Bangladesh Resident Mission

Building a Nation

Background

The Asian Development Bank’s partnership with the Government of Bangladesh is based on the common goal of eliminating poverty.

ADB’s emphasis has consequently been on fast economic growth. ADB has been providing assistance to projects that catalyze economic activities. Improving and developing physical infrastructure has been a major preoccupation of ADB, as this has direct impact on growth.

ADB is also trying to jump-start the private sector, bring about a culture of good governance, and develop the country’s human resources by providing better access to education and health services. Many ADB-supported projects focus on empowering women—who are important agents of economic growth and yet the most deprived of society—and allowing them to take part in national development.

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Better Roads, More Growth

Proper physical infrastructure is essential for growth and poverty reduction as it provides access to markets and employment. ADB’s strategy for the road subsector aims to facilitate an effective internal road network to serve major arterial traffic and farm-to-market transportation.

Another goal is to develop links with neighboring countries and offer competitive transport options to growing regional and transit traffic. Consistent with ADB’s policy, it is compulsory that the projects have a participatory approach, including extensive discussions with stakeholders in the field.

Since 1994, ADB has played a key role in changing the Roads and Highways Department’s thrust from new construction to maintenance. ADB has helped this department in other ways, including setting up a training institute, human resource development program, planning unit, and road safety cell; and initiating strategic management.

ADB has also promoted private sector participation, prepared action plans for road safety and traffic management, and developed proposals to rationalize ferry operations.

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Making Bangladesh Railway More Efficient

Since 1975, ADB has played a significant role in the railway subsector. Presently, ADB is the only development partner providing financial assistance to revitalize the railway subsector. In total, ADB has provided four loans to the Bangladesh Railway (BR), amounting to $260 million.

The $80 million Railway Recovery Program loan, approved in 1994, was aimed at restoring BR’s financial ability and realizing a breakeven level against operating expenses.

A $110 million loan for the Jamuna Bridge Railway Link Project involves the new construction of a 99-km dual gauge railway from Joydevpur to Sirajganj across the Jamuna Bridge and conversion of 245 km of broad gauge track into dual gauge from Sirajganj to Parbatipur. The project will integrate the railway network in the eastern and western regions of the Jamuna River. Increasing rail passenger and freight capacity and eliminating ferry services will usher in economic development of the western regions.

ADB’s technical assistance grants, moreover, facilitate reforms to turn BR into a corporate entity, rationalize BR staff, separate BR’s infrastructure from its operations, and include private sector involvement in BR’s operations. These actions are expected to transform BR into an efficient entity in the transport sector.

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Privatizing and Reforming the Energy Sector

Since 1973, nearly one fourth of ADB’s financial assistance to Bangladesh—about $1.5 billion—has been in the energy sector. Yet only about 20% of the population has access to electricity and about 10% to natural gas.

Inadequate supply of electricity is a major constraint to economic growth in Bangladesh. Although the installed generation capacity exceeds peak demand, substantial load shedding occurs, particularly in summer. This is because some old power stations need to be replaced, and regular shutdowns for maintenance reduce effective supply. Lack of competition has also made the sector inefficient.

The Government’s Power Sector Master Plan, updated in 1995 with ADB assistance, estimates that the demand for power will increase at about 8% annually, requiring huge domestic and foreign investments. About $6 billion will be needed from 1995 to 2005.

ADB is assisting the Government in implementing a reform agenda under several projects, including the Rural Electrification Project, completed in 2000, which helped break the Bangladesh Power Development Board’s monopoly on power generation.

The Ninth Power Project and the Dhaka Power System Upgrade Project helped create commercially oriented corporate entities, depoliticize tariff setting, rationalize the area between distribution entities, and promote private sector participation in power generation. The ADB-financed West Zone Power System Project, which supplies electricity to the district towns and villages in southwestern Bangladesh, will facilitate private sector participation in generation, transmission, and distribution.

While transmission will remain in the public sector, generation and distribution assets will have both public and private ownership. The objective is to eliminate monopolies and foster competition that will promote commercial discipline and good customer service.

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Reforming the Gas Subsector

Natural gas is an important resource for economic development and accounts for more than 70% of commercial energy in Bangladesh. In 1993, the Government introduced a new petroleum policy to encourage private sector participation in gas exploration and production under production-sharing contracts.

The ADB-funded Third Natural Gas Development Project aims to improve infrastructure, increasing the supply of commercial energy in Bangladesh and introducing structural reforms in the subsector. The project will increase the number of gas-producing wells and gas treatment facilities and expand the gas transmission and distribution network.

ADB’s technical assistance will help prepare a long-term demand and least-cost expansion study for the gas subsector until 2005 and outline a system for strengthening the industry through more commercialized management.

ADB’s operational focus in the gas subsector is to

• Create an enabling environment for private investment
• Segregate the functions of sector regulation and operation
• Help make sector entities fully autonomous
• Establish a regulatory framework
• Rationalize prices
• Reduce system losses
• Improve efficiency

A key aspect of reforms in the gas subsector is the establishment of a Gas Regulatory Authority, which is proposing to set up one integrated regulatory authority for both power and gas. Furthermore, ADB will promote regional cooperation and assist the Government in developing a gas use policy to maximize the economic benefit of gas reserves.

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Power Sector Strategy

In discussions held with 50 nongovernment organization (NGO) representatives on 9 May 2002, ADB President Tadao Chino reaffirmed ADB’s commitment to working closely with civil society to fight poverty in Asia and the Pacific. The hour-long meeting took place in Shanghai on the eve of the formal opening of the 35th Annual Meeting of the ADB Board of Governors.

ADB not only provides funds for power projects, but also actively supports the Government in structural reforms and institutional capacity building in the sector. ADB’s strategy for the power sector consists of the following.

• Changing the business environment through corporatization, commercialization, and increasing private sector participation
• Implementing institutional improvements in the Bangladesh Power Development Board and Dhaka Electric Supply Authority
• Creating new sector agencies that could serve as role models for the sector
• Enlarging the scope of the Palli Bidyut Samities (Rural Power Cooperatives)
• Strengthening the long-term planning and regulatory processes in the sector

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