MANILA, PHILIPPINES - Bangladesh will mobilize massive private sector funds to invest in infrastructure projects with the help of a $165 million loan facility to be funded by the Asian Development Bank (ADB).
The Public-Private Infrastructure Development Facility will catalyze private sector investments of up to $600 million to finance 15 to 20 projects, mostly in energy, adding at least 900 megawatts of power generation capacity in Bangladesh and providing electricity to about 100,000 more households through the renewable energy program.
ADB is providing $82 million to help finance large infrastructure projects worth more than $30 million each; $50 million to assist small and medium-sized energy projects with a total project cost size of not more than $30 million each; and $33 million to promote renewable energy.
A $500,000 technical assistance grant will also be provided for training and support.
Bangladesh's public investments in the infrastructure sector have remained stagnant in recent years, accounting for only 6% to 7% of the gross domestic product. At present, only 60% of urban households and 22% of rural households have electricity connections.
"The Facility will improve the infrastructure sector in Bangladesh through increased private sector participation, thereby promoting economic growth and reducing poverty," said Peter Marro, Senior Investment Specialist at ADB's South Asia Department.
He added that private sector participation can potentially speed up the pace of infrastructure development, expand access, and deliver efficient services.
The Public-Private Infrastructure Development Facility 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 state-owned Infrastructure Development Co. Ltd. (IDCOL), which will provide financing of up to 40% of 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 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.