Bangladesh to create $165m loan facility for PPPs

Funded by the Asian Development Bank, officials hope the loan facility will spur up to $600m of infrastructure investment in the country. Bangladesh’s state-owned Infrastructure Development Company will administer the facility and provide 40 percent of financing for each project.

Investors hoping to fund infrastructure projects in Bangladesh will soon have a new source of lending thanks to the creation of a $165 million loan facility for public private partnerships in the country.

The Public Private Infrastructure Development Facility, funded by the Asian Development bank, will be managed by Bangladesh’s state-owned Infrastructure Development Company, which will finance 40 percent of each project and provide loan repayment periods of up to 20 years. Private investors will be required to inject no less than 20 percent equity into each project to be funded under the initiative.

Officials at the Asian Development Bank estimate that the loan facility will promote up to $600 million total investment for 15 to 20 projects in Bangladesh, mostly in the energy sector.

Nearly half, or $82 million, of the loan facility will be devoted to large infrastructure projects worth more than $30 million each. A further $50 million of the facility will be dedicated to small and medium-size projects worth less than $30 million.

The remaining $33 million will be devoted to renewable energy, which is targeted to add at least 900 megawatts of power generation capacity in the country and provide electricity to about 100,0000 more households.

Bangladesh: in need of
power generation

Bangladesh’s investment in infrastructure has long lagged behind necessary levels since government revenues, at just 10.3 percent of GDP, remain far too low to meet growing demands for infrastructure and social services. In recent years, Bangladesh’s spending on infrastructure has accounted for no more than 7 percent of GDP. Only 60 percent of urban households and 22 percent of rural households in the region have electricity connections.

Since Bangladesh joined the Asian Development Bank in 1973, the country has received 186 loans totaling nearly $9.3 billion as of 31 December, 2007. Previous infrastructure-related loans have included $465 million of assistance to help increase power generation, $200 million to improve the management and operations of urban water supplies and $130 million in assistance for improving rail transport efficiency and capacity in the region, all of which were approved last year.

The Asian Development Bank is a multilateral development bank owned by 67 members, 48 of whom come from the region. Over the last four years, the bank’s annual lending volume averaged $7 billion.

Officials at the Asian Development Bank were not immediately available for comment.