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ADB, World Bank, DFID, Japan to Help Revamp Railway Systems

Dhaka, Bangladesh, 15 February 2007

The Government of Bangladesh today signed credit agreements totaling US$170 million with the Asian Development Bank (ADB) and the World Bank to support the Government's plans to transform Bangladesh Railway into a well-managed, customer-focused organization.

Of the total US$170 million, ADB is providing US$130 million, and the World Bank US$ 40 million.

ERD Secretary Md Aminul Islam Bhuiyan signed for the Government while Country Directors Hua Du and Zhu Xian signed on behalf of ADB and World Bank respectively, at a simple ceremony at ERD, Sher-e-Bangla Nagar, Dhaka. Penny Davies of DFID, Masami Tamura of Japanese Embassy and Kyoshi Amada of JBIC were, among others, also present at the signing ceremony.

ADB Country Director Hua Du says, "As identified in Bangladesh's national poverty reduction strategy (2005), we are committed to support the railway sector development as it is critical for accelerating economic growth and poverty reduction, which remains a formidable challenge in spite of the impressive socio-economic progress over the recent years." She added, "upgrading the railway network will directly reduce transport costs for Bangladesh's major exports, especially ready-made garments."

Zhu Xian, World Bank Country Director for Bangladesh said: "This US$40 million development support credit is one of the flagship operations with our Country Assistance Strategy partners and will play a catalytic role for ensuring the success of the reform program by coordinating with all donors and the wider government ministries and agencies."

The Railway Sector Investment Program (RSIP) is the first joint initiative of ADB, JBIC and WB, which, together with the United Kingdom's Department for International Development (DFID), have developed joint strategies to assist Bangladesh in a more coordinated manner.

Of the ADB's US$130 million, US$100 million will be used to support Bangladesh Railway's priority investments and US$30 million for the reform program. ADB's total commitment for RSIP amounts to US$430 million under the Multi-Tranche Financing Facility, and the balance of the loan will be made available later, in line with the agreement between ADB and the Government.

The World Bank's US$40 million will be used to support Government efforts to make institutional and governance improvements in Bangladesh Railways, as well as to improve financial management and human resource management, and to increase operational efficiency. The World Bank support will be followed by another proposed development policy credit of US$60 million for the Railway Reform Program in 2009. An additional US$200 million credit is also envisaged in 2009 to support another Government initiative to improve infrastructure and network expansion of railways.

JBIC is also providing an investment loan for the Dhaka-Chittagong Corridor, linking award of major civil work contracts to reform progress. The United Kingdom's Department for International Development (DFID) is providing technical assistance to the Planning Commission on wider sector governance issues, including the preparation of a 20 year Railway Development Master Plan.

The multi-year, multi-donor railway sector reforms program will help restructure Bangladesh railway into a 'lines of business' organization to improve its commercial and customer focus. It will also help adopting a modern and transparent financial management system, and better human resource planning and incentives. A corporatized Bangladesh railway would operate like a business, while remaining fully government-owned.

The Railway Sector Investment Program (RSIP) entails a total of $924.5 million, of which ADB will provide $430 million, with another $250 million from the World Bank, $100 million from JBIC, and with the balance provided by the Government of Bangladesh.

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