$120M Loan to Improve Urban Planning, Services, in Bangladesh

News Release | 11 November 2010

MANILA, PHILIPPINES - Bangladesh, supported by a $120 million equivalent Asian Development Bank (ADB) loan, is planning an overhaul of urban planning and infrastructure in two of its biggest city regions where services have struggled to keep up with booming populations.

The ADB Board of Directors approved the loan for the Bangladesh City Region Development Project, which will target energy-efficient, environmentally friendly urban services, more coordinated regional development planning, and stronger management capacity for municipalities in the sprawling city regions of Dhaka and Khulna, which include surrounding secondary towns.

"The goal is to increase the growth potential and environmental sustainability of these two city regions," said Masayuki Tachiiri, Urban Economist in ADB's South Asia Department.

Bangladesh's cities have been growing at breakneck pace with the urban population expected to double to 74 million by 2035. However, planning and services have failed to expand at the same pace, resulting in sanitation, drainage, water supply and other problems, which have restricted economic and social activities. A metropolitan development plan for Dhaka, covering the period 1995 to 2015, has been slow to rollout and is fast becoming outdated, undermining the city's potential for growth.

Along with physical improvements to water, drainage, urban transport and other facilities the project will incorporate a pilot program that will install energy-efficient water pumps and solar-powered street lights. This will deliver substantial cost savings for municipal authorities as well as reducing carbon dioxide emissions - an increasingly important issue for Bangladesh, which is one of the most vulnerable countries in the world to climate change. Based on a study to simulate climate change impacts, the project will also support adaptation measures to strengthen climate change resilience, notably the improvement of drainage in Khulna.

"Municipalities are not well prepared to adapt to the expected negative impacts of climate change, and are not well aware of the potential benefits of efficient energy use, and this project will help address these concerns," said Mr. Tachiiri.

To tackle planning weaknesses, the project will review and update existing urban plans including the Dhaka Metropolitan Development Plan, and draw up a framework for integrated, coordinated regional development. Support will be given to help municipal agencies improve their capabilities for urban planning, tax assessment, property tax collection, human resource management and public participation.

Performance-based funding for a previous urban infrastructure project in Bangladesh was successful in meeting planned outcomes, and ADB will again link its financing to performance criteria, providing an incentive for participating municipalities to meet targets.

Technical assistance will be extended to lay the groundwork for project activities, including support for regional planning and governance improvements, the promotion of energy efficiency programs in municipalities, and detailed energy audits to pave the way for energy-efficient pumps and solar-powered lights.

The loan from ADB's Special Fund resources covers about 71% of the total project cost of $170 million. It has a 32-year tenor, with an 8-year grace period carrying an annual interest charge of 1% during the grace period, and 1.5% for the balance of the term. The Government of Bangladesh will provide counterpart support of $50 million.

The technical assistance will include a $675,000 grant from ADB's concessional Technical Assistance Special Fund, while ADB will also administer a grant of $1.5 million from the Government of Japan-established, Asian Clean Energy Fund, held under the Clean Energy Financing Partnership Facility.

The Local Government Engineering Department is the executing agency for the project, which is due for completion in December 2016.