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China tags new conditions on lending to BD
The move may create operational problems
FHM Humayan Kabir
China plans to set new terms and conditions for its lending to Bangladesh which are likely to create problems for the government in matters of disbursement and availability of such funds.
"Beijing has asked Dhaka to overlook two steps from the loan approval procedures for Bangladesh's development projects. This has created new barriers to borrowing for the projects in the pipeline," a senior official of the ministry of finance (MoF) told the FE.
Beijing has recently sent its new lending modalities to Dhaka which it said will be applicable to all new lending operations from now on, the official said requesting for anonymity.
Bangladesh has sought over US$5.0 billion as loans from the government of China for 29 development projects.
Beijing has already finalised loans for the 7th Bangladesh-China Friendship Bridge on the Arial Khan river in Kazirtek, Bangladesh-China Friendship Exhibition Centre in Dhaka, setting up of Shahjalal Fertiliser Factory and 3G telecommunication system upgradation.
Economic Relations Division (ERD) officials said Beijing has recently agreed to fund two other priority projects of Bangladesh including the Pagla-Keraniganj water treatment plant and Info-Sarker under the ministry of Information & Communication Technology (ICT).
An ERD official said the Chinese lending agency, Exim Bank, has recently sent a letter to it, proposing to skip two steps in the loan approval process.
The proposal said that Beijing will not give "letter of confirmation" to Dhaka for the loan against any project. It will not also select the contractor.
A government official said Dhaka follows seven steps under the existing procedures, before signing any loan agreement with Beijing. "Now Chinese lender Exim Bank proposed to ignore the second and fourth steps of the procedures. This has put us in trouble to finalise the loans under negotiations with Beijing," he said.
The seven steps include (a) selection and communication of the proposed project to the Chinese government, (b) letter of confirmation by the Chinese government, (c) loan applications with reports on feasibility and environmental studies that are sent to the Chinese government, (d) selection of contractor by the Chinese government and its communication to the government of Bangladesh.
Other steps are: (e) negotiation and finalisation of commercial contract between the Chinese contractor and the relevant agency of the government, (f) signing of commercial contracts, and (g) negotiation and signing of financial contracts.
A senior finance ministry official said: "We have asked the Chinese government to clarify the new funding modalities."
"We have also told the Exim Bank that if we send the signed loan application forms with the required study reports to China without written indication (ignoring step-b), the question will now arise whether we can expect that the remaining priority projects of Bangladesh will be funded by Beijing", he observed.
He also said that if the step-(d) is ignored, the questions will then arise about the selection of the negotiating counterpart of the executing agency and for concluding commercial contract.
Under the existing procedure, the selection of contractor is done by the Chinese government and is communicated officially to the government of Bangladesh.
"We strongly feel that step-(b) and -(d) are very much important for us," the official said.
Another official said, "Since we have raised objection to the new proposal, Exim Bank has proposed to discuss the issue and settle it with us for further loan negotiations".
The move may create operational problems
FHM Humayan Kabir
China plans to set new terms and conditions for its lending to Bangladesh which are likely to create problems for the government in matters of disbursement and availability of such funds.
"Beijing has asked Dhaka to overlook two steps from the loan approval procedures for Bangladesh's development projects. This has created new barriers to borrowing for the projects in the pipeline," a senior official of the ministry of finance (MoF) told the FE.
Beijing has recently sent its new lending modalities to Dhaka which it said will be applicable to all new lending operations from now on, the official said requesting for anonymity.
Bangladesh has sought over US$5.0 billion as loans from the government of China for 29 development projects.
Beijing has already finalised loans for the 7th Bangladesh-China Friendship Bridge on the Arial Khan river in Kazirtek, Bangladesh-China Friendship Exhibition Centre in Dhaka, setting up of Shahjalal Fertiliser Factory and 3G telecommunication system upgradation.
Economic Relations Division (ERD) officials said Beijing has recently agreed to fund two other priority projects of Bangladesh including the Pagla-Keraniganj water treatment plant and Info-Sarker under the ministry of Information & Communication Technology (ICT).
An ERD official said the Chinese lending agency, Exim Bank, has recently sent a letter to it, proposing to skip two steps in the loan approval process.
The proposal said that Beijing will not give "letter of confirmation" to Dhaka for the loan against any project. It will not also select the contractor.
A government official said Dhaka follows seven steps under the existing procedures, before signing any loan agreement with Beijing. "Now Chinese lender Exim Bank proposed to ignore the second and fourth steps of the procedures. This has put us in trouble to finalise the loans under negotiations with Beijing," he said.
The seven steps include (a) selection and communication of the proposed project to the Chinese government, (b) letter of confirmation by the Chinese government, (c) loan applications with reports on feasibility and environmental studies that are sent to the Chinese government, (d) selection of contractor by the Chinese government and its communication to the government of Bangladesh.
Other steps are: (e) negotiation and finalisation of commercial contract between the Chinese contractor and the relevant agency of the government, (f) signing of commercial contracts, and (g) negotiation and signing of financial contracts.
A senior finance ministry official said: "We have asked the Chinese government to clarify the new funding modalities."
"We have also told the Exim Bank that if we send the signed loan application forms with the required study reports to China without written indication (ignoring step-b), the question will now arise whether we can expect that the remaining priority projects of Bangladesh will be funded by Beijing", he observed.
He also said that if the step-(d) is ignored, the questions will then arise about the selection of the negotiating counterpart of the executing agency and for concluding commercial contract.
Under the existing procedure, the selection of contractor is done by the Chinese government and is communicated officially to the government of Bangladesh.
"We strongly feel that step-(b) and -(d) are very much important for us," the official said.
Another official said, "Since we have raised objection to the new proposal, Exim Bank has proposed to discuss the issue and settle it with us for further loan negotiations".
