Manila, Oct 15, 2006 AEST (ABN Newswire) - Asian Development Bank (ASX: ATB) will help improve the efficiency and capacity of Bangladesh's rail transport through a US$430 million investment program provided over five years through a multitranche financing facility.
The Railway Sector Investment Program has been developed jointly by ADB, Japan Bank for International Cooperation (JBIC), and the World Bank together with the Bangladesh Government as a comprehensive package of support for reforms and investments in Bangladesh Railway.
The financing represents 46.5% of the total needed under the Government's $924.5 million seven-year roadmap and investment plan for the railway sector. This seeks to make the railways more commercially focused, improve governance and accountability, and invest to upgrade infrastructure and rolling stock to overcome capacity bottlenecks.
Over the years, Bangladesh Railway has been losing market share and, consequently, losing money and relying more on Government budgetary support.
"Efficient transport is essential to achieve higher levels of economic growth needed for sustainable poverty reduction in Bangladesh," says Prodyut Dutt, an ADB Senior Transport Specialist. "Greater use of railways will ease the pressure on land since Bangladesh has a very high population density, congested roads and land is scarce."
To be implemented in five loans, the investment program will undertake both capital investments and reforms to ensure that the investments lead to sustainable improvement of Bangladesh Railway's financial and operational performance.
In 2007, a $100 million loan will help double the capacity of the Tongi-Bhairab Bazar line. Depending on the implementation of agreed reforms, in 2008, a $150 million loan will finance subprojects in the Dhaka-Chittagong and Dhaka-Darsana-Khulna corridors, where demand for intercity train passenger and freight services is high.
Planned $100 million and $50 million loans for 2009 and 2011, respectively, for other sections of the railway's main line will again be contingent on agreed reform actions being carried out.
The program's reform component, funded by a $30 million loan, will focus on helping transform the Government-owned Bangladesh Railway into a more commercially oriented organization.
"The program will help reduce costs for users and increase the country's competitiveness for investment. For instance, the two project railway corridors cater to imports and exports and can support potential major investments," adds Mr. Dutt. "At the same time, it will allow the release of Government funds from budgetary support of the railways for other poverty reduction uses."
A $2 million advisory technical assistance grant will be provided to support the Bangladesh Railway's implementation of reforms.
The investment component loans will come from ADB's ordinary capital resources. Interest will be determined according to ADB's LIBOR-based lending facility. The reform component loan will come from ADB's concessional Asian Development Fund. It will carry a 32-year term, including an 8-year grace period, and an interest rate of 1% per annum during the grace period, and 1.5% afterwards.
The Government will contribute $107.5 million towards the program's total estimated cost of $537.5 million. Bangladesh Railway is the executing agency for the program.
The program is the first to arise from ADB's Country Strategy and Program, jointly developed with the United Kingdom's Department for International Development (DFID), the Government of Japan, and the World Bank, in support of the Government's national poverty reduction strategy.
ADB has been the lead development agency in the country's railway sector, providing assistance to improve the Dhaka-Chittagong and Khulna-Parbatipur lines and for the Jamuna Bridge Railway Link approved in 1997. Earlier in 1994, ADB approved a program loan for the railway sector designed to support the Government's macroeconomic stabilization program.
Contact
Omana Nair
Email: onair@adb.org
Tel:+632 632 5178; Mobile: +63 918 914-7003
Graham Dwyer
Email: gdwyer@adb.org
Tel:+632 632 5253; Mobile: +63 920 938-6487
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