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ADB to Help Boost Private Investment for Infrastructure in Bangladesh

DHAKA, BANGLADESH (21 October 2008) – The Asian Development Bank (ADB) and the Government of Bangladesh today signed a loan agreement of $165 million for Public-Private Infrastructure Development Facility (PPIDF).

ERD Secretary Md. Aminul Islam Bhuiyan signed for the Government while Paul J. Heytens, Country Director of ADB’s Bangladesh Resident Mission, signed the loan agreement on behalf of ADB at a ceremony at ERD, Sher-e-Bangla Nagar, Dhaka.

ADB is providing $82 million to help finance large infrastructure projects; $50 million to assist small and medium-sized energy projects primarily in rural and semi urban areas; and $33 million to promote renewable energy, such as solar home systems and bio mass installations though a microfinance based, direct sales program. A $500,000 technical assistance grant will also be provided for capacity building to support project implementation.

The assistance will support the PPIDF, which seeks to catalyze private sector investments of up to $600 million, mostly in energy, and could add at least 900 megawatts of power generation capacity in Bangladesh and provide electricity to about 100,000 more households through the renewable energy program.

The PPIDF is an integral part of ADB’s sector strategy and complements ADB’s parallel initiatives in governance, capital markets development, and promotion of public-private partnerships. It will be managed by the state-owned Infrastructure Development Co. Ltd. (IDCOL), which will provide financing of up to 40% for each project and a loan repayment period of up to 20 years. Private investors are required to inject at least 20% equity in the projects they invest in. Aside from renewable energy, IDCOL’s project pipeline includes small transportation and water projects. The Islamic Development Bank is currently processing a parallel financing facility of up to $18 million for IDCOL’s solar energy program.

"The Facility will improve the infrastructure sector in Bangladesh through increased private sector participation, thereby promoting economic growth and reducing poverty," said Country Director Paul J. Heytens. "Private sector participation can potentially speed up the pace of infrastructure development, expand access, and deliver efficient services". "Public investment in infrastructure has remained stagnant in recent years at 6-7% of GDP".

ADB, based in Manila, is dedicated to reducing poverty in the Asia and Pacific region through inclusive economic growth, environmentally sustainable growth, and regional integration. Established in 1966, it is owned by 67 members – 48 from the region. In 2007, it approved $10.1 billion of loans, $673 million of grant projects, and technical assistance amounting to $243 million.

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