

Source: Export Promotion Bureau, Bangla Top



Bangladesh export in major countries (2011-May,12)

Source: Export Promotion Bureau, Bangla Top

Investment and Trade
Bangladesh has attracted substantial amounts of foreign direct investment in the last ten years. 1. Bangladesh's economic and fiscal reforms, improvements in infrastructures and developing industry clusters have been amongst the main local stimuli to FDI. 2. Nevertheless the country continues to compete hard for every investment dollar! 3. Despite the pressures from other competitive economies Bangladesh remains, in the eyes of many investors, the most cost competitive and industrious location to set up a foreign subsidiary company.



FDI continues to develop the Bangladesh economy

Sources: Bangladesh Economic Review 2011 (Bangla Version)



FDI in Bangladesh
"Pakistan could learn about economic growth and confronting terrorism from its former eastern province.‖-said Sadanand Dhume, columnist for The Wall Street Journal in his article titled Bangladesh, 'Basket Case' No More. Yes, our real GDP growth rate has been higher than that of Pakistan since 2006. Whereas we maintained a steady 6% level with slight ups and downs, Pakistan's growth rate faltered from 7.7% of 2005 to 3.7% in 2009 (Source: World Bank) and portrays a consistently declining trend. Still Pakistan could attract USD 2387 million FDI inflows in 2009 and our share was a USD 716 million, almost one third of Pakistan (Source: UNCTAD). Vietnam is an economy more comparable with Bangladesh in terms of size and other macro-economic indicators. Vietnam's growth rate slowly declined from 8.4% of 2005 to 5.5% in 2009 (Source: World Bank). Their FDI inflow in 2009 was USD 4500 million, more than 6 times our share. If we focus on the recent trend of FDI inflows, however, Bangladesh is in a better position. Total FDI inflows to all countries declined by 31% YOY in 2009 over 2008. Bangladesh saw a decline of 34% whereas the rate was negative 44% and 56% for Vietnam and Pakistan, respectively. A direct relationship exists between natural resources of the country and investors' interest. For instance, Angola attracted USD 13,101 million FDI inflows during 2009, which is an almost 22% total FDI inflow to Africa (Source: UNCTAD). Investment in Angola is mostly directed towards oil extraction. In this kind of investments, the investor is willing to ignore local politics, economy and business environment. Their focus remains extraction of natural resources and exit in due course. As we know, there are several other determinants of inward FDI attractiveness of an economy. Economic growth trend, more importantly projected growth rate is a key indicator. Subjective and more difficult-to-measure factors like level of terrorism, political stability, and corruption are also equally important. Various controllable and out-of-control factors play significant role in determining what portion of inward FDI of the world is going to which country. Here are a few pain points that I believe, are holding us back but we can create sufficient control over the situation. These must be fixed so we can reach our maximum potential.



Eliminate bureaucracy Nothing new, I know, this is a decades-old issue. The investment barrier that has been addressed time and again is the administrative bureaucracy-red tape. Till date it hampers the growth of FDI. In the Doing Business 2011 index, Bangladesh ranked 107th among 183 economies, 4 ranks up from Doing Business 2010 rank (Source: Doing Business Index published by World Bank). Still there is a long way to go in terms of making the hands-on experience better for the investors. In the latest Business Environment survey, 67% entrepreneurs perceived that procedures for business operation are bureaucratic, showing a slight improvement over last year (Source: World Economic Forum).

Make land acquisition and construction Easier ―At the same time, office rents per square meter decreased in most locations across the entire Asia region. In particular, office rents fell substantially, by more than 20%, in India. Even in China rents fell except for in Shanghai and Dalian, where they stayed largely unchanged.‖ Commented Japan External Trade Organization (JETRO) in the April 2010 report regarding real estate costs. The situation is quite opposite in case of Bangladesh.



Land prices, especially in the industrial areas in Bangladesh have doubled in the last five years, according to my conservative estimate. Scarcity of land in the EPZs coupled with high acquisition cost in other places increase the cost estimates. As a result, many investors who follow the cost leadership strategy are eyeing other Asian countries with relatively lower land price, such as China and India. In India, there are hundreds of public-private Special Economic Zones with low land price and other lucrative facilities essential for industrial setup. Chinese government rents land to foreign investors with a 99-year lease agreement with a low rental cost. Rent on housing for expatriate employees decreased largely in most Chinese cities except Shanghai and Shenyang and remained unchanged in most ASEAN nations. On the other hand, rents in Dhaka and New Delhi are reaching the same level as in Singapore (Source: JETRO).

However, there can be little justification for subsidizing cost of land for FDI (or for domestic investors) by the government. Otherwise we can expect to see troubles like what TATA's Nano project faced in West Bengal. A win-win solution can be investors offering the landowners equity in their undertakings instead of paying the full land price in cash at the beginning of the project. However, the foreign investors have uncertainties over the actual worth of the overheated real estate market. On the other hand, the landowners have uncertainties over the future cash flows of the project. Availability of reliable information, mutual trust, and an independent mediator can make this structure work.



In Bangladesh, the land purchase process is cumbersome, to say the least. It involves dealing with ―what's in it for me‖ type of questions from the local extortionist to the Government officer at every phase and can be quite a frustrating experience for someone unfamiliar with Asian haggling. Even if you manage to get the land, you have to now wait for another year or so for gas connection. Then comes the question of construction. Bangladesh ranked 116th in the overall ―Dealing with Construction Permits‖ criteria with no change in position from last year (Source: World Bank). Number of procedures and relative cost are okay compared with South Asia average. However, it takes 231 days in Bangladesh to complete the process starting from survey map collection to water and sewerage connection. The timeline is 241 days in South Asia and 166 days in OECD countries. I do not believe the investors mind the cost bit much; they are rather concerned with the timeline. This is a major improvement area whereby we can turn the weakness into strength. Up-grade regulations and implement If we look at the FDI history of China, it is evident that Govt. regulations played one of the most important roles in both accelerating the inflows and restricting the flows deliberately in selective sectors. In case of Bangladesh, archaic regulations, complex legal framework coupled with weak implementation are enough to drive away the potential investors. 46% participants in the Business Environment survey opined that obtaining information about changes in government policies and regulations are impossible (Source: World Economic Forum). During October 2010, total 154 investment proposals worth USD 610MM were registered with the Board of Investment. Out of this, 45% came from foreign and joint venture investments whereas 55% came from local investment. Both sectors showed an upward trend of 27% and 19% respectively over September 2010 (Source: Board of Investment Bangladesh and the Financial Express). We must take note of this enthusiasm of local entrepreneurs and by no means discourage them by not doing enough for them. Local entrepreneurs' attitude to competition from FDI is really not very welcoming with fears of being competed out. In theory we preach that competition makes us excel and put in our best. But when it comes to practice, local entrepreneurs start advocacy to protect their business by creating entry barriers. This is also true that FDI follows strong domestic investment, which carries testimony about encouraging business environment as well as `opportunity to make money'. All the stakeholders therefore should understand relationship between domestic and foreign investment.



All the while we have to keep in mind that FDI is not an end in itself, it is the means towards economic growth. I do not suggest granting lower priced lands and utilities to investors just because they are foreign. The policy-makers can perform a deep dive objective analysis and who knows, the conclusion may be against FDI! But the approach should be to assess how much investments we need to attain the aspired GDP growth, how much can be contributed by domestic sector in itself, and how much foreign investment we need to bridge the gap. Then comes the question: does Bangladesh have the right investment climate to guarantee that FDI? If not, what is the strategy to ensure the desired amount of FDI? Instead of offering excessive generous facilities for FDI inflows and by that upsetting local talents, we should opt for more free-of-cost but better ways like promoting the county's competitive advantages. For instance, the desired investors must be communicated about the large pool of cost competitive young manpower that is the main attraction of Bangladesh as an investment destination. Are we certain that we have reached the right audience and made them aware of us? JETRO publishes a report on foreign investment climate in Asian countries for the benefit of Japanese investors who are interested to venture overseas. The table for Bangladesh has blank or n/a marked fields in some key indicators as the information on Bangladesh was not available to the Japanese authorities. The Bangladesh embassies and Trade Commissions abroad can put in a special drive to bridge these communication gaps. Bangladesh with growing middle class, increasing purchasing power, capacity building, information technology integration and respectable work ethics deserve to have better space as an investment destination, provided we put our efforts together.



The Daily Star Tuesday, July 10, 2012

FDI in Bangladesh
A. R. Chowdhury Foreign Direct Investment (FDI) has been an important part of the economic transition, business liberalisation and macro-economic growth story in Bangladesh over the last decade. Our strong showing in attracting FDI is an example of how a number of corrective measures could go a long way in promoting economic growth. Bangladesh received FDI of $1.13 billion last year compared to $910 million in 2010. This increase of about 25% is higher than the average 23% worldwide growth of FDI. According to the 2012 World Investment Report (WIR) of the UNCTAD, the garment sector attracted the highest amount of FDI followed by the banking, energy and telecommunication sectors, respectively. Over the last few years, foreign investor sentiment towards Bangladesh has improved. The Doing Business Indices recently ranked Bangladesh 9th among the countries that have improved significantly in business start-ups. This factor particularly works as a positive motivator for many foreign investors. The presence of foreign-invested projects is particularly visible in various export-oriented business sectors, where they now account for a considerable proportion of total foreign currency earnings and export volumes. Despite these recent developments, it is still true that when the competition regarding investment promotion incentives, both tax and non-tax related, is taken into account, Bangladesh's incentive measures have a number of disadvantages to those of rival countries in South Asia in terms of both tax and financial incentives for exports and R&D -- making Bangladesh less attractive as a destination for investment. Nonetheless, the Board of Investment (BOI) has recently adjusted its investment promotion strategies, from attracting across-the-board investment through broad-based incentives to focusing on investment that develops the workforce with special expertise, placing more emphasis on the development and transfer of skills among different levels of the workforce, supporting R&D and technology transfer, and fostering innovation to attract quality investment.



In addition to those sectors mentioned earlier, the key sectors where FDI could make a difference include, but are not limited to, agri-business, ceramics, electronics, frozen foods, ICT, leather and leather goods, etc. The problems facing FDI in Bangladesh are welldocumented and need not be mentioned here. In short, complicated bureaucracy, political unrest, corruption, high inefficiency cost, absence of autonomous regulatory bodies, erratic power supply, lack of administrative coordination, inefficient customs processing, etc. are at the top of anyone's list. Possible remedies that have been suggested include, among others, good governance, coordination in policies of different government agencies, accountability and transparency, ensuring uninterrupted power supply, maintaining incentives and benefits in the export promotion zone, etc. But let's take a broader view of foreign investment in Bangladesh. A relevant question is, what would be the best foreign investment promotion policy for Bangladesh? Should it be reducing investment obstacles? Or handing out incentives to all investors while setting up conditions to selectively promote strategic investment? If we consider the short-term needs, setting up investment conditions to selectively promote investment is not going to significantly improve the situation as Bangladesh still does not have enough advantages to attract quality investment. On the other hand, when long-term sustainability is taken into account, the use of investment promotion policies such as tax incentives or other complimentary giveaways is usually effective in the short-run, but not sustainable in the long term. This is because rival countries can always offer similar tax cuts and investment promotion incentives, to the point that in the end no country may genuinely benefits from this zero-sum game competition. I believe that a viable investment promotion strategy should aim to meet both short-term and long-term targets. Bangladesh may need to use broad-based policies to FDI without imposing too many restrictions. At the same time, more specific measures aimed at attracting quality investment should be applied to meet the nation's long-term strategic needs. However, attracting quality investment requires that Bangladesh deliver enough satisfactory rewards to make investors agree to transfer technology to local businesses and entrepreneurs. Those rewards cannot be generated by giveaways or simple incentives, but from the readiness of economic infrastructure, the quality of manufacturing factors, and the environments that help quality investment.



Increasing the incentives to attract foreign investment in R&D and technology transfer in Bangladesh must be accompanied by market development and healthy competition. This can be done by adjusting the economic structure towards the target economic sectors and speeding up trade liberalisation with neighbouring countries to expand market size. This would increase the payback for R&D investment. Existing laws should also be improved and better enforced to protect the rights and intellectual properties of investors. In parallel, the government should aim to reduce investment costs in target economic sectors by addressing investment problems and obstacles, which are the tacit costs shouldered by the private sector, by developing human resource and basic infrastructure to accommodate the expansion of those target sectors, and by creating a conducive environment for quality investment. Efforts should also be made to attract proactive investment by designating target industries and countries, as well as developing and fostering investment networks. Bangladesh's FDI policies should be oriented more towards these sorts of wider issues relating to the host country business environment, and where gains made would also be of benefit to local companies. One way to achieve this is to take FDI reforms out of the specific sphere of foreign investment activity per se, and into the much wider realm of the host country business environment. Such an agenda may be more effective than continuing to shower foreign investors with fiscal incentives that sometimes give an unfair advantage to foreign multinationals over local companies. Moreover, any improvement made to the host country business environment in general can be expected to benefit local companies as well as foreign investors. Besides, as international business forms evolve and cross-border production networks proliferate, making a clear distinction between the two (local and foreign firms) is becoming increasingly difficult. Thus efforts to attract FDI must dovetail with Bangladesh's specific situations and needs. Attracting quality investment will not be successful if superficial investment promotion incentives are used. Hence steps should be taken that lead the investors to believe that they will be rewarded with lasting benefits.



Section C
Quick Rental Power Plant
No wonder, QRPP (Quick Rental Power Plant) did sound magical when it first hit the headlines soon after the government had taken over. Power generation in the country was in a shambles. Something had to be done, and as a short-run device, QRPP looked to be an immediate remedy to the decision makers despite the high-cost implications. There were criticisms within the country branding it a 'quick' device for evil cash. However, it did not seem to pose itself as threatening enough to put the entire economy in the state it is now. In a span of little over two years, the shock waves are felt everywhere. And these are too loud to ignore. As part of its Crash Programme to set up power generation plants having a total capacity of 7,000 MW during the next five years the government in October 2009 undertook the rental, quick rental and peaking plants to address the nagging power crisis. The QRPP projects were supposed to add about 2,000 MWs of electricity to the national grid. Due to delayed installation and less than projected production, the major segments of the power plants contracted to be on quick rental are reportedly failing miserably causing huge financial losses to the national exchequer. The figures are astronomical to frighten any conscious citizen. The government has to pay a monthly rent from US$ 9,000 to US$ 30,000 for each megawatt of electricity produced to the power plants on account of capacity-building charge. The plants are provided with fuel at subsidised rate and the end product is purchased at an exorbitant price. Last year, the government had to pay by way of rent a whooping Tk 26.97 billion to the 12 rental and 15 quick rental plants. By the end of the current fiscal, the amount is likely to shoot as high as Tk 31.22 billion. The situation is so precarious that the government has to approach the donors pleading for loans to help tide over the crisis, which everyone knows comes at a heavy price. One such is the Extended Credit Facility (ECF) funding support of the International Monetary Fund (IMF) -- that the government had to turn to, of late. The ever escalating costs of the oil-based rental plants and the booming oil import bills that the government has to bear are, to say the least, so strikingly at odds, one can only wonder at the appalling state of mismatch.



The QRPPs have failed to deliver. They have caused more damage than what the most cynical of the critics could perceive of. An estimate shows that last year, out of the twenty seven rental and quick rental plants having a total production capacity of around 2,000 MWs, daily average availability was only 629 MWs. But the rent was pocketed by the companies on the basis of the total production capacity.

BPC to import 8 lakh tonnes furnace oil to feed rental, quick rental power plants
The Daily Star Sun, 12/08/2012 - 2:13am | by Lutphea.tory The state-owned Bangladesh Petroleum Corporation (BPC) will import 8 lakh metric tons of furnace oil to fuel the rental and quick rental power plants in six months beginning from July this year. The BPC recently finalised the import estimation of the heavy fuel oil (HFO) after it had received requirements from the state-owned Power Development Board (PDB). The PDB has deals to purchase electricity from the rental and quick rental power plants. The government allowed setting up the rental and quick rental power plants as short term measure to address the nagging power crisis. But production cost of the plants is very high. The rental and quick rental power plants now generate about 2,000 MW of electricity. The government has to supply fuel to these plants at a subsidised rate and also purchase electricity from them at a relatively higher rate through giving subsidy.



BPC Chairman Abu Bakar Siddique told UNB that he has received the demand notes about the furnace oil requirements recently and finalised a plan to import about 8 lakh metric tons of fuel for the coming months. He said the Cabinet body recently approved six proposals for import of 1.650 tonnes petroleum fuels which were mainly diesel, kerosene, octane and jet fuel. ―There was no proposal for furnace oil import. But, now we‘ll move proposal for furnace oil import after completion of import negotiation with different suppliers,‖ the BPC chairman said. He also noted that the BPC will talk to different international banks to obtain loan for import of the fuels in the six months. Sources said after receiving the Cabinet approval, the BPC is completing its necessary procedures to import a total of 1.650 million metric tons of different refined petroleum oils worth about $ 1.518 billion from six countries. The fuel supplying companies of six countries from which the BPC will import petroleum include Kuwait Petroleum Corporation, Malaysian Petronas Trading Corporation, Singaporebased Petrochina International, the Philippines‘ PNOC Exploration Corporation, Egypt‘s Middle East Oil Refinery Limited (MIDOR), and the Emirates National Oil Company (ENOC). The country‘s annual fuel consumption is about 5-6 million metric tons. Of them, it needs about 2.5-3 million in the first half and the rest is imported in the next half of the year. Diesel and furnace oil are the main components of this.

Electricity production

Electricity data Per capita generation (Kwh) Per capita consumption (Kwh)

2006-07 168.08 149.97

2007-08 2008-09 176.87 158.20 184.26 165.32

2009-2010 200.32 170.27

2010-2011 252



Source: Annual report 2009-10, Bangladesh Power Development Board

Source: Power and Energy Sector Development Roadmap, Ministry of Finance

Year 2006-07 2007-08 2008-09 2009-10 2010-11

Installed (MW)<1 5,202 5,201 5,719 5,823 7613

capacity Generation (MW)<2 3,717 4,130 5,166 5271 5000-5300

capability Demand forecast Demand served (MW)<3 (MW)<4 5,112 5,569 6,066 6454 3,717 4,130 4,162 4606

Source: Annual report 2009-2010, Bangladesh Power Development Board



Quick Rental Power Plant project failing in Bangladesh
by Special Correspondent August 27, 2011

Establishment and timely commencing production of the major segments of the power plant, contracted to be established on "Quick Rental" basis in Bangladesh is failing gradually, thus not only causing huge amount of financial loss to national exchequer but also increased sufferings of the citizen of the country. Up to April, 2011 all the 14 Quick Rental Power Plant [QRPP] projects, which were undertaken by the ruling Bangladesh Awami League government on a "fast-track" basis to generate electricity to meet the current acute power crisis in the country, have miserably failed to commence production. According to contract, these projects were scheduled to start production latest by April 2011. The policy of letting private companies establish QRPP was greatly criticized by experts in the country. Many said, this was a mere "money-making" project of some of the influential figures in the government and the ruling party. Awami League government adopted a "Crash Program" in October 2009 to set up power generation plants in next five years having total capacity of 7,000 MW. So far, the government has signed contracts for 33 power plants in the public and private sectors. Among those, most are costly quick rental and rental power plants. The private sector sponsors were supposed to install these plants from which the government would purchase electricity at a very exorbitant rate of between TK 9.75 [US$ 0.13] and TK 22 [US$ 0.29] per unit.



Power Development Board [PDB] said, the rental, quick rental and peaking plants were undertaken on a fast-track basis to address the nagging power crisis. The QRPP projects were supposed to add about 1,000 MW of electricity to the national grid. These QRPP projects are Meghnaghat 100 MW, Khulna 115 MW, Meghnaghat 100 MW, Ghorasal 78.5 MW, Ashuganj 80 MW [gas-generated], Keraniganj 100 MW, Ashuganj 53 MW, Noapara 40 MW, Amnura 50 MW [Chapainawabganj district], Juldha 100 MW, Siddhirganj 100 MW and Katakhali 50 MW. Energy ministry sources in Bangladesh claimed that, QRPP are considered to be quickest method of meeting the growing demands of electricity in the country, and end consumers will pay the same or a bit less for their electricity. Opposing the idea of QRPP, experts said that mostly second-hand equipments and machinery are used in such plants, which will be less efficient and the tariff will ultimately rise. They argue that the government would be better off spending money on upgrading the existing power stations. Bangladesh's energy infrastructure is quite small, insufficient and poorly managed. The per capita energy consumption in Bangladesh is one of the lowest [136 kWH] in the world. Noncommercial energy sources, such as wood, animal wastes, and crop residues, are estimated to account for over half of the country's energy consumption. Bangladesh has small reserves of oil and coal, but very large natural gas resources. Commercial energy consumption is mostly natural gas [around 66 percent], followed by oil, hydropower and coal. Electricity is the major source of power for country's most of the economic activities. Bangladesh's installed electric generation capacity was 4.7 GW in 2009; only three-fourth of which is considered to be 'available'. Only 40 percent of the population has access to electricity with a per capita availability of 136 kWh per annum. Problems in the Bangladesh's electric power sector include corruption in administration, high system losses, and delays in completion of new plants, low plant efficiencies, erratic power supply, electricity theft, blackouts, and shortages of funds for power plant maintenance. Overall, the country's generation plants have been unable to meet system demand over the past decade.



In generating and distributing electricity, the failure to adequately manage the load leads to extensive load shedding which results in severe disruption in the industrial production and other economic activities. A recent survey reveals that power outages result in a loss of industrial output worth US$1 billion a year which reduces the GDP growth by about half a percentage point in Bangladesh. A major hurdle in efficiently delivering power is caused by the inefficient distribution system. It is estimated that the total transmission and distribution losses in Bangladesh amount to one-third of the total generation, the value of which is equal to US$ 247 million per year. Bangladesh has 15 MW solar energy capacities through rural households and 1.9 MW wind power in Kutubdia and Feni. Bangladesh has planned to produce 5 percent of total power generation by 2015 & 10 percent by 2020 from renewable energy sources like air, waste and solar energy. The Ministry of Power and Energy has been mobilizing TK. 40,000 crore [US$ 5.88 billion] to generate 5,000 MW of electricity to reduce load shedding into a tolerable level within next three years during the term of the present government, which came in power in January 2009. Under this plan, Power Development Board [PDB] was supposed to generate 500MW gasgenerated electricity between July-December 2009. The PDB was also supposed to hire furnace-oil based 1000MW electricity from private sector during January-June 2010. According to this plan, the government was also supposed to install furnace-oil based 800MW power plant. But so far, most of such five-year plans have miserably failed. Meanwhile the government decided to establish a 1000MW Nuclear based power plant with Russian technical assistance at Rooppur. Bangladesh government already has signed a framework agreement with Russia in this regard. Commenting on possible risk of radiation leaking from the damaged nuclear plant as it happened in Japan, Bangladeshi Prime Minister Sheikh Hasina said, "those power plants were constructed 40 years back, whereas present security systems at the nuclear power plants have improved significantly." Bangladesh government aspires to complete the first 1000MW nuclear based power station at Rooppur by 2015 while another plant is planned to be established at the same site with same production capacity by 2018. Bangladesh government was also negotiating with Iran for their assistance in establishing both or at least one of the nuclear based power plants in the country. Delegation from Iran has already made a number of trips to Bangladesh to discuss and negotiate the project with the ruling party tops.



Experts have already issued warning of potential hazards, if Bangladesh concludes the deal with Russia, without properly evaluating the risk hazards. Sources within the energy ministry, on condition of anonymity told Weekly Blitz that, decisions related to power plants are being exclusively dictated and finalized by Prime Minister's advisor Dr. Tawfiq-e-Elahi, who, according to energy experts, greatly lacks in proper knowledge and experience on such nuclear power plants. Moreover, there are serious allegation of manipulation and corruption by Dr. Tawfiq in finalizing power plant deals. Many opine that, he is solely responsible for the current failures of establishment of QRPP by private and public companies. Meanwhile, a local company named Quantum Power Limited [an enterprise of OTOBI Limited] has been fined TK 200 crore [US$ 25 million] for their failure in commencing production of a 105MW plant at Bheramara district in Bangladesh. Quantum Power Limited got this contract against QEPP project. The authorities concerned though have collected an amount of TK. 6.4 million [US$ 90,000] only as penalty money out of the total amount of TK 200 crore [US$ 25 million], while, OTOBI is actively pursing with various important figures in the government including the energy advisor in averting payment of the remaining amount of penalty. QRPP projects have already come totally messed up as the policymakers in the energy ministry, instead of looking into national interest were busier in making evil cash. A large number of projects were also illegally awarded to a company owned by two of the influential and controversial ministers in the government.



Prime Minister Sheikh Hasina on Sunday launched a 100 Megawatt quick rental power plant in Keraniganj upazila's Chargalgalia's Abdullahpur area. She urged the country's people not to waste electricity and be economic in its use. Hasina said the indiscriminate use of power is not right. "Power cost at present is huge. Why would we have to provide subsidy? We have to be economic [in its use] so that electricity bill is lessened," she said. The plant was jointly constructed by the Malaysia-based Mutiara Consolidated Sdn Bhd and Bangladesh's Sikdar Group Power Pack Holdings. Power crisis is a burning problem in Bangladesh. According to government estimate, the daily average power demand is over 7,500MW as against an average 6,500MW production due to gas crisis. The government says that load shedding is necessary to meet the shortage. In her inaugural speech she greeted everyone on the occasion of the month when Bangladesh won its independence from Pakistan in 1971. "We've achieved independence by giving blood. Keraniganj played an important role in our War of Liberation," she said. The Prime Minister said the Awami League government, in its 19962001 term, had increased power production to 4,300MW from a mere 1,600MW. "We are the first [among the country's governments] to work out a power production policy in the private sector and were able to attract both foreign and local investments and reduced system loss," the two-time Prime Minster said. "Then in 2009 [when we came to power], we found power production reduced to 3,200MW," she added. Hasina said it has been possible to uplift the power production capacity to 8,425MW as the incumbent government prioritised production and took instant, short-term, medium-term and long-term programmes to this end. "We repair the old power stations and prioritise rental and quick rental power plants to meet the demand swiftly," she added. Hasina said due to her government's efforts there was a recent record production of 6,350MW.



Prime Minister's Advisor Tawfique-e-Elahi Chowdhury, State Minister for Energy, Power and Mineral Resources Enamul Haque, State Minister for Law Advocate Quamrul Islam, Chairman of the Parliamentary Standing Committee on Energy, Power and Mineral Resources Subid Ali Bhuiyan, Dhaka-3 MP Nasrul Hamid Bipu, Keraniganj Upazila Parishad Chairman Shaheen Ahmed and Chairman of Sikder Group Zainul Haque Sikder, among others attended the function. The government entered a deal the Malaysia-based company in July 2010 to construct this quick rental power plant on 7.11 acres of land. The plant started production in March this year, although it was slated to do it a year earlier. After the incumbent government took office, more than 2,500MW of electricity has been added to the national grid from various plants including rental and quick rental plants.

The Daily Star Saturday, October 6, 2012

Stop rental power plants
Speakers at a seminar yesterday stressed the need for shutting down rental and quick rental power plants and repairing national power plants to meet the country's power demands. They also suggested taking initiatives and setting up big power plants to increase energy production locally rather than depending on multinational companies. Shaptahik, a weekly news magazine, organised the seminar on "Excessive hike of electricity price: Liability of rental-quick rental power plants" at Bangladesh Institute of Law and International Affairs auditorium in the capital. "Not a single country in the world succeeded in solving their electricity crisis through rental power plants," said Dr Akbar Ali Khan, former adviser to a caretaker government. He said the government could solve the power problem by repairing the existing power plants and solving the gas crisis instead of opting rental power plants. Why will people pay excessive electricity bill resulting from system loss, mismanagement, corruption and quick rental power plants, he asked. Columnist Syed Abul Maksud said corruption in the power sector can be much more devastating than that in any other sectors of the country.



A keynote paper of Kallol Mostafa presented at the seminar showed that the main causes of increasing power production cost included using liquid energy instead of gas in electricity production, failing to increase gas production at cheap rate through state owned companies, and purchasing gas at higher rate from multinational companies. Engr BD Rahmatullah, in another keynote paper, said the government will have to give Tk 20,700 crore yearly if it takes 2,000 MW power from quick rental and rental power plants and this cost will go up with increasing power needs. Shaptahik Editor Golam Murtaza moderated the seminar while economist Prof Abu Ahmed, CPB General Secretary Mujahidul Islam Selim and economist Prof Pias Karim addressed it among others.

Is expensive power the only solution?

Photo: Star Archive M. Tamim In 2009, the average electricity production cost was below Tk.3/kWh. The energy mix for power production was roughly 82% gas, 10% oil, 4% hydro and 4% coal. Within a span of three years the oil contribution of power production has shot up to 30%; reducing gas component to 67% and the average production cost has more than doubled to Tk. 6.5/kWh. As a result the government was forced to raise the electricity tariff several times recently. Bangladesh power Development Board (BPDB) has been the sole custodian of power sector management with the support of the Energy Ministry. In 1998, BPDB predicted that the peak demand would be 6,000MW in 2007. This was done during the time when the last two major base load plants (Meghnaghat 450MW and Haripur 360MW) came on stream.



Despite warnings from PDB and concerned citizens, all attempts to establish base load power plants failed due to indecisions over the awarding of projects. Till 2007 the principal barrier to electricity generation was lack of power plants, a scenario that rapidly changed when we faced acute gas shortages in 2008. More than 500MW generation got stranded due to gas shortage, especially in Chittagong. Primary fuel shortage was a new challenge to all but none could escape the mindset of the politically rewarding process in setting up new power plants. At the end of the previously elected government's tenure the idea of oil based rental power plants was coined and a number of companies were selected (ironically not due to gas shortage!). This was a makeshift short-term arrangement for not being able to add base load generation. An earlier measure taken due to failure of adding grid power was allowing captive power generation for the industries. That measure although inefficient, saved the sector. The caretaker government picked up the idea of rental units and signed ten oil based power deals. The quickest way of bringing power to the grid is oil based small plants. Knowing very well that this could not be a long-term solution, the term "three year quick rental" was coined to remind everyone that the expensive solution was for short-term only. The initial thought was not to expand the oil based production beyond 2,000MW. Al resented the idea of quick rental for the first six months and criticised its pitfalls in the same way they are facing themselves today. The reality of a daunting gap between electricity supply and demand forced them to go the rental way. They had no other choice but what they failed was to envision a long-term solution to replace the expensive oil based solution that they strongly criticised at the beginning of their tenure. At the same time expanding oil based power plants beyond 3,000MW was done without analyzing financial and infrastructural involvement. Since 2010, the 5-year planning PDB put forward is basically a non-starter mainly due to lack of secured fuel supply and assured financial support for the projects. Majority of the proposed base load large capacity projects are on paper only with the exceptions of the two Bibiyana plants and the Shahbazpur combined cycle power plant. In the 1,40,000MW plan, 4,000MW is gas based (!), another 2,000+ is dual fuel and about 3,600MW is dependent on imported coal. The 500MW import from India is advancing slowly but more likely to be added to the system by 2013.



Supplying power at high price is argued showing that the cost of not supplying a kWh to the economy maybe anywhere from Tk 25 to Tk 50. The 50% share of total power consumption in the household sector in Bangladesh defeats this argument from an economic point of view although there is no denying of productivity loss due to energy shortage. The obvious pressure at the present scenario is perhaps more political. Two countries in this subcontinent have gone towards a liquid fuel path -- Sri Lanka for its prolonged civil war and Pakistan for its political indecision and internal feuds. Both are paying high price for this decision, Pakistan by facing 8,000MW of load shedding; mainly due to its inability to pay for the high price oil, and Sri Lanka by administering one of the highest electricity rates in any developing country. Pakistan has huge potential in hydrocarbon and hydro power but the proxy war within the country and the perpetual indecision on national issues pulling the country wide apart -- especially energy wise. On the other hand Sri Lanka is quickly correcting the forced mistake they committed by establishing a 300MW imported coal based power plant that will be expanded to 600MW soon. They have also declared that no more liquid fuel based power plant will be set up. Sri Lanka's 40% power comes from Hydro and they have no other energy source within the country. Frequently asked is how long the "3-5 year short term rental" will last in Bangladesh? As a result of extended use of liquid fuel, can our economy sustain the pressure of prolonged (high) cost of oil import? Are we going to end up like Pakistan (bankrupt from oil bill) or like Sri Lanka (a very high electricity tariff)? Whichever way we look at, Bangladesh simply cannot afford to bear the high cost of oil/electricity -- neither the government nor the public. Only a steady and secured supply of alternate primary fuel at sustainable price can save the country from a disaster like Pakistan. Once the fuel is assured, a sensible commercial framework of business will automatically bring in investment (finance). This can be done either by importing fuel or indigenous supply. Securing long-term coal or LNG import deals at a flat rate is becoming very difficult. Recently Indonesia, South Africa and Australia, the three major coal exporting countries adopted a new policy that stipulates benchmarking of coal prices to international market rates that increased the cost of long-term coal contracts for Indian companies from $50/ton to $100/ton. The long-term Australian coal price forecast (FOB) by Citi is $130-160/ton. After peaking in February to $120/ton, the present price has fallen to $90/ton (FOB). Including freight and tax, this good quality coal will cost about $170/ton or more at the coastal power plants of Bangladesh.



The other option is LNG import. In addition to their present supply of 7.5 million ton, India wanted 5 million ton/year of LNG from Qatar but it refused the price Qatar asked for the gas last month. Qatar wanted at least 14.5% of Brent crude price; at 110$/barrel that would mean about $16/Mcf at Qatar port. Add shipping and taxes would cost $20/Mcf to the Indian consumers. The $5/Mcf price initially coined by Petrobangla for imported LNG in Bangladesh that was doubled to $10 later is just a pipedream. The weighted average gas selling price in Bangladesh is just $1.6/Mcf! The stoppage of coal development and gas exploration despite the presence of clear economic advantages has forced the governments to take short-term and expensive oil based rental power plants. Our current economy simply cannot afford or sustain the burden of importing expensive energy either. Apart from supply interruption risk, the international energy price volatility is also a source of great uncertainty. If the entire country is offered for exploration by the IOCs, any new gas will not cost more than $3/Mcf (including profit gas) and that is without any financial risk to Bangladesh. The question of any export does not arise now as the current deficit including suppressed demand in the local market is more than 1bcf per day (very different from 1999). Production cost of our own coal will not exceed more than $90/ton even using the most expensive extraction process. Along with efficiency improvement, using mainly indigenous primary fuel (50% coal, 30% gas, 8% renewable including hydro) and some imported liquid fuel (12%), the average electricity production cost can be maintained at Tk.4/kWh even for a production of 20,000MW for the next 20 years. This will require a lot of preparation, planning, engineering, financing, integration, managing and most importantly determination and courage to implement, but this is a far better theory than the one being chalked up by PDB. This will ensure sustainable solution meeting the three basic requirement of energy security -- affordability, availability and accessibility.



Tawfiq’s quick rental power plants cause quick plunder
Sun, 08/07/2012 - 3:57am | by priyodesk The quick-rental operation launched in the country‘s power sector at the behest of Prime Minister‘s power and energy adviser Tawfiq-E-Elahi Chowdhury has caused massive plunder of public money.

A handful of persons have benefited from the setting up of quick-rental power plants, but the country‘s 160 million people have been plunged in deep trouble and sufferings while an adverse impact has been cast on the country‘s total economy, including trade and commerce. Worse still, foreign currency to the tune of millions is being siphoned abroad. The country‘s foreign-exchange reserves are shrinking as the price of power produced by quick-rental plants has to be paid in foreign exchange. Bangladesh Petroleum Corporation (BPC) is being overburdened with the debts to import oil being used to run the plants, competent sources said. In order to reduce the debt, the price of fuel has been raised on five occasions in a single year. Power tariffs have been raised from Tk 2.5 to Tk 8 over the three and a half years and another round of increase is in the offing. The people‘s standard of living has reached the lowest ebb consequent upon the frequent rise of power and fuel prices.



In the words of the opposition parties, the quick-rental power plants have turned into ‗machines for making quick money‘. Through this, a group of influential people close to the government are becoming millionaires at the cost of the public. Prime Minister‘s adviser Tawfiq-E-Elahi is widely known as the father of the quick-rental power system. It is alleged that massive corruption has been indulged in the construction of these plants without inviting tenders. Few influential persons in the power sector are earning huge money as kickbacks by awarding the works to the enterprises of choice. Moreover, arrangements have been made for fixing high capacity-building charge and ensuring oil supply at subsidized rate even during the closure of plants so that those enterprises can earn three-pronged profit by selling electricity at high prices. A senior executive of power division said the production of electricity from the government plants after repairing those would have been more than that of rental power plants. ―But the people concerned did not go that way as there was no scope for deriving personal gains‖. Now a process has been set in motion to extend the tenure of these plants. He said without assessing the qualification, Summit Group alone has been awarded the works of 2,000megawatt plants of which three big plants of 1,000 megawatts are facing uncertainty. Meanwhile, amid criticism of rental and quick-rental power plants by different circles, Dr Tawfiq had dubbed the criticism as ‗anti-state‘. On 5 June, at a seminar at CIRDAP auditorium he termed the critics of rental power plant as ignorant or anti-government or antistate. Eminent economist Dr Debopriya Bhattacharya said, ―Question has been raised about our patriotism for the comments on the quick-rental plants but in the last fiscal the single factor that disrupted discipline of the budget was the quick rental‖. Meanwhile, although the people are forced to bear the burden of heavy expenses of these plants, they are not getting any good results. The production in most of the rental power plants has fallen by 20 to 40 percent. A number of rental plants fail to go for full-scale production even after getting Tk 26 crore per day recently as against Tk 15 crore in March and April for oil purchase. In 2010-11, only 629 megawatts of electricity was available per day from quick power plants having capacity of 2,000 megawatts. Strangely, though, against the backdrop of such miserable performance of Tawfiq‘s rental power plants, he ―shamelessly and audaciously‖ dubbed the critics of the plants as anti-state, said many a critics. This he could have said only because he is powerful adviser to the Prime Minister of the country, they said.



THE DAILY SUN Saturday, October 25, 2012

Bangladesh's foray into quick rental power labeled a total failure
Bangladesh's quick rental project had totally failed to meet the demand for electricity, according to a ranking member of the country's committee on power. Prof Anu Mohammad, member secretary of the National committee to Protect Oil, Gas, Mineral Resources and Power and Ports, said during a round table that it could not be acceptable for the government to spend Tk. 32,000 crore as subsidy for running the rental-quick rental power plant projects. He added that the government could not provide fuel to the rental and quick rental projects and as a result those projects could not generate power. On the other hand, he said, it was being discussed that 27 more plants would get government‘s nod. The job of the energy regulatory commission, Prof Anu Mohammad said, has become limited to raising price of power. The government was frequently raising the price of electricity on recommendation of the World Bank and IMF, he said adding the government has failed to realize the compensation money from multinational companies NIKO and Chevron which caused serious damage to the country's gas resources. Prof MM Akash said the finance minister was describing the rental and quick rental power project as a wrong decision while energy adviser to the prime minister Toufique Elahi was branding the critics of the decision as ignorant and even acting against the national interests.



THE DAILY STAR April 4, 2012

State Power versus Electric Power in Bangladesh

Bangladesh Awami League is set to enjoy the state power in Bangladesh till the end of its term, but predictably remaining period of its term will not be without bumps, shocks and blackouts. For its own follies and mismanagement AL government has allowed "Electric Power" to emerge as the major "shocking factor" to the "State Power" of AL. Bangladesh had the misfortune of enjoying a brief stint of the 1/11 government, which actually set the quick power generation idea into roll and Awami League government decided to carry it forward. In carrying over the martial 1/11 ideas of quick power generation AL government put all its egg in the basket of a few over-zealous Bangladesh Power Development Board (BPDB) bureaucrats, a few of them remnants of 1/11 era and all-knowing Honorable Energy Advisor, Dr. Tawfiq Elahi Chowdhury. In the beginning of the AL tenure these "all knowing team of the Hon. Energy Advisor" enjoyed all the limelight and organized seminars in the country and road shows abroad, but miserably failed to put a workable, efficient and internationally sale-able "Long Term Master Plan" in place for the development of the electric power sector in Bangladesh. As a matter of fact, the whole energy sector in Bangladesh is in crises now, because of the irrationalities of this "all knowing team". They miserably failed to seek and learn from the experiences of countries like Philippines and Malaysia, who successfully came out of their nagging energy crises or learn from Singapore, which efficiently produces nearly all its electrical energy from imported fossil fuels using cogeneration and trigeneration technologies.



Natural gas available at very low cost was the engine of growth for industrial, fertilizer and electric power sector of Bangladesh for the last few decades. Bangladeshi planners at political level were seemingly, never serious about managing it prudently nor allowed generous investment in finding new fields both by state run organizations and international oil & gas companies. Politics was allowed to play its tricks in the management of this scare valuable resource. Bangladesh has struck huge deposits of coal in various known fields, enough to meet its energy needs for the next several decades, but again politics is retarding its extraction on a large scale commercial basis. India seems to be emerging as a major player in the power sector of Bangladesh. India has shown committed interest to supply Bangladesh with substantial power from its so called surplus production, but till date nothing is coming. Besides BPDB has signed a major contract to increase its base load with a coal fired power plant to be supplied and built by Indians, but it is mired with built in complexities and unwanted delays. India, itself is short of electric power and heavily dependent on the Western capital and technical knowhow to develop its electric power sector, BUT has seemingly and mysteriously convinced Bangladesh to "follow and depend on India in the development of electric power sector in Bangladesh". India for its geographic location can become the regional catalytical power (within SARC with inclusion of Myanmar) for the growth and production of cheap base load electric power using the vast hydro resources flowing down their mountains, not to speak of the discovered and undiscovered vast natural gas fields lying both onshore and offshore. Besides a regional interconnected grid line built on European interconnected grid or Asean grid experience, can immensely benefit all the countries in the region including India and Bangladesh and add a few percentage points to the GDP of all these countries. (Bangladesh, Bhutan, India, Myanmar and Nepal). Coming back to Bangladesh, the "Power Team" led by the Hon. Energy Advisor seems to be running out of energy in providing energy to the energy hungry people of Bangladesh, specially this summer, which is predicted to be hotter than usual, because of climate change realities. BPDB officials proudly lamented to The Daily Star correspondents (see Daily Start of April 1, 2012) about their inability to pay for the fuel needed to run the liquid fuel run Rental and Quick Rental Power Plants. Electric Power has the built-in ability to shock when "in production and live", but in Bangladesh it seems it has the uncanny ability to shock even



when "not in production and not live" at all. The shocks of no electric power almost every alternate hour is gradually becoming unbearable and seems to be creating strong resentment among the people. These shocks are further extended when shortage of electric power results in short or no supply of water in most urban areas. The Daily Star of April 1, 2012 reports, that BPDB has no money to pay for the liquid fuel, resulting in partial or no supply of liquid fuel to the Rental and Quick Rental Power Plants. It is reported, that most of these power plants are nowadays lying idle especially during peak hours. The sad part is these Rental and Quick Rental Power Plants get paid millions of dollars in payments every month even if BPDB don't take any electric power from them. The Rental and Quick Rental Power Plants were mostly set up by the local un-experienced entrepreneurs. BPDB, local lending banks & financial institutions failed to guide or vet them properly, resulting in nearly all of them ending up importing inefficient fuel guzzling reconditioned or second hand generators, costing the country billions of dollars. It is learnt, that the local entrepreneurs misguided themselves or were misguided by BPDB officials, in drawing up the "Contracts for supply of Electricity on Rental Basis" thus ending up losing both on economic and technical terms, which is causing them huge losses in terms of different types of penalties or liquidated damages (LD). To cite an example, one can look into the contract of AGGREKO, a foreign company, which is drawn more professionally than that of say any other Bangladeshi Rental Power Producer. Corruption is reported to be one of the major factors in the poor management of the whole electric power sector and knowledgeable observers opine that a complete overhaul of this sector is long overdue. Age old practice of allowing politically identified forces, which changes with the change of government, to dominate the workings at all levels of specially BPDB and related organizations is seriously hampering the growth of good practices and growth in this vital sector. Efficiency of all the power plants in Bangladesh be it private or government owned, Rental or Quick Rental and Independent Power Producers is reported to be around or below 30 percent, which is much below any or all current international standards in terms of fuel efficiency. Currently the technology can deliver efficiencies of up to 62 percent, which means by using the same amount of natural gas or liquid fuel, Bangladesh can produce almost double the kWh of electricity, which it produces now.



Finally, can Bangladesh be rescued from this disastrous situation and can Awami League Government do it? The answer is simple, Yes - Bangladesh can definitely be rescued successfully from this disastrous situation and Awami League Government can definitely do it. Awami League government has to go for launching a long term marshal plan in consultation and co-operation with all the stake holders taking all the political forces into confidence. The political divide of Bangladesh must understand, before it is too late, that the electric power problem is a national problem and it now affects the lives of almost every citizen daily and is seriously dampening the industrialization and job creation in the country. The Government should awaken the liberation war spirit of 1971 and unite the political divide rising above petty political differences for a long term solution to this serious national problem. Failing which the consequences can be disastrous. Said all things good and bad about the past, present and future in the power sector the question arises, "How to solve the current problem in the power sector and minimize the miseries of the people"? Again a question arises, whom should we put this question to? Both the questions are difficult to answer, but the writer has a suggestion. The electric power crises is definitely going to turn worse, specially taking into account the Holy Month of Ramadan this summer. The government should be generous in seeking suggestions and help from all the stake holders on an urgent basis. One solution can be the formation of a powerful "Power Crises Management Task Force" working under the direct supervision of the Honorable Prime Minister manned by thoroughly knowledgeable stakeholders from all sectors. This Task Force must work in tandem with the Ministry of Finance, Minister of Energy & Power, BPDB and others and create a situation financially and technically conducive for the efficient working of all the power plants during peak and off peak hours. The chances of failing to solve the current, short, medium and long term problems in the electric power sector in Bangladesh will create shocks, which will be felt on a wider scale on all sides of the political divide. Load shedding have helped BPDB and governments to rotate the pain and suffering among the common people, but what if the "load shedded people" learn to play the load-shedding tricks in politics and in choosing their future leaders ?



Bangladesh rental power hit for increasing electricity prices
Bangladesh electricity prices are increasing due to government projects on quick-rental power. This was the observation of speakers at a discussion meeting on ‗Power Tariff Hike‘. Organized at the National Press Club by Forum for Energy Reporters Bangladesh, speakers said it‘s not a right decision for the government‘s to take series of rental power projects in a short time. ―If the government took long-term and energy-efficient large-scale power plants, then the power tariffs might be cost-effective,‖ the meeting was told. According to Prof M Tamim, the government was compelled to produce electricity from costly power projects as it failed to install the large power projects in time. ―Power tariffs would not have to be hiked frequently if the government was able to invest in Bibiyana-1like large power projects in time,‖ he observed. Rafiqul Basar, director of FERB, presented the keynote paper and said the government has permitted installing around 3000MW rental electricity. ―But the government produces less than 2000MW electricity from the plants,‖ he said. He said around 1000MW electricity gets capacity payment.

Crisis management in Bangladesh power-energy sector
June 30, 2012 By Kh.A.Saleque. Bangladesh managed to achieve an effective power generation capacity of 3500MW till 2009 and three and half years since then present government added 3300MW new power. Without fuel constraint the total generation could be 6800MW. Some persons may not like the way the new power generation has been added but all must appreciate that in a country like Bangladesh it is no mean achievement. But government failed to anticipate impacts of price increase of liquid fuel in volatile world energy market requiring huge subsidy obligation. Government failed to initiate exploration of own sweet coal , government failed to advance traditional fuel based major power plant installation. Fuel constraints restrict power generation to about 5200-5500MW against an increased demand of 7500MW. Consequent deficit does not make visible of positive impacts of new power generation as load shedding continues and people criticize.



Every power plant in the private sector whatever is its size large, medium or small is a rental plant. For private sector power plants Bangladesh has required policies. Liquid fuel based contingency plants, peaking plants should be categorized under small IPP. If liquid fuel based Barge Mounted plant at Khulna could be categorized as IPP why not the liquid fuel based small contingency plants be called small IPP. Somebody somewhere someday called these Quick Rental plants and now everyone has found it a favorite pastime to talk about it in Bangladesh.

When the present government came to state power there was a power deficit of 2000MW at generation level. The coincident peak demand was about 5500 MW and the generation was 3500 MW. In three and half years about 2000MW new demand has been created for various reasons ranging from more and more people acquiring power consuming new electronic gazettes [freezes, televisions, air conditioners, personal computers], new power connections, easy bikes etc. Government theoretically added about 3300 MW new power. Hence rising power generation from 3500MW to 6800MW [Although for fuel supply crisis effective generation is 5200-5500MW] and demand increased to 7500MW. Consequently the deficit of 2000MW continues to remain creating massive load shedding. One can easily imagine the consequences if no new power could be added and government continued on a business as usual like its predecessors. We find government policy makers trying to respond to the bitter criticism of some quarters with controversial statements. PM‘s energy advisor termed his critics as intellectually dishonest persons and anti-state elements. We find some activists talking about government actions as total failures without making in depth technical and financial analysis. Some



business community leaders [being direct beneficiary of contingency power generation actions] are talking in favor of it. One Professor of Economics cum activist [claiming to be Energy Specialist] considered rental power strategy of government a total failure. The debate is going on with no side providing a credible analysis of how the government actions over the last three and half years have impacted overall economy, trade and commerce of Bangladesh. We are aware that the effective power generation when present government took over power in January 2009 was about 3500MW. In three and half years present government has added about 3300 MW new power in various form- some liquid fuel based plants , some gas based and some dual fuel. Maximum Generation recorded on 22/03/2012 was 6066MW. But average generation hovers around 5200-5500MW. If required fuel could be supplied without interruption it would be possible to steadily 6200-6500MW. Setting aside all other considerations one must not be so unkind to present government in that at least over 3000MW new power could be added to national grid. This new power has definitely made tremendous impact in many areas. Supply of steady power to irrigation pumps has made significant impacts in attaining food autarky through bumper crops; Bangladesh is steadily making over 6% GDP growth despite of global economic recession. BNP led opposition and civil society aligning to them have no reason to criticize present government as during their time from 2002-2006 they could add only corruption ridden Tongi 80MW power plant. All other new power plants coming on stream during their period was the outcrop of previous Awami League led government. But with the advancement of society power demand is increasing at geometric progression. More and more people are buying freeze, television air condiotiners. Many people are having one or more mobile telephones, personal computers, IPS . Easy bikes are using electricity. It started with a deficit of about 2000MW in 2009. .But in three years power demand has increased about 3000MW. Hence there still exists about 2000 MW deficit. This summer witnessed several round of heat waves raising the power demand still higher .This deficit caused unprecedented load shedding all over the country .



Setting Wrong People in Sectoral Management Government has serious failures in managing demand growth, arranging fuels for power [failures in exploration of own coal and expediting gas exploration] and advancing implementation of traditional fuel based major power plants. While government failed in these areas it achieved mixed success in power and energy sector. Government could not change the culture of favoring political victimization of competent, experienced and qualified professionals in power and energy sector. Consequently government favored less inefficient professionals failed to make proper planning of power and energy projects, implement key projects on time or manage maintenance and operation of generation, production , transmission and distribution of power and gas supply . There has been no progress in exploration of own sweet coal resources and mine mouth coal plants , only mining operation at Barapukuria has grown sicker , minimum progress has been achieved in gas exploration and development . Government has to continue relying on very expensive liquid fuel based power generation. Wrong professionals misguided government into making wrong planning of importing coal and LNG leaving our substantial coal resources underground and making no sincere efforts of exploring huge untapped petroleum resources at onshore frontiers and offshore. Performance in Gas Sector There is no explanation why Gas based large power projects at Bibiyana could not advance .Government awarded two large projects to Summit –GE JV which failed to make financial closure .Why government awarded them such huge projects without professionally assessing their financial capabilities? Why government actions for fast track gas exploration failed? Who is to be blamed for that? Why the largest gas field Titas is allowed to leak profusely for years? If relatively smaller to Titas field can produce about 1000MMCFD per day why production from Titas could not be increased accordingly? Is there any major difference in production pay sands or reservoir characteristics? Petrobangla after conducting some seismic surveys are ridiculously talking about major discovery of gas and oil and even quantifying the extent of recoverable reserve.



BAPEX made some commendable forward march .It managed to work over and rehabilitate some gas wells and bring some marginal gas fields on stream. It is working on some exploration and development works. But its efforts may bring some trickles in the big sea. Government /Petrobangla made inordinate delays in implementing key gas transmission infrastructures .The gas pipeline compressor stations of GTCL and implementations of some key transmission pipelines has been delayed for several years causing transmission constraints. TGTDCL, BGSL have failed to check unauthorized illegal gas connections, theft and pilferage of gas. There is no valid reason for increase of gas demand over the last 3.5 years as no major new gas consumer has come on stream and gas supply to many major consumers like power and fertilizers are rationed. It is a major failure of Petrobangla companies. Small IPP/ Contingency Plants / Quick Rental Plants These were obvious choice given the huge prevailing deficits and time to implement large base load projects. But government planning was flawed. These plants were to give the required relief for the interim period of 3- 5 years till major plants could be installed. Actually the actions for contingency and peaking plants started at the last stage of BNP-Jamat led four party alliance government. But they failed to make any headway due to excesses of HAWA Bhaban and party cadres. Care Taker Government could sign some contracts. But present government made the fundamental mistakes of opening it up for all novices. The qualification criteria was relaxed and first timers got unprecedented sponsorship of getting imported liquid fuel cheaper from BPC and selling power at a relatively higher price . Consequently sold and outdated used machineries made some plants generate much less than rated capacity. Buying liquid fuel and selling at lower price to power plants made BPC bankrupt. Government‘s budgetary control was stressed for paying huge subsidy. Government failed to anticipate impacts of price increase of liquid fuel in international market. It should have had a financial model and risks analysis carried out before jumping unguarded to contingency power plant actions. Government should have concentrated more in advancing implementation of large base load power plants and act more positively on replacing old fuel inefficient power plants with new modern plants.



Power / Energy Demand Management and Efficiency It appears from failures in making positive impacts of additional power to national grid that government action for load management and ensuring better efficiency has failed. What happened to energy efficient appliances installation? What happened to high voltage government actions against delinquent consumers? What happened to installations of pre paid meters? How could power demand and gas demand continue to increase uncontrolled? There must have loopholes in management. Genuine law abiding innocent citizens are suffering while unscrupulous persons are making hay though sun is not shining on power and energy sector. Major Fertilizer plants continue to remain shut down, power plants cannot be supplied with required gas at right pressure, gas supply to CNG is rationed, industries suffering from low gas pressure and lack of supply. Then how can power and gas demand show continued upward curve? Are Power Plants based on Imported Coal Feasible? The largest local power company Summit Group has failed to arrange financial closure to Bibiyana Power plant. Yet another local company Orion Group has got awards for setting up three medium to large imported coal based power plants at Maowa, Munshiganj, Rampal, Bagerhat and Anowra Chittagong. They have announced to import coal from Australia and Indonesia. What will be the quality of coal? What will be their price? Mother vessels cannot anchor at Chittagong or Mongla port. Huge coal required for uninterrupted supply to power plants will require to be transshipped through several ligtherage vessels to power plant locations causing crowding. Can the waterways handle that? Self burning coal is not clinker, cement or food grains. It is a hazardous commodity. Can inland waterways ensure all season navigations to carry coal all the way from deep sea to place like Maowa? Has anyone done any deep analysis and risk analysis? Investors have told about supercritical technology to minimize emissions. Are they aware of what quality of coal is required for it or what will be the cost of such plants? It is very easy to confuse novice policy makers and people. But the real world of coal fired power generation has many issues and challenges. We hope our policy makers analyzed these. The present group of policy makers unfortunately may not be there when the imported coal based power plants will be struggling with issues and challenges post 2013.



Power and energy Pricing New power using modern technology and new gas using latest techniques obviously increase cost. One of the major reasons for gas and power sector crisis is very poor and uneconomic pricing. Consumers must pay economic price of power and fuel. Taking very low [ lowest even in the region ] price of power and gas there has been mushrooming of energy inefficient medium to large energy inefficient industries in congested power and gas corridors around Dhaka and Chittagong cities . Existing distribution infrastructures could not cope with abnormal pressure of demand. For sustained professional service consumers must pay market price or cost plus price. Present government had no option to increase price of power and gas in several small increments. There must not be any politics here. But at the same time government must ensure better services. Good consumers must be served better and delinquent consumers must get disconnected. While government can be credited for adding about 3300 MW new power to national grid and about 400MMCFD new gas to gas grid it still failed to manage demand and reduce deficit. While we cannot criticize government for non actions we must make them accountable for flawed actions, poor management and failures in arranging required fuel for power and industries. Policy makers must acknowledge their mistakes and try to learn lessons themselves rather than telling critics to learn. Inexperienced critics must not also blame government for everything .Some wrong actions are still better than inactions.



Experts discourage costly rental power

Photo: STAR Staff Correspondent Participants at a dialogue on challenges facing the economy and the tasks ahead held at The Daily Star Centre in the city yesterday. The Daily Star organized the event. Top economists yesterday urged the government to fast track the coal policy, instead of relying too much on costly rental power, to ensure energy security. Some of them backed open-pit mining as an option. They said there was no point going for underground mining as the method produces only up to 20 percent of a proven coal reserve as against 90 percent under open-pit operation. Bangladesh is failing to reach a decision about the mining method due to resistance from a small group of people, said Mohammed Farashuddin at a dialogue, "Challenges facing the economy and the tasks ahead", organised by The Daily Star at its office in the capital. A former governor of the central bank, Farashuddin called for political consensus on the mining method. "One government will not be able to do it alone. Here we need political consensus. Then we will be able to do it." He said the government should draw up an "excellent programme" to settle people to be affected by the open-pit mining. The government has to go for coal-based power plant for ensuring energy security of the country, Farashuddin said. To back up his argument, he said South Africa produces 94 percent of its electricity from coal, China 81 percent, Australia 76 percent, the USA 49 percent and India 64 percent. "We have good quality of coal, but we cannot extract." The government was due to import two compressors for improving pressure of the gas,



Farashuddin said, but nothing has been done about the issue in the last two years. He noted Infrastructure Development Company Ltd and Bangladesh Bank are doing a fantastic job in taking steps to spread usage of solar panels in the non-grid areas. "By lighting 1 million households they have actually lighted the economy. We should try hard so that solar energy covers 10 percent of the population in place of the current 3 percent," he said. The speakers at the programme suggested that the government review its plan on furnace oil-based quick rental power plants as these were affecting the country's balance of payments due to costly fuel imports. They said the costly power could be made cheaper by increasing generation and utilising it in the manufacturing sector. Since assuming office in January 2009, the government has approved about two dozen fuel based rental power plants to produce electricity on an emergency basis to reduce load shedding. Initially, the project tenure was for three to five years, but for some projects the lifeline is about 15 years, which the economists say is not well-judged. "By allowing quick rental power plant the government has prolonged the burden," said Mirza AB Azizul Islam, finance adviser to the last caretaker government. To feed these rental power plants, the country's fuel imports have doubled this year to 70 lakh tonnes from about 35 lakh of two years back. Coupled with rising import of capital machinery, this is putting pressure on the balance of payment. "The high dependency on quick rental power has put us in a quicksand," said Zaid Bakht, research director of Bangladesh Institute of Development Studies (BIDS). "Due to these plants we are being forced to double our oil imports. As a result, it has created problems on domestic fronts. I do not see any short-term respite from this. But we have to come out of it." Mustafa K Mujeri, director general of BIDS, noted that rental power plants were a stop-gap measure. "Although they were not appropriate for us, we did not have any other option to save the country from the power crisis." When the country had to rely on imported oil to resolve its energy crisis, it has failed to tap its own coal resources by formulating a coal policy. "The government should know that the oil import bill will go up due to the rental power plants. But we did not do much home-work on the issue. It is a failure on the part of the government," Mujeri said. "The delay in taking decision costs dearly. Our development is being hampered. This is an example how we are wasting our time." Sadiq Ahmed, vicechairman of Policy Research Institute of Bangladesh (PRI), added, "The shortage of primary fuel is a major concern. We have to diversify our energy resources. We have to finalise our



coal policy." "We also need to engage in energy trade with neighbours and take steps to bring hydropower from Bhutan," he pointed out. "We also need to lower our dependency on quick rental power plants." Mustafizur Rahman, executive director of Centre for Policy Dialogue (CPD), said Bangladesh would have to produce 40,000 megawatts of electricity in 2025 for 8 percent GDP growth. "But the government plan is to produce electricity up to 2015 by imported coal." "We have coal, but we are not being able to take a major decision like this despite urgency," he said. Zahid Hassan, senior economist of World Bank, said Bangladesh had no other way but to go for expensive electricity. "But expensive electricity can be cheaper if the government can increase supply and use power in the manufacturing sector." "Bangladesh has to solve its problem for primary energy. The government cannot take it for granted the situation, when power used to go off in every two hours a few years ago, will not come back." The speakers also thanked the government for paying attention to strengthen state-run Bangladesh Petroleum Exploration and Production Company Ltd.



Bangladesh rushes head-long into coal, protests grow as vital wetlands threatened
Published Date: 20-02-2012 Source: New Age Xtra Source Date: 14-02-2012 Parlous prospects face many thousands of Bangladeshi citizens – and the country‘s fragile environment – as the government seems to be rushing headlong into dependency on coalfired power. Plans to mine the Phulbari deposit continue being stalled, due to intense domestic political wrangling prompted by continuing resistance. So now, the government envisages importing coal from overseas. Although no contracts have yet been signed, Indonesia, Australia and South Africa are cited as possible sources of supply. Late last month, Bangladesh signed a deal with India to construct the first joint-venture coal-fired power plant, just 10 km north of the world‘s largest protected wetlands. The proposal created a wave of protest from within the country. Twelve prominent Bangladeshi citizens have called for the plant to be cancelled immediately, at least in its currently-proposed location. New Age Xtra (India) 14 February 2012 To enhance the electricity generation situation of the country, Bangladesh government signed an agreement with India on January 29, 2012 to produce coal-fired electricity as the Power Development Board (PDB) of Bangladesh and the National Thermal Power Corporation (NTPC) of India partnered to build a 1,320 megawatt coal-fired power plant at Rampal in Bagerhat. The first ever joint venture between the two country‘s governments in electricity production will cost around $1.5 billion, according to PDB, and it will start supplying electricity to the national grid by 2016. Two units of the plant, with 660 MW generation capacity each, will be built over 1,834 acres of land which will be located about 10 kilometres north of the Sundarbans, the world‘s largest mangrove forest. The plant will be the largest power plant in the country based on imported coal.



According to the agreement, PDB and NTPC will contribute equally 30 per cent of the total cost while the rest 70 per cent will come from bank borrowing. ASM Alamgir Kabir, chairman of PDB, informs the media that the price of power from the joint venture would range between Tk 5 and Tk 7 per unit. Prior to that on December 20, 2011, PDB inked deals to build three coal-fired power plants to generate about 1,087 MW electricity based on imported coal with a consortium of local Orion Group and Chinese Long King to initiate electricity generation by 2014 with a price of Tk 4 per unit. BPDB has also floated international tenders to build six more coal-fired power plants to generate up to 2,775 MW of electricity based on imported coal in different areas across the country, especially in Chittagong, Dhaka and Barisal areas. According to PDB website, two power plants will be built in Dhaka area having a capacity of 600 MW to 800 MW, another two having the same capacity will be in Chittagong and another plant will be set up in Barisal having capacity of 100 MW to 300 MW. Before ascending to power, the incumbent Awami League-led government pledged in its manifesto to enhance the capability of the country in electricity generation as it is one of the burning demands of the entire nation. During three years of its tenure, the government took some initiatives to improve the electricity generation by adopting mainly quick rental power plants, which consume huge amount of fossil-fuel. The move has already affected the indicators of the country‘s economy as the government has to provide a large amount of subsidy for importing fuel and it has also to buy the produced electricity costing at a high rate. The government has been facing criticisms from different quarters for not adopting proper policy for electricity generation. Now, after almost three years, the government is taking another path to increase electricity generation depending on the coal-fired power plants. Finance Minister AMA Muhith also echoed the government‘s move toward coal-based power plants as he said in the agreement ceremony on January 29 that electricity from coal-fired power plant will be cheaper than that of the oil-fired plants. The Indo-Bangla agreement is the implementation of a MoU (Memorandum of Understanding) signed between the two governments during the visit of the prime minister of Bangladesh to India in January 2010. Later, BPDB and NTPC inked a MoU in August 2010 in Delhi for setting up coal-fired power plant. It was initially considered that the coal to run the power plant will be imported from India. Later, PDB found the coal of India not having proper quality and thus changed its decision. Now PDB is considering Indonesia, Australia and South Africa as the tentative sources for coal import.



The project falls under the red category of industrial classification made under the Environment Conservation Rules of 1997 that requires Location Clearance Certificate and Environment Clearance Certificate from the Department of Environment (DoE). In 2010, BPDB entrusted Centre for Environmental and Geographical Services (CEGIS), a public trust under the Ministry of Water Resources, with the responsibility of conducting Initial Environmental Examination (IEE) and Environmental Impact Assessment (EIA) with purpose of obtaining clearance certificates from DoE. But experts say, before initiating such type of projects there should be some studies which will find out whether the proposed project is economically viable, technically possible, socially acceptable and environmentally tolerable. If these steps are followed properly and findings are adequate, then the project becomes feasible. Engineer M Inamul Haque, chairman of Institute of Water and Environment alleges, ‗The required steps had not been taken properly, rather the government is in a rush to implement the project.‘ According to Article 7 (4) of Environment Conservation Rules 1997, location clearance certificate and thereafter environmental certificate shall be obtained from DoE for industrial unit falling under red category. After examining both Lobanchara of Khulna and Shapmari area of Bagerhat district, the CEGIS submitted the IEE report in September 2010 recommending Shapmari for the project. The report states that the potential impacts during the pre-construction phase will be the loss of agricultural land (shrimp farming ponds, crop lands) and homestead land due to land requisition. At the construction phase, it will affect through visual intrusion, local air pollution due to generation of dust particles and emissions from engine vehicles, noise from machinery and engine vehicles, solid waste from construction site and labour colony. During post-construction or operation period, air pollution might occur due to emission of sulphur dioxide, nitrogen dioxide and SPM (suspended particular matter). The report also warns about the accidental release of fly ash which will have an impact on ecosystem. The report also reveals that the most likely impacts from the thermal power plants are deterioration of surface water quality due to sediment runoff, runoff from coal yard, and discharge thermal plume. It presumes that the water quality will reduce due to leakage and spillage of oil and chemical. It continues, ‗Excess mining of ground water intake for cooling purpose may reduce the ground water level, subsequently killing juvenile fish and other micro lives in water resources.‘ Environmentalists tell Xtra that coal is one of the large toxic



emitters. It emits carbon mono-oxide, carbon dioxide, sulphuric acid, which are risky to biodiversity. Even when coal is kept on soil, it emits hydro-carbonates that usually mix up with the soil. Due to this, plants do not grow in these areas later on. Moreover, a large amount of sweet water, mainly from surface and deep underground sources, will be needed in cooling the machines and in the recycling process of the steam. The discharged and waste water will affect the flora and fauna. Coal burning emissions and greenhouse gas will pass over the Sundarbans in dry seasons when wind blows from north to south, affecting the trees heavily. ‗In monsoon there will be acid rain that will severely affect the green land, vegetation and habitat,‘ says Engineer Inamul Haque. The CEGIS report recommends that good housekeeping of the stockpiles, fencing around the boundary, vehicle management, use of high potential and advanced machinery with noise control devices, and waste management might mitigate the pre-construction impacts. Maintaining the DoE standard of emission by using advanced technologies of pollution control might reduce the air pollution. Proper maintenance of the storage system, provision of rain water harvesting and retention ponds may mitigate the declination of ground water. The fisheries and wildlife habitat might be protected by creating minimum disturbance during the construction phase. Disturbance to the dolphin habitat might be reduced by limiting the construction activities within day time period and avoidance of their surfacing time and dolphin conservation programme might be initiated to mitigate the potential impacts on their mitigation. Regular inspection and maintenance, continuous monitoring from the control room and adopting safety plans would be necessary for the security of the environment. Engineer Inamul Haque criticises the recommendations in the report for leaving an uncertainty on the impacts with words such as ‗might‘, ‗may‘, ‗might be‘ etc. He says to Xtra, ‗through the ―eye wash‖ study of CEGIS, the government claims that the project is feasible.‘ In the report, CEGIS states that most of the people are supportive towards the project, except the landowners, whose lands will be acquired. Further, it recommends that proper resettlement and compensation as per government‘s regulation, and employment opportunity for the local people might resolve the public concerns and would make them cooperative towards the projects. Public concerns lie in the affects of the project that will be responsible for threatening the bio-diversity of the Sundarbans, a critical zone declared by DoE. Dr Abdus Sattar, chairman of environmental science department of Bangladesh Agriculture University of Mymensingh, found in his study that the project will threaten the livelihoods of 50,000 people while it will also exacerbate deforestation.



The Bangladesh Poribesh Andolon (BAPA) is also worried about the project and said in a statement that the power plant units would release toxic chemicals that will harm the neighbourhood and the Sundarbans. BAPA said the project is contradictory to the environmental laws in force as it has not obtained environmental clearance yet. In this regard, an official of DoE informs Xtra, seeking anonymity, that the project only obtained location clearance certificate and after completing EIA, the project will get the environmental clearance certificate. Finance Minister AMA Muhith said at the signing ceremony that new technology would be introduced at the plant, so that it becomes more environmentally sustainable. Twelve noted citizens of Bangladesh have also demanded immediate cancellation of the proposed project through a statement while urging the government to select another location for the plant after assessing environmental impacts and public opinion. The statement said ‗Although we welcome the government initiative to generate more electricity but we are seriously concerned over selection of Rampal as the project site.‘ The statement also said the primary environmental report, based on which the government gave location clearance for the project, did not discuss the impacts of the power plant on the Sundarbans although the site is very near to environmentally vulnerable area of the forests. Even the Department of Environment granted a certificate without paying hardly any attention to the issue. The law does not allow such a project outside an industrial area. The eminent personalities who made the appeal are: Sultana Kamal, executive director of Ain o Salish Kendra; Professor Abdullah Abu Sayeed, president of Bishwa Sahitya Kendra; Muhammad Zafar Iqbal, professor of Shahjalal University of Science and Technology; Rasheda K Chowdhury, executive director of Ganosakkharata Ovijan; Syeda Rizwana Hasan, chief executive of Bangladesh Environmental Lawyers Association; MA Matin, secretary general of BAPA; Abu Naser, chairman of PABA; Sara Hossain, honorary director of Blast; Khushi Kabir, coordinator of Nijera Kori; Badiul Alam Majumder, founder secretary of Sujan; Farah Kabir, executive director of ActionAid Bangladesh and Iftekharuzzaman, executive director of Transparency International Bangladesh. In their 2008-election manifesto, the incumbent government mentioned about formulation of coal policy after ascending to power but the government could not adopt any decision so far after three years of assuming power. Since 2005, ten editions of the proposed coal policy have been made but none did get the final whistle.



Prime Minister Sheikh Hasina recently said that local coal will be kept reserved for utilisation by the future generation adding that after adoption of policy the coal will be extracted. Experts see the decision merely as a ‗political one‘. Dr AB Mirza Azizul Islam, economic advisor to former interim government, says, ‗The present government has every opportunity to go for a policy to extract indigenous coal as it has the greater majority in the parliament.‘ The government is now planning to build more coal-fired power plants as it has a target to generate 7,000 MW from the coal-fired power plants by 2016 and a total of 15,000 MW by 2030. The country has around three billion tonnes of high quality bituminous coal reserves in five discovered coalmines. The country‘s only coal-based 250MW-power-plant is located in Barapukuria, which consumes around 2,500 tonnes of coal every day. ‗Thus the proposed Rampal power project will need around 13,000 tonnes a day,‘ observes MM Akash, professor of economics department at University of Dhaka. ‗This will need huge amount of money that will add more problems in the country‘s balance of payment and foreign exchange reserve,‘ he adds. This will create an extra havoc in the country‘s economy, thinks Mirza Azizul Islam. He says, ‗There should be cost-benefit assessment before initiating such steps.‘ He also doubts whether the government‘s analysis has been done properly or not. Dependency on imported coal would initiate uncertainty in behaviour of price and the transport cost would be higher as it will come from large distance. The government has allowed nearly two dozen small liquid fuel-based power plants which forced the nation to import more fuels. A statistics shows that the demand for fuel has increased almost two folds over the fiscal year. Bangladesh Petroleum Corporation imported fuel worth Tk 165.66 billion in 2009-2010 fiscal while the import cost increased to Tk 285 billion in the next fiscal. As the government has to provide large amount of subsidy to import fuel, the retail prices of diesel, kerosene, petrol and octane have been increased by Tk 15 per litre and furnace oil by Tk 18 per litre since May 2011. The import of a large volume of diesel and furnace oil for these plants has put additional pressure on the government resources and external reserve, which has led to high government borrowing. BD Rahmatullah, former director general of Power Cell, thinks that the method the government is adopting to enhance electricity generation is not sustainable. He criticises the government for not adopting environment friendly and cost-cutting methods in electricity generation. Production of gas, the key source for power generation, has already started declining. Rahmatullah criticises the government for not concentrating enough on the



reserve of gas. He suggests that the government should increase the efficiency of BAPEX to find gas. He also thinks that there is a vast opportunity to mitigate energy demand from renewable sources. Engineer Inamul Haque, however, alleges that the government has opened the domestic market for India in the name of ‗partnership‘. He says, ‗NTPC could not initiate coal-fired power plants in some provinces of India because of the environmental risks and local people‘s protest. But why then are both the governments in a rush to implement the project without examining the imminent impacts?‘ Experts urge the government to step forward at adopting wise decisions through consultation with the concerned quarters. Otherwise, the overall economy will be under pressure, biodiversity will face major threats and the entire nation will be the ultimate sufferers. Anu Muhammad, professor of the department of economics at Jahangirnagar University, explains to Mahfuzul Haque how the wrong policy of the government for power generation is putting the country‘s economy and environment at stake The government so far added electricity supply of about 3,000 MW in the national grid but at the same time the supply of 1,700 MW of electricity from public sector power plants are no longer part of the national grid as most of these plants are inactive due to lack of maintenance and also scarcity of gas supply. Thus, the government has added net 1,300 MW of electricity to the national grid. If the government repairs the existing power plants and increases gas supply, it will cost not more than 1,000 crore takas. Per unit cost of electricity from the public sectors power plants is less than two takas. Spending about 1,000 crore takas, we can get 1,700 MW of electricity costing two taka per unit. But the electricity supplied from quick rental power plants cost 12 to 16 taka per units. The government also has to supply huge amount of fuel for the plants and as a result the government spends more 20,000 crore takas just for importing fuels. Thus, the price of electricity is increasing and the government has to increase subsidy in electricity and again more subsidy is going toward importing added fuel. For importing fuel, the government is taking more loans from the banks and pressure is increasing on the price of dollar. The burdens of government‘s bank loans are going on the people. Moreover, investors are getting less money from the banks because of government‘s heavy borrowing. Import cost is also increasing because of depreciation of taka and inflation rate is continuously increasing.



MH: Do you see any respite from rental and quick rental power plants in the near future? AM: It will be difficult to get rid of the danger we have already fallen into. Because the rental power plant contracts have already been signed and that will run at least two to three years more. As short term solutions, if the government renovates and repair existing power plants instead of rental plants, there will be respite. But the government does not pay any heed to these solutions. MH: Recently we are seeing an inclination toward coal-based power plants. Without the national coal policy, we would have to import coal. Would that not affect us, economically? AM: We see two types of agreements; one is with domestic company and another with foreign company. We do not know the details from where coal will be imported. The per unit cost of electricity with domestic company in agreement will be four takas and we do not know the exact price of electricity in the agreement with India. Unofficially it might be Tk 8 per unit. Moreover, the government has no ground-work on the places of the plants and its impacts as it is yet to finalise the source of coal and how it will be imported. Moreover, 70 per cent of the total investment of the agreement with India for Rampal power plant will come from bank borrowing. It will bring more financial, social and environmental loads. MH: How do you perceive the recently signed agreement of coal-based Rampal power plant between Bangladesh and India? AM: The agreement is very risky and dangerous as the location is near the Sundarbans. The government has no environmental impact assessment. The mangrove forest is not only important for Bangladesh but also for the whole world and its contributions are beyond monetary evaluation. Again, the adjacent Mongla port will be affected.



In this agreement Bangladesh and India will invest 30 per cent equally and the rest will come from bank loans. But India will hold 50 per cent of total ownership investing only 15 per cent. It is not a rational agreement as Bangladesh is giving a large part of green lands, taking environmental risks and evicting a large number of people from that area. Moreover, Bangladesh has expertise to do such project from its own as it has about 10 years of experience in handling such plants. If required, Bangladesh can also hire foreign experts. There is no base in involving India in the agreement for just 15 per cent investment. I also doubt that India will claim 50 per cent of total produced electricity. MH: What can be the ideal solution at the moment? AM: We are very lucky that we have reserve of primary fuels for power. We have gas reserves and there is vast possibility to get more significant reserves. If we ban export of gas and utilise properly then it is possible to solve power crisis for the next several decades. Moreover, we have coal resources. If we can utilise the resource with safer technology then it will be a safe energy resource. We also have potential renewable energy resources. If we can enhance our national capability for utilisation of the three resources then we will get sustainable energy security. What is needed in this regard is a comprehensive plan from the government.



PM’s energy advisor wrongly blames critics
Energy Bangla, June 6, 2012 Engr. Khondkar Abdus Saleque Dr Tawfique-E-Elahi Chowdhury, BB in a recent press meet has termed his critics as Intellectual dishonest and anti state persons. He is Energy Advisor to Prime Minister of Bangladesh. The PM is also in charge of Power, Energy & Mineral Resources. Bangladesh and the rest of the world knows that the country is now passing through the worst ever power and energy crisis. Major cities of the country are suffering from 8-10 hours load shedding on the average. The gas and power crisis has stalled growth of industries, and has stagnated economic development. Many apprehend that at least 1% GDP growth has been impacted for lack of power and energy supply. Needless to mention that these have happened for failure of power and energy sector policy makers and management to make visible and credible improvement of diabolic situation the present government inherited from failed previous government. Energy Advisor is not elected representative of the people.PM preferred him to other elected MPs and senior leaders possibly considering his previous dynamic track records, from his strong links with US Companies active in Bangladesh and his contribution to liberation war of Bangladesh. He was Secretary of MOEMR in earlier term of Bangladesh Awami League Government. Much of the credit of expeditious improvement of similar crisis situation of power and energy in 1996-2001 can be attributed to his dynamic leadership. But compared to that 1996- 2001 period performance of Energy Advisor this time is well below per. There can be several reasons .May be there is no such young accomplished sector professionals , may be the depth and diversity of the problems are much greater. But there cannot be any denial that energy and power sector management has miserably failed to confront the crisis. The major controversy is about success and failure of Quick Rental imported fuel based power plants considered under short term contingency actions in confronting power crisis. No person would have raised any questions if all the power plants claimed to have created 3300 MW new plant could be up and running steadily now. If the contingency action dues to



flawed planning did not create bleeding of economy created from huge subsidy over burden. The controversy has arisen due to failure of quick rental option to bring sustained relief. Many of the contracts of this expensive option could come to an end if some major base load power plants could be commissioned in three and a half year.

Why Quick Rental plants failed to achieve expected results?
# The responsibilities for arranging fuel from volatile world liquid fuel market was wrongly vested on state owned BPC. # BPC was made to import diesel and liquid fuel at high price and supply at much lower price to power plant developers. These created serious liquidity crisis of the SOE .Significant subsidy given to it as loan could not compensate the losses. # Instead of qualifying developers through competitive bidding novice developers – mostly first timers were allowed to try their luck. Many of them failed to set up plants within time or even within several extended period. # Most of the developers brought fuel inefficient second hand plants which failed to generate even 50% of the rated capacity . # Increase of fuel price created huge financial strain on BPC. Even Government budget was stressed to provide subsidy. # Developers were allowed to get phenomenal power tariff much higher than other base load or peaking plants. This caused PDB loose heavily. # Although on paper 3300MW new power was generated. But actual increase of was 52003500= 1700MW. # PDB always hides actual power demand and real % of system loss. Accordingly real power deficit was always masked. According to many power deficit now is not less than 3000MW.



The quick rental power initiative was adopted without required feasibility study and financial analysis. We agree that there were little other options to improve the situation within the shortest period. But the process in which the Pandora box was opened for all, it benefitted ruling party blessed energy mafia syndicate only. Government was forced to take unpopular and unpleasant decisions of increasing power tariff on some occasions despite of diabolic power supply situation. Energy Advisor cannot deny blame for this as he is also a PHD in Development Economics from Harvard University. He should have done required financial analysis of the options considering its sustained impacts on national exchequer. Power sector management failed to advance traditional fuel based base load power plants in three and a half years. Local Summit Group and GE JV were disqualified in bidding for Bibiyana and other major power plants during Caretaker Government. But the same JV almost won all major contracts for gas and dual fuel based plants now. Till writing this report only the 450MW dual fuel based plant at Meghna Ghat has an outside chance to start generation within December 2013. Summit has failed to have financial closure of any of its large Bibiyana plants till now. Summit Group is the major power plant developer and operator in Bangladesh .But it definitely does not have financial, technical and managerial capacity to implement construction of several large power plants simultaneously. Failure of implementing any major gas based power plant in three and half years has failed to cause major improvement in power supply situation. Energy Advisor could not steer PDB making appropriate planning for rehabilitating and replacing many old outdated fuel inefficient power plants with fuel efficient new plants. Consequently power generation from all gas based power plants have been drastically reduced .Power generation suffers from frequent outages of these plants. Petrobangla supplies about 850 MMCFD Gas to PDB. Using this volume of gas modern combined cycle power can easily generate at least 6000MW power. But unfortunately for lack of action from PDB in replacing old plants situation has now become serious. Moreover, due to failure of Petrobangla is planning and implementing various gas exploration- exploitation projects on time, gas system is also suffering from serious deficit.



Energy Advisor wrongly advised PM for imported coal based power plants and for importing LNG. For technical constraints, infrastructures constraints these initiatives are not feasible over mid terms. Energy Advisor failed to convince PM about the realistic strategy of mining own coal and setting up of mine mouth coal plants. If started by the middle of 2009 at least 2000MW own coal based power plants installations could be at advanced stage now. Unfortunately coal mining still is at stalemate situation. Energy Advisor is possibly in the grip of Coal Mafia syndicate. All are worried about aquifer above and below the coal reserve of Bangladesh. It must not be a cause of concern. Modern mining technology has appropriate water management. Mine water after treatment can serve the purpose of sweet water supply in mine areas , can be used for irrigation round the year and part of it can also be pumped back to replenish aquifer . Other environmental and social impacts can also be effectively managed and mitigated. The only under operation Barapukuria Coal Mine using underground long wall method has suffered from all impacts – water flooding , gas formation and inevitable mine subsidence .Barapukuria according to experienced miners is the most ideal mine for surface mining . But for inappropriate and illogical mining method nation will be deprived off most of the coal as some seams of the blocks from where mining has been done are already crashed into powder. Mine subsidence has already been initiated making the entire area vulnerable. There is no credible technical reason why surface mining cannot be done at Barapukuria and Phulabri. Using own coal for power generation is the only credible option for creating midterm energy security of Bangladesh. Energy Advisor also miserably failed to make Petrobangla drive its fast track gas field development to success. PM herself had to take initiative of bringing Russian Energy Giant GAZPROM to Bangladesh. Many say Energy Advisor tried to create some barricade to PM‘s initiative as well. If GAZPROM could be mobilized by early January 2012 there were opportunities to get about 200MMCFD new gas in national grid by End June 2012. Delay in concluding agreements, ensuing monsoon and growing political uncertainty may impact upon this initiative adversely. For lack of appropriate actions Titas Gas field is leaking dangerously for several years. We constantly advised through our column to carry out on-stream pigging of major gas transmission pipelines to restore maximum capacity. Only this operation can allow transmission of about 200MMCFD addional gas from stranded production facilities to downstream demand centers. Pigging can also significantly improve low gas pressure situation.



This author wrote mails to Energy Advisor and even met him in person. But he has so far failed to take positive actions. The present crisis situation has triggered from failure of exploring and exploiting own resources – Coal and Gas. While BAPEX made some contribution IOCs other than Santos could do very little. Why Bangladesh could not go for fresh bidding round at onshore frontiers? At this stage of crisis there could have been a dozen rigs hunting for petroleum. But this did not happen due to lack of required leadership of PM‘s Advisor. The mining efforts of own coal suffers from evil acts of coal mafia syndicate which is managed to persuade policy makers in opting for impossible to implement within short term the imported coal option .Again there is no financial modeling and credible feasibility study. The PM‘s advisor must not have blamed his critics as anti state elements. Patriotism is not his sole property. All his critics are not anti state elements. He must say sorry and withdraw his statement. Many of us are aware of his controversial role in some matters. On his insistence Petrobangla was compelled to let Chevron, an upstream operator construct a Gas Pipeline Compressor Station at Muchai .It could be built at a much lower cost by GTCL selected contractor .For his insistence an unnecessary pipeline is being constructed from Bibiyana – Dhanua through very aggressive ROW .For his wrong strategy People of Rajshahi is deprived of pipeline gas supply though gas in the line pack can very well meet the requirement. We still have respect for his dynamic leadership. We also know that it is only he who can provide leadership to tide over the present crisis. The author did several milestone projects under his dynamic leadership. We are among the major critics of his present policies. We are definitely not intellectual dishonest persons or anti -state elements. When it comes to serving national interests we will definitely not leave any of his unwarranted comments go unchallenged.