Mega Development Projects in Bangladesh: Key Objectives and Stakeholders

By Shaikh Abdur Rahman, External Contributor

Geostrategic factors like its location between South Asia and Southeast Asia, sustained economic growth, present political stability, cheap labor, and large consumer market—cumulatively offer competitive opportunities for business and trade in Bangladesh. The Bangladesh government intends to capitalize on these growth fundamentals through several mega development projects, which will steer the country’s transition out of LDC status (by 2026) and help it become a high mid-income country by 2041.

Various challenges to this ambition persist, and include maintaining economic diplomacy between major infrastructure financing stakeholders, avoiding debt traps, ensuring project transparency and construction timelines, spreading economic development more evenly across the country, and boosting transportation, energy, and communication linkages.

In this article, we offer insights into some of the mega development projects underway in Bangladesh and their expected impact, put the spotlight on external stakeholders involved, and provide updates on marquee projects. 

Having celebrated fifty years of independence, Bangladesh is at a landmark stage. Its rapid rate of economic progress may have slowed due to the economic shock delivered by the COVID-19 pandemic, but the country has maintained positive economic growth. Bangladesh has accelerated trade and investment partnerships with its key development partners and ensured that mega infrastructure projects stay the course, thereby creating long-term market opportunities.

This article is part of our ongoing coverage of Bangladesh’s business landscape and trade and investment environment. We have previously discussed Bangladesh’s tax advantages, provided a supply chain assessment, and explained the legal entity options for foreign investors, procedure for opening a bank account, and intellectual property protections available.

Status of some upcoming mega development projects in Bangladesh and key stakeholders

Notes:

• *Initial financing was cancelled by the World Bank in 2012 after it stated it had evidence of a corruption conspiracy (and other funding sources were the ADB and JICA). Subsequently, in 2013, Bangladesh withdrew its request for project funding from the World Bank.
• **Parliament Q&A session, April 6, 2022: Update by PM Sheikh Hasina. 100 percent work on the approach road and service area at both ends of the Padma Bridge project has been completed, and the physical progress on the main bridge is at 96.50 percent. Currently, work is underway on viaduct carpeting, waterproof membrane, movement joint of main bridge and viaduct, lamp post, aluminium railing, gas pipeline, 400 KVA electricity, and railway line.
• *** Cox’s Bazar district administration has provided the Chattogram Port Authority (CPA) with 283.27 acre of land for the Matarbari Sea Port project as per reports on April 1, 2022.

How does Bangladesh view mega development projects?

For a developing country like Bangladesh, infrastructure development megaprojects are seen as a catalyst for accelerating economic growth. In the budget for the fiscal year 2021-22, Bangladesh allocated BDT 472.83 billion from the total annual development program (ADP) to implement 12 mega projects, including those on the fast-track list, in order to strengthen the country’s communication, power, logistics, and energy sector.

How is Bangladesh financing these mega development projects?

Though Bangladesh relies on self-funding for the Padma Multipurpose Bridge, for all remaining projects, the country has relied on loan grants and aid from key development partners—China, Japan, Russia, and India.

Since 2015, China has been the top trade and investment partner for Bangladesh. Out of nine mega projects, the three largest projects are funded by China; Japan is providing funding for the Dhaka metro rail and Matarbari deep sea port and Russia and India are financing one project each.

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Because of the huge external loans involved, the issue of debt management has often been raised. Citing Pakistan’s Gwadar port and Sri Lanka’s Hambantota, some economists have expressed concern over whether Bangladesh is falling into a “debt trap” by joining the China-envisioned Belt and Road Initiative (BRI).

However, unlike other South Asian countries, Bangladesh’s prudent and selective engagement with China’s BRI has helped Dhaka avoid debt management crises. For instance, the country called off the Chinese-funded Sonadia deep sea port project due to its economic vulnerability arising from its close location to the other deep sea port already planned at Matarbari. 

On the other hand, India, the closet neighbor of Bangladesh, has been unable to match China’s big-ticket infrastructural investments in Bangladesh. The only India funded fast-track mega project is Maitree Super Thermal Power Plant, which is expected to be in operation by June 2022. Other India-funded infrastructure projects are also facing delays and upward cost revisions. 

Another all-weather and trusted development partner of Bangladesh, Japan, has been supporting Bangladesh through proper infrastructure development with environment and social consideration. Since 1972, Bangladesh has received the largest Official Development Assistance (ODA) from Japan. Japanese contribution has been vital in the areas of infrastructure and human resource development, such as the Dhaka Mass Rapid Transit (MRT), the deep sea port at Matarbari, the Jamuna Railway Bridge, the Hazrat Shah Jalal International Airport terminal three, and the economic zone at Araihazar. Compared to other development partners, Japan provides funds with less rigid conditions, low-interest rates, and high grace periods, which have brought the two friendly nations even closer.

Why are external stakeholders attracted to Bangladesh’s development roadmap?

Bangladesh is consistently able to attract investments from its major development partners because of the country’s rapid economic growth, ambitious development plans to upgrade infrastructure capabilities, a growing middle-class with steadily rising purchasing power, and a huge domestic market of around 165 million people.

For instance, the February (2022) Chinese proposal for Chattogram Metro rail in return for a stake in developing a ‘smart city’ (located between Patenga and Mirsharai) immediately came after South Korea’s completion of a pre-survey mission. China has proposed US$6 million grant in aid to set up metro rail in Chattogram. South Korea is also keen on funding soft loans for the Dhaka metro rail Line-4 construction at a marginal 0.1-0.5 percent interest rate. Besides, various new mega projects kicked off last year. 

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According to the country’s mid-term policy statement (2020-21 to 2022-23), Bangladesh is highly focused on transport and communication development, seen as prerequisites for its transition to becoming a more developed country. The construction work of the first subway in Dhaka, the MRT Line-1 and Line-5, Dhaka-Ashulia Elevated Expressway Project (DAEEP), Bangabandhu Rail Bridge over Jamuna River, Dhaka-Chittagong high-speed train, and Cox’s Bazar Runway extension projects were all planned to start in 2021.

All these upcoming projects offer lucrative opportunities for the country’s development partners to gain mutual benefits. It has earned Bangladesh the reputation as a “hot spot for global investment” in South Asia. Moreover, Bangladesh has strived to keep a balance in seeking external funding support and providing tenders to contractors from multiple countries by prioritizing economic diplomacy above all else.

The road ahead

Bangladesh is expected to graduate from its Least Developed Country (LDC) status by 2026. This is contributing to the higher aspirations of its people for enhanced facilities and access to a better quality of life. The mega development projects should contribute to the country’s economic transformation and put it on the path of achieving high mid-income country status by 2041.

While the sustainability of the country’s project financing models and the economic viability of these mega development projects may raise cause for concern, their cumulative impact will be undeniable – ensuring better intra-country market access, improving trade logistics capabilities, diversifying energy sources, and closing gaps on public infrastructure requirements.

The location of Bangladesh between South Asia and Southeast Asia, sustained economic growth, relatively higher political stability than before, cheap labor with a large market—cumulatively offer competitive opportunities in investment for businesses and infrastructure development financiers.

The author is a research assistant at the Central Foundation for International and Strategic Studies (CFISS) based in Dhaka. This article includes research and inputs from Dr. Melissa Cyrill at Asia Briefing.

For business and investment intelligence and research concerning Bangladesh, please email our Dhaka offices at bangladesh@dezshira.com. 

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