ADB Reinforces Support for Urban Development in Bangladesh

News Release | 29 October 2008

MANILA, PHILIPPINES - The Asian Development Bank (ADB) is providing additional funds to improve the basic services and infrastructure in small and medium-sized towns of Bangladesh.

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 towns, including slum areas. More towns will be included as the project is implemented.

The $87 million loan, sourced from ADB's Asian Development Fund, will be released in phases. The fund disbursements to each town 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.

"Good governance is a critical factor in encouraging economic growth and reducing poverty. The performance criteria linked to the fund allocation emphasize citizen participation, urban planning and financial management and this participatory approach makes elected leaders and town officials more accountable to the public and transparent in their use of resources," said Masayuki Tachiiri, an Urban Economist with ADB's South Asia Department.

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 women are fully involved in governance and planning process.

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.

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.