AIIB earmarks US$541 million in loans for major projects in Bangladesh

The four projects - expected to be approved next year - set for one of the poorest countries in Asia promise to upgrade and build bridges, roads and power generation facilities

Next year the Asian Infrastructure Investment Bank (AIIB) is expected to approve US$541 million in loans for three infrastructure and power projects in Bangladesh.

Local Bangladesh press reports say that proposals are proceeding on schedule for loans involving the Mymensingh Kewtkhali Bridge Project, the Sylhet-Tamabil road Upgrade Project, and the Power System Upgrade and Expansion Project in the Chittagong region

The Mymensingh Kewtkhali Bridge is part of the Dhaka-Mymensingh-India border corridor, which is strategically important for both regional and local connectivity. The economy of the north-central part of Bangladesh is growing and demands better connectivity.

The work will involve a 900-metre-long bridge, plus a six kilometre approach road. Total project cost is estimated at US$235 million, with US$82.5 million coming from the Government of Bangladesh, and US$152.6 million provided by an AIIB sovereign backed loan.

The project will be implemented by the Ministry of Road Transport and Bridges. The proposed project implementation period is from July 2019 to July 2023.

A second project, the Sylhet-Tamabil Road Upgrade Project will improve cross-border connectivity between Bangladesh and India via a safe and efficient road link between Sylhet and Tamabil.

According to AIIB documents, the Sylhet-Tamabil road (about 58.4 kilometres in length) is part of the Dhaka-Narsingdi-Sylhet-Tamabil (DNST) National Highway 2 (N2) corridor with a total length of 286 kilometres. DNST is one of the most important corridors in the country, connecting the entire north-eastern districts with Sylhet and Sylhet Division and Dhaka, and with Tamabil on the northern border with India.

Currently, the corridor mainly serves the domestic economy connecting Sylhet Division with the rest of the country. Sylhet is the fifth largest city in Bangladesh in terms of population (reaching 500,000). The Sylhet Division is important for tea production and gas and mineral reserves, and is the centre of electric power generation.

The DNST corridor is strategically important for sub-regional connectivity with seven northeastern states of India, Bhutan, Myanmar and China. The road is part of route 1 of the Asian Highway Network connecting South Asian countries with Kunming, Yunnan Province, and the Association of Southeast Asian Nations.

Project cost is estimated to be around US$435 million, of which US$268 million will be met by an AIIB sovereign backed loan. The government will cover the land acquisition costs of about US$167 million.

The project will be implemented by the Ministry of Road Transport and Bridges. The proposed project implementation period is from April 2019 to April 2024.

The Power System Upgrade and Expansion Project will increase the capacity of the transmission network in Chittagong, allowing new consumers to be connected to the grid and reducing load shedding. The project involves constructing around 46 kilometres of 400kV and 230kV double-circuit transmission lines, which will connect three substations at Anowara, New Mooring and Khulsi in the Chittagong region.

The Project's cost estimate is about US$177 million, of which a loan of US$120 million will be provided by AIIB. Any shortfall in the funds required would be covered by the government and/or Power Grid Company of Bangladesh. The project will be implemented over 45 months from April 1 2019 through December 2022.

Final board consideration for each of the three projects is expected sometime between May and August 2019.

In July this year, the AIIB's Board of Directors approved a new governance model that will strengthen its role in establishing the policies and strategies of the bank and its ability to hold the president accountable for the management of AIIB. It will also delegate authority to the President to approve a select group of projects based on predetermined criteria.

This new model is expected to enhance efficiency and make the president more responsible and accountable to the shareholders for AIIB's operations. The bank said that a strong risk culture, coupled with an oversight mechanism, was currently being established at AIIB as part of the transition to a new governance framework. The framework also lays out clear reporting and performance guidelines to reinforce the Board's oversight role.

"AIIB was envisioned to be a new kind of multilateral development bank with twenty-first century governance," says Jin Liqun, president of AIIB.

"We drew upon international best practices in developing our new accountability framework that places more responsibility for decision-making on management and staff. We believe this will embed a culture of accountability at the bank, which will in turn lead to more rigor and ownership placed on project outcomes," he adds. "The accountability framework strengthens and clarifies the respective responsibilities of Management and the Board. It reinforces the Board's strategic role and enhances its ability to hold management accountable," says Sir Danny Alexander, vice president and corporate secretary, AIIB.

"Getting to this point was a very collaborative process, and as a result, I believe we are now in an even stronger position as an institution to succeed in our mission to support sustainable economic development for people in Asia," he adds.