Black_cats
ELITE MEMBER
- Joined
- Dec 31, 2010
- Messages
- 10,031
- Reaction score
- -5
The government is taking more Chinese loans on tougher terms
By Jahangir ShahMarch 27, 2023 at 12:10 PM
dollar
Once again, Bangladesh is taking a loan of more than 500 million dollars from China under difficult conditions. This money is coming to Rajshahi Wasa water treatment plant and ship purchase project of Ministry of Shipping. Among them, the loan negotiations for the Rajshahi Wasa water treatment plant project are over. The loan will be signed next month. The deal for the other is yet to be finalised. In these two projects, more than 5000 crores of loans are being taken in total.
The condition of these loans is that Exim Bank of China will decide the project contractor. The interest rate is 2.2 percent but the repayment period is only 15 years. Apart from this, the grace period is five years. That is, if the loan agreement is signed in 2023, the repayment will start from 2027. As the repayment period is quite short, the amount of loan installments is relatively high. Loans from organizations like World Bank, Asian Development Bank (ADB) have to be repaid in 30-35 years.
Also Read: Go Slow Policy on Chinese Debt
According to Economic Relations Department (ERD) sources, a loan of 275 million dollars is being taken from Exim Bank of China for setting up surface water treatment plant for Rajshahi Wasa. Last week, Exim Bank and ERD officials finalized the negotiations with this loan. Now the loan documents are being prepared. The officials of ERD are expressing hope that the loan agreement will be signed between the two parties within the next month of April. This negotiation has been going on for about four and a half years.
Parvez Mamud, Director and Chief Engineer of Rajshahi Wasa
On the other hand, the discussion on the project of buying six ships for Bangladesh Shipping Corporation has not been completed for two years. There may be a loan agreement of 25 million dollars in this project. China will supply these ships within four years if the loan agreement is signed. It is supplier credit. China will provide money and ships.
Although contacted in this regard, no official statement was received from ERD. However, ERD officials said the recruitment of contractors, quality of work, interest rates, loan repayment limits—these are different from other foreign aided projects. Hence sensitivity takes time to negotiate.
Major infrastructure expert and former secretary Muhammad Fawzul Kabir Khan told Prothom Alo , 'China's loan is not to help us, but the main purpose is to expand China's business. For example, Chinese contractors will work on that project of Wasar in Rajshahi, Chinese materials will be used. Engineers, consultants—all from China. Most of the loan money will go back to China. Since the contractor is not fixed through any competition, the cost is much higher than the actual cost. The quality of work may also be questioned. He said, a study has shown that such tough loan schemes cost 15-25 percent more.
CHINESE CONTRACTORS BEFORE THE LOAN IS FINALISED
In July 2018, a project worth Tk 4,62 crore was taken up for setting up surface water treatment plant for Rajshahi Wasa. This refinery will be in Godagari. At the time of the project's passage, it was said that the implementation of the project is subject to the availability of Chinese loans. The term was fixed till June 2022. The project could not be started for so long as the loan money from China has not yet been received. Meanwhile the duration of the project has been extended till June 2024 and the loan negotiations have also been completed.Although the matter of getting the loan from China has not been finalized for a long time, the Chinese contractor Hunan Construction Engineering Group Corporation became involved in the project four years ago. Exim Bank of China fixed this contractor. The contracting company advises on feasibility studies, project planning, costing—everything.
Later in March 2021, a formal contract was signed between Rajshahi Wasa and Chinese contractor Hunan Construction Engineering Group Corporation. But even then, the negotiations on getting a loan from China's Exim Bank were not completed, and the money was not confirmed.
In this regard, Project Director and Chief Engineer of Rajshahi Wasa Parvez Mamud told Prothom Alo , 'Based on a letter from ERD in 2018, we started working with Hunan Construction Engineering Group Corporation.
We did everything including feasibility study, project design, the officials of that company only gave suggestions. Exim Bank of China has fixed this contractor. I have not yet started the main work as I have not received the loan amount. As the Chinese loan deal has been finalised, I will be able to complete the work within the next two years if I get the money.'
LIMITED TENDER
Last December, China agreed to hire contractors through the Limited Tendering Method (LTM). But this will not be applicable in case of Rajshahi Wasar project. Generally, when a loan is proposed for a project, the Chinese authorities finalize the Chinese contractor for that particular project. That contractor completes the work. There is no opportunity to select a contracting firm from multiple contractors through tendering.Limited Tendering Method (LTM) invites tenders for the appointment of contractors for a project, only Chinese contractors will participate. A contracting firm will be finally selected from among the many contractors participating in the tender. At present, projects taken up through India's Line of Credit (LoC) are fixed by the Indian contractor under the LTM system.
TWO TO TWO AND A HALF YEARS TO ENTER INTO A COMMERCIAL AGREEMENT
It took two to two-and-a-half years for all the projects taken up with Chinese loans to sign commercial contracts. According to ERD sources, when a proposal is sent to the Exim Bank of China for a loan for a project, the Chinese authorities first consider the potential economic benefits of the project.After that, if the loan is agreed upon, a contracting company is contacted by the ministry or organization implementing the project in Bangladesh. After both parties sit down and finalize the design and work plan of the entire project, the commercial agreement is made. It takes about two to two and a half years to complete the work.
TOTAL LOAN AGREEMENT OF 1854 CRORE DOLLARS
In the last 10 years, Bangladesh is implementing 12 projects with loans from China on tough terms. Among the projects are the construction of a multi-lane road tunnel under the Karnaphuli River; Shahjalal Fertilizer Factory; Dasherkandi Sewage Treatment Plant; Info Government-3; Construction of Dhaka-Ashulia Elevated Expressway; Modernization of Telecommunication Network for Digital Connection; Power network expansion and distribution;In all these projects, a loan agreement of 1 thousand 854 million dollars has been made. So far, one and a half billion dollars have been discounted. All but one of China's loans have an interest rate of 2.2 percent and a grace period of 15 years.
In the meantime, three projects - Shahjalal Fertilizer Factory, Padma-Yashaldia Water Treatment Plant and Development of Information Technology Sector - have completed the five-year grace period and the loan repayment has started. So far about 100 million dollars of debt has been paid.
কঠিন শর্তে আরও চীনা ঋণ নিচ্ছে সরকার
www.prothomalo.com
কঠিন শর্তে আরও চীনা ঋণ নিচ্ছে সরকার
www.prothomalo.com
