WHY Be careful with over-optimism for megaprojects
Geostrategic elements inclusive of its region between South Asia and Southeast Asia, sustained economic growth, relative political balance, availability of reasonably-priced labor, and a large consumer market have made Bangladesh an attractive funding middle for plenty of nearby and worldwide players. Capitalizing on this, the Bangladesh government has been eyeing some of the megaprojects to shift its economy into the following gear. Three of these tasks are being funded via China. Japan is offering investment for the Dhaka Mass Rapid Transit metro rail and Matarbari deep seaport tasks and contributing to the Jamuna Railway Bridge and Hazrat Shahjalal International Airport Terminal 3 initiatives, while Russia and India are financing a mission each.
In April, the top minister said 2022 and 2023 might be very essential years for Bangladesh in terms of infrastructure development. The Padma Bridge, which is anticipated to make contributions 1.2 percent to the GDP, she said, is set to be inaugurated in much less than a month. The Dhaka metro rail may be opened on the 14km Uttara-Agargaon route by means of the stop of the yr, bringing “innovative exchange” to Dhaka’s delivery system. The Karnaphuli River Tunnel in Chattogram, the country’s first underwater tunnel, is predicted to be opened this October. And the first unit of the Rooppur Nuclear Power Plant (1,200MW), the most important improvement task in the USA’s records, is expected to be commissioned by way of the give up of 2023.
While all this is good news, the recent financial debacle in Sri Lanka ought to offer us some meals for notion.
Experts have furnished a number of reasons which include cronyism, dictatorial energy, family politics, loss of economic diversification, and immoderate overseas borrowing for what’s happening in Sri Lanka. But another aspect that has currently been discussed is the difficulty of endemic over-optimism. Due to the awesome put up-struggle overall performance of the Sri Lankan financial system, coverage complacency and irrational exuberance brought about investments in famous big-price ticket initiatives, which unnoticed the underlying macroeconomic vulnerabilities. Clear caution signs and symptoms together with falling exports, mounting debts, and rising inequality were disregarded much like a grey rhino’ running at you at an excessive speed, consistent with Dr. Niaz Asadullah, professor of economics at Malaya University and Monash University Malaysia, and also coverage adviser on food and agriculture to the Malaysian government.
Does Bangladesh face comparable risks? Perhaps not, if it can triumph over the various demanding situations to its ambition, consisting of retaining monetary diplomacy among the major infrastructure financiers, heading off debt traps, making sure project transparency and construction timelines, and spreading monetary development flippantly across u. S ..
One important however the oft-omitted aspect is that layout and implementation mistakes put off the sales-generation segment of megaprojects. For instance, the 55km Dhaka-Mawa-Bhanga Expressway is the most high-priced motorway in the united states of America and the world, where more than Tk 2 hundred crores has been spent in steps per a kilometer. But with the toll plaza now not geared up, the limited-access highway remains not able to generate the anticipated sales. Perhaps because of these lost sales, even earlier than enforcing the toll quotes formerly constant for the throughway, the authorities is already planning to increase the toll charges a move that will push up delivery costs.
If we look at the RNPP mission, it became firstly supposed to begin generating 1,200MW of strength in 2021 and 2,400MW by way of 2022. However, despite the fact that the first reactor has been mounted, no electricity transmission line has been designed or constructed, and so, even if the reactor is prepared, it will not be capable of circulating into manufacturing, and the government will need to pay potential expenses against the idle plant. The same thing came about with the Rampal energy plant.
These are a few examples of how public expenditure is not paying off the promised monetary utilities. Because development projects in Bangladesh have a propensity to go through a couple of phases of revision, ensuing in fee escalation and delays, when juxtaposed against the preliminary projection of expected consequences, the majority of them fail to attain their goals. In the give up, the burden falls at the cease purchasers, who’re disadvantaged by the timely shipping of offerings, at the same time as the cost of the services to be introduced by means of the task rises.
Repayment of the loans we’ve got taken for those projects also will become more complex. According to eminent economist Debapriya Bhattacharya, Bangladesh’s debt state of affairs may grow to be relatively elaborate in 2024-2025 if the authorities fail to increase its sales base now because the repayment timetable for a number of the high priced loans might begin then. Bangladesh’s foreign mortgage composition has already started to change, with concessional loans from multilateral lenders being replaced with dearer bilateral loans with better hobby charges and shorter grace periods because of the USA’s commencement from the low-income bracket. Therefore, it’s miles crucial for the authorities no longer to be wasteful with those overseas loans and to locate a few ways to boom the tax-GDP ratio, which has proven to be a Herculean undertaking to date.
Another aspect that needs to not be unnoticed is that the quick-music megaprojects take hold of a massive chunk of the budgetary allocation set aside for the Annual Development Programme ADP as an example, in FY2021-22, 10 such initiatives grabbed nearly one-0.33 of the Tk 225,324 crore ADP—the Planning Commission can’t provide adequate finances for plenty other small, medium and large initiatives, in step with their very own admission. The possible cost that arises from this is never insignificant, and it provides up over the years.
The backside line is that Bangladesh is not guaranteed to advantage significantly from the megaprojects that are presently in the pipeline. In truth, if we maintain our current trajectory, they even have the potential to do extra harm than preciseness. That’s why the authorities ought to avoid falling into the entice of being overly optimistic about them. Instead, it needs to paintings towards developing the potential to enforce this kind of initiative on time and within their unique budgetary requirements.