Ufinished Highways a Hurdle to Bangladesh's Economic Dreams

Across the road from Dhaka airport, workers in bright yellow hardhats walk past rusting steel beams that show both the promise and risks facing Bangladesh’s economy.

 

The piles of metal are meant to be the building blocks of the country’s biggest public-private venture -- a 20-kilometer (13-mile) elevated road that will allow cargo trucks to bypass the capital’s crowded intersections. It will connect with a highway, now being widened to four lanes, to the main port of Chittagong. Plans are underway for another expressway running parallel that will slash the travel time to two hours from eight.

 

 

A train passes an area of land where construction is yet to start on the elevated highway

A train passes an area of land where construction is yet to start on the elevated highway Photographer: Jeff Holt/Bloomberg

When completed, the three projects would allow companies to quickly ferry goods along a 250-kilometer route that carries 90 percent of Bangladesh’s exports. Prime Minister Sheikh Hasina’s looking to set up several of the 100 planned special economic zones along the roads, generating growth that would allow Bangladesh to move beyond making garments and triple incomes to more than $4,000 a year by 2021.

 

The rust, however, reveals the uncertainties. Work on the elevated highway, originally agreed to start in 2011, began only last August. The highway expansion has missed at least two completion deadlines and risks becoming obsolete soon after 2020 as traffic volumes rise. The parallel expressway has been at the planning stage since 2011.

"Without proper infrastructure to establish connectivity, the SEZs will not be attractive to investors," said Zahid Hussain, lead economist at the World Bank’s Dhaka office. "It’s like putting the cart before the horse."

 

 

‘Row Harder’

 

With the global economy slowing, it’s becoming more urgent for Bangladesh to pick up the pace. In cutting the benchmark interest rate to a four-year low, central bank Governor Atiur Rahman warned on Thursday that Bangladesh will have to “row harder" to achieve economic growth rates that have averaged over 6 percent since 2010.

 

Bangladesh’s government wants overseas investment to rise 10-fold to about $10 billion over the next five years, and aims to double annual exports to $60 billion. The plan is meant to move Bangladesh beyond garments, which comprise 80 percent of overseas sales, and into more value-added industries such as food processing.

 

To do that, Hasina offered China, India and Japan land pockets and 10-year tax breaks to build special economic zones at 37 sites. This will be expanded to 100 by 2030.

 

PPP Pipeline

 

 

Some companies have jumped. China Harbour Engineering Co. will develop a 774-acre zone in Chittagong for Chinese investors, while China National Machinery Import & Export Corp. is in talks for another one nearby. India will provide $88 million for two zones, Paban Chowdhury, executive chairman of the Bangladesh Economic Zones Authority, said in an Oct. 4 interview.

 

Workers build a crew camp building at the start of the elevated expressway site

 

“These companies will just build the zones," Chowdhury said. The "real investments" will come from companies that set up shop there, he said.

 

Bangladesh has a pipeline of 45 PPP projects worth $15 billion spanning over four years. Yet finding investors has been difficult, in part due to financing. As a result, Hasina’s administration has created a $250 million annual fund to subsidize promising projects, Syed Afsor H. Uddin, chief executive of the Public-Private Partnership Office, said in October.

 

"A number of things we looked at," Uddin said. "One was institutional reform, then it was regulatory reform, then capacity building, then it was development of a bankable pipeline of projects. And finally it was supporting the development of the financing ability."

 

Financing Hurdle

 

One way for Bangladesh to overcome the financing hurdle is to use its "very respectable" growth performance to lure foreign direct investment, said Ahsan H. Mansur, executive director of the Dhaka-based Policy Research Institute of Bangladesh. The government must then acquire land and build supporting infrastructure to connect it to the ports, Mansur said by e-mail.

 

 

The government needs to make it easier to do business and hasten the completion of key projects to attract investment, according to Hussain from the World Bank. He cited Mongla in southwestern Bangladesh as an example of an isolated sub-district that lacks connectivity.

 

Over the past decade Mongla port has lost half its market share, and the road-rail bridge across the river Padma that authorities say will boost business has been pushed back three years with cost overruns. The World Bank withdrew from the Padma project in 2012 amid corruption allegations, leaving the government to build with its own funds.

 

In Dhaka, land issues and financing costs led to the delays in starting construction on the Dhaka Elevated Expressway. So far only 7 percent of the work has been completed. Developer Italian-Thai Development Pcl didn’t respond to an e-mail seeking comment.

 

"Work is slow," said Jahangir Alam, 28, one of the laborers at the elevated expressway site. "I don’t know why.