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ADB to Boost Efficiency and Security at Bangladesh's Chittagong Port

MANILA, PHILIPPINES (21 December 2004) - The Asian Development Bank (ADB) will help increase the capacity of the Bangladesh port of Chittagong and enable international port security and environment standards to be met, through a loan approved for US$30.6 million.

The Chittagong Port Trade Facilitation Project, the first external assistance to the country's port sector in more than two decades, will install modern computer systems to expedite cargo processing, which will lead to lower shipping and port-handling charges and foster greater international trade.

The port is an integral part of the subregional transport and logistics chain connecting Bangladesh and northeastern India, Bhutan and Nepal to Europe, North America and Southeast Asia.

About 80% of the trade flows of Bangladesh pass through Chittagong port. But high shipping and port costs at Chittagong port are severely undermining the competitiveness of Bangladesh in international trade.

A major cause of the high charges is congestion in the container yard, due partly to the archaic, paper-based terminal management and document processing, and limited road access from the port to the container terminals.

"Several procedural and operational improvements are needed to realize the full potential of planned and ongoing investment in infrastructure and cargo-handling equipment at the port," says Prianka Seneviratne, an ADB Senior Project Specialist and mission leader for the project.

"They include enhancement of personnel skills, a strategic plan for increasing productivity and cutting costs, support for the preparation of an anticorruption strategy, modernization of procedures, revisions to tariffs, and better environmental management."

The current customs clearance process requires documents to be manually moved through several stages requiring 48 endorsements, opening up opportunities for corruption.

The average container dwell time has remained almost unchanged over the past few years at about 18 days against about 10 to 12 days at comparable container terminals in the region.

These delays and informal payments to expedite the flow of documents have contributed to higher maritime cost for Bangladesh's textile exports to the US as compared with exports from the People's Republic of China; India; Thailand; and Taipei,China.

In addition to speeding up operations, a transparent and quick computerized system will minimize opportunities for corruption.

The ADB project has three components that will be carried out by three agencies - the Chittagong Port Authority (CPA), the Customs House of Chittagong (CHC), and the Roads and Highways Department (RHD).

The CPA component includes the installation of a computerized container terminal management system (CTMS), improvement of port area water quality, investment in spill cleanup equipment and oil-waste treatment facility, and improvement of intra-port roads and bridges.

The CHC component consists of the activation of ASYCUDA++ (an automated system for customs data management) with connections to the CTMS, and installation of container scanners needed to meet new international security standards in detecting human and drug trafficking.

The RHD component is the construction of an access-controlled link from Chittagong port access road to the two container terminals inside the port.

ADB has provided assistance to other transport sectors in the Dhaka-Chittagong corridor. The expected increase in land transport capacity in the corridor due to the rail and road projects is expected to substantially enhance the port capacity and contribute to the long-term sustainability of the project.

The total cost of the project is about $41.3 million, of which the Government will provide $10.7 million.

ADB's loan, covering 74% of the project cost, comes from its ordinary capital resources, with a 25-year term, including a grace period of five years. Interest is determined based on ADB's LIBOR-based lending facility.

CPA, CHC, and RHD are the executing agencies for the project, which is expected to be completed by July 2008.

Accompanying the project loan is a technical assistance (TA) grant of US$700,000, from ADB's Japan Special Fund, financed by the Government of Japan. The TA will address hinterland transportation issues at the policy level and help sustain the long-term benefits of the project loan, including helping the Ministry of Shipping and CPA revise port tariffs.

ADB is dedicated to reducing poverty in the Asia and Pacific region through pro-poor sustainable economic growth, social development, and good governance. Established in 1966, it is owned by 63 members - 45 from the region. In 2003, it approved loans and technical assistance amounting to US$6.1 billion and US$177 million, respectively.

More at adb.org/media

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