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ADB Reinforces Support for Urban Development in Bangladesh

DHAKA, BANGLADESH ( 04 November 2008) – The Asian Development Bank (ADB) and the Government of Bangladesh today signed a loan agreement of $87 million to improve the basic services and infrastructure in municipal towns of Bangladesh.

Musharraf Hossain Bhuiyan, Secretary for Economic Relations Division (ERD) 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.

As many as 3.8 million people are expected to benefit from the Second Urban Governance and Infrastructure Improvement (Sector) Project which will expand access to and delivery of water, sanitation, solid waste management and other urban services in an initial 35 targeted municipal towns, including slum areas. More towns will be included as the project is implemented. The project expects increases in income, employment, and land values in all participating towns by 2015, with 60% of residents in targeted slums to have access to improved services.

"The project will help improve service delivery and urban infrastructure through implementation of a proper incentive mechanism, putting in place a performance-based fund allocations system, increased citizen participation in urban planning and implementation, and adoption of a participatory approach to ensure transparency and accountability of the town officials and elected leaders," said Paul Heytens, Country Director for ADB’s Bangladesh Resident Mission.

The loan, sourced from ADB’s Special Funds, will be released in phases. The fund disbursements to each town are performance based and are linked to governance reform and improvement in urban services. The project draws on lessons from the ongoing Urban Governance and Infrastructure Improvement (Sector) Project which found that improvements to urban infrastructure and services are more effective and lasting when they are tied to governance reforms.

Services in urban areas currently fall well short of public requirements. Water, sewerage and solid waste collection are either minimal or non-existent and management is weak with little citizen participation, especially from women and the poor. There is little or no planning for future developments. Bangladesh’s urban dwellers are expected to double by 2035, making up 40% of the country’s total population.

By linking financial help to governance change, ADB will be providing an incentive for town leaders to reform their governance procedures and engage people who were previously excluded from the decision-making process. The amount of funds to be allocated to each town will depend on progress made on reforms.

Each participating town will have to use at least 5% of their allocated funds to improve basic services in slum areas, while gender action plans will be established to ensure that women are fully involved in governance and planning process.

German development institutions, Gesellschaft für Technische Zusammenarbeit (GTZ) and Kreditanstalt für Wiederaufbau (KfW), will provide cofinancing equivalent to $4.7 million and $36.1 million respectively. The government of Bangladesh will provide an additional $31.7 million. The towns involved in the project will supply the equivalent of $7.3 million, and the beneficiaries an additional $700,000.

The project will be carried out from 2009 to 2014 in three phases with the Government, ADB, GTZ and KfW jointly reviewing progress at least twice a year. Local Government Engineering Department under the Ministry of Local Government, Rural Development and Cooperatives will implement the project in cooperation with the participating pourashavas.

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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