Bangladesh: Dhaka-Chittagong Expressway Public-Private Partnership Design Project

Sovereign Project | 45174-001

Summary

The TA Loan is to develop the design for the Dhaka-Chittagong Expressway ready for financing under a private-public partnership scheme and assist the Roads and Highways Department in engaging contractors. The TA Loan will assist the Government in updating the feasibility study, preparing the detailed engineering documents, procurement and PPP-financing scheme for the Dhaka-Chittagong Expressway Project.

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Project Name Dhaka-Chittagong Expressway Public-Private Partnership Design Project
Project Number 45174-001
Country Bangladesh
Project Status Approved
Project Type / Modality of Assistance Loan
Source of Funding / Amount
Loan 2856-BAN: Dhaka-Chittagong Expressway Public-Private Partnership Design Project
Asian Development Fund US$ 10.00 million
Strategic Agendas Inclusive economic growth
Regional integration
Drivers of Change Governance and capacity development
Private sector development
Sector / Subsector

Transport - Road transport (non-urban)

Gender Equity and Mainstreaming Some gender elements
Description The TA Loan is to develop the design for the Dhaka-Chittagong Expressway ready for financing under a private-public partnership scheme and assist the Roads and Highways Department in engaging contractors. The TA Loan will assist the Government in updating the feasibility study, preparing the detailed engineering documents, procurement and PPP-financing scheme for the Dhaka-Chittagong Expressway Project.
Project Rationale and Linkage to Country/Regional Strategy

The Project is in line with the Government's targets of the 6FYP to triple infrastructure development from 2% to 6% of GDP with substantial participation of the private sector through PPPs.

In recent years, road transport has become the dominant mode of surface transportation in Bangladesh, carrying more than 70% of passengers and 60% of freight. The Bangladesh Road Master Plan (2007) forecasts annual growth of 6.4% in both freight and passenger traffic during 2010-2015 and 6.0% over the master plan period (2005-2025).

Dhaka and Chittagong are the two major metropolitan areas of Bangladesh. Dhaka is the main commercial center and administrative capital of the country; Chittagong is the primary seaport, accounting for about 90% of imports and exports. About a quarter of Bangladesh's population lives along the Dhaka-Chittagong corridor. The government's Sixth Five-Year Plan, 2011-2015 assigns the highest priority to increasing the capacity of the existing Dhaka-Chittagong Highway, which is part of the Asian Highway network, by widening it to four lanes and building the Dhaka-Chittagong Expressway.

Road traffic between Dhaka and Chittagong is hampered by the lack of capacity of the existing 250-kilometer highway and load restrictions on bridges. In general, a fully loaded container cannot be transported by road to Dhaka. Road safety on the two-lane highway is poor because it is overcrowded with different types of vehicles, including rickshaws, bicycles, motorcycles, cars, buses, and trucks. The journey between Dhaka and Chittagong can take up to 10 hours because of congestion on the road.

Based on traffic counts in 2009, 20,000-25,000 motorized vehicles, up to 40% of them trucks, use the highway each day. The number of motorized vehicles is expected to grow to at least 35,000 in 2020, 66,000 in 2030, and more than 119,000 in 2040, depending on the section and selected scenario for the traffic forecast. The 2009 traffic count indicates that the capacity of the existing two-lane highway is already saturated; the capacity of the four-lane highway currently under construction will be saturated shortly after 2020 because of the mixed traffic and large number of intersections, villages, and towns passed by the highway. This demonstrates the need for the additional road transport capacity that will be provided by the Dhaka-Chittagong Expressway.

Dhaka and Chittagong are also linked by air, inland waterways, and railway, but road and railway links handle the bulk of passenger and high-value cargo traffic in this corridor. Both of these modes of transport are facing serious capacity bottlenecks. About half of the length of the 327-kilometer railway line between Dhaka and Chittagong is only a single-track line, which limits the number of daily trains. Passenger trains are frequently sold out and because passenger transportation is given preference over freight transportation, only four container trains operate between Dhaka and Chittagong daily, carrying about 10% of the containers to and from Chittagong Port.

To address the transport needs in this corridor, the government is (i) upgrading the existing Dhaka-Chittagong highway by widening of the remaining two-lane sections to four lanes, which is planned for completion by 2013; (ii) improving the capacity of the railway line by making the remaining single-track sections double-track, which is planned for completion in 3-5 years; and (iii) planning to build a new access-controlled expressway. This expressway will provide enough additional capacity in this important corridor to accommodate future traffic growth and will also meet the demand for a safer and more reliable road connection. This expressway is badly needed, particularly with recent high-level intergovernmental consultations and agreements that will allow better access for Bhutan, India, and Nepal to Chittagong Port. This additional traffic of goods and passengers will use the Dhaka-Chittagong corridor and has to be considered when planning the road capacity between Dhaka and Chittagong.

The congestion on the existing highway requires the government to progress rapidly with this core transport project. Because funds available for the follow-on investment project are limited and the financing needs are large, opportunities for private sector participation have to be identified to structure and implement the first PPP project in Bangladesh's transport sector. This is in line with ADB's long-term strategy to promote infrastructure projects with private sector participation. High-quality international consultants should be engaged in a timely manner to support streamlined and efficient preparation of the PPP project, which will allow the government to enter into a fair agreement with the private sector based on a detailed design with proper allocation of risks between the parties.

The TA loan benefits from the findings of a study financed by ADB and completed in 2008, which prepared a pre-feasibility study and conceptual design for an access-controlled Dhaka-Chittagong Expressway (footnote 4). The study concluded that the route alignment selected for the study of the expressway is technically, economical, and financially viable based on 2008 assumptions, costs, and revenue streams. The selected option was estimated to cost $2.75 billion equivalent in 2011 prices and the implementation period was assumed to be 5-6 years. However, the government failed to attract private investment for the project studied and is discussing different route alignment options that were not appraised in the earlier study. Earlier attempts to recruit a concessionaire on a PPP basis failed mainly because (i) a detailed route alignment design had not been agreed upon, creating uncertainty about the required land acquisition; (ii) an attractive legal framework and risk allocation between the partners was lacking; and (iii) the foreign currency exchange risk allocation was unclear. The cost and revenue streams have changed since the 2008 study and an understanding was reached that a successful PPP project needs detailed project preparation, especially as this project will be the first large PPP project implemented in Bangladesh's transport sector.

Preparing the Dhaka-Chittagong Expressway for financing under a PPP is in line with the government's target in the Sixth Five-Year Plan to triple investments in infrastructure development from 2% to 6% of gross domestic product through substantial private participation. This TA loan will benefit from the PPP unit established in the Prime Minister's Office with the support of capacity development TA from ADB. The capacity development TA also supported the government in proposing an institutional and legal framework for PPP projects, and in drafting a new PPP law and an environmental and social management system for PPP projects. Proposed future assistance to Bangladesh will support capacity development for the implementation of PPP projects.

Impact Efficient construction, operation and management of the Dhaka-Chittagong Expressway under a PPP scheme.
Project Outcome
Description of Outcome Agreed upon design of the Dhaka Chittagong Expressway for implementation under a PPP
Progress Toward Outcome
Implementation Progress
Description of Project Outputs

1. Feasibility study with assessment of different route alignment options.

2. Economic and financial analysis for the follow-on project, structuring of the PPP, establishment of the financial model, and recommendation of the PPP structure for the follow-on project.

3. Capacity development for PPP project implementation.

4. Detailed engineering design for the selected option including the finalization of all safeguard documents.

5. Transaction advisory services for the preparation of the prequalification and bidding documents for the concession agreement, preparation of the concession agreement, and support for the project executing agency during the bidding process.

6. Support for safeguard implementation in follow-on project.

Status of Implementation Progress (Outputs, Activities, and Issues)

Feasibility studies under activities (1-2) completed and recommended alignment option is selected, subject to high-level confirmation. Activity (3) is ongoing, while activity (4) on detailed design for preferred option commenced in Aug-2015.

Consultant Recruitment (contract signing stage) ongoing for transaction adviser under activity (5) and expected to mobilize in Sep-2015.

Activity (6) not yet commenced, since follow-on project is not yet defined.

Geographical Location Dhaka,Chittagong
Safeguard Categories
Environment C
Involuntary Resettlement C
Indigenous Peoples C
Summary of Environmental and Social Aspects
Environmental Aspects There will be no impact from the proposed TA loan. Studies for ensuing investment projects will be undertaken as stipulated in TOR under the proposed TA loan.
Involuntary Resettlement There will be no impact from the proposed TA loan. Studies for ensuing investment projects will be undertaken as stipulated in TOR under the proposed TA loan.
Indigenous Peoples There will be no impact from the proposed TA loan. Studies for ensuing investment projects will be undertaken as stipulated in TOR under the proposed TA loan.
Stakeholder Communication, Participation, and Consultation
During Project Design Workshops, community mobilization, and consultation with stakeholders representing spectrum of socioeconomic groups will be implemented.
During Project Implementation Community meetings and focus group discussions will be organized during the course of the social assessment. These will involve men, women, farmers, high income groups, poor, shopkeepers, and bus/taxi/rickshaw/ truck drivers, etc., to ensure a comprehensive perspective on the project as well as its impacts. Other key stakeholders will also be consulted. In addition, consultations will also be undertaken with the affected households and communities during the course of the resettlement census survey of all affected people along all project road/railway alignments.
Business Opportunities
Consulting Services

Advance contracting actions will be undertaken for consultants' recruitment to enhance project readiness. The consultants will be selected based on ADB's quality- and cost-based selection method using full technical proposals in accordance with ADB's Guidelines on the Use of Consultants (2010, as amended from time to time) and a quality to cost ratio of 90:10.

Two international consulting firms will be recruited for the (i) preparation of the engineering design and (ii) transaction advisory services. It is estimated that about 115 person-months of international staff and about 390 person-months of national staff will be required for the engi-neering design services and about 5 person-months of international staff and about 5 person-months of national staff will be required for the transaction advisory service. A third consulting contract may be requested by the government for Social Safeguard Implementation for subpro-jects to be financed by ADB, if any. About 240 person-months of national staff will be required for this consulting service.

Procurement Procurement of equipment to be financed from ADB loan will be undertaken in accordance with ADB's Procurement Guidelines (2010, as amended from time to time).
Responsible ADB Officer P. V. Ravi
Responsible ADB Department South Asia Department
Responsible ADB Division Transport and Communications Division, SARD
Executing Agencies
Ministry of Road Transport and BridgesThe Roads and Highways Department
Dhaka, Bangladesh
Timetable
Concept Clearance 22 Aug 2011
Fact Finding 14 Sep 2011 to 22 Sep 2011
MRM 05 Oct 2011
Approval 30 Mar 2012
Last Review Mission -
Last PDS Update 28 Aug 2015

Loan 2856-BAN

Milestones
Approval Signing Date Effectivity Date Closing
Original Revised Actual
30 Mar 2012 03 Apr 2013 13 Jun 2013 31 Mar 2016 31 Mar 2018 -
Financing Plan Loan Utilization
Total (Amount in US$ million) Date ADB Others Net Percentage
Project Cost 12.50 Cumulative Contract Awards
ADB 10.00 30 Mar 2012 7.90 0.00 87%
Counterpart 2.50 Cumulative Disbursements
Cofinancing 0.00 30 Mar 2012 2.64 0.00 29%
Status of Covenants
Category Sector Safeguards Social Financial Economic Others
Rating - - - - - Satisfactory

Safeguard Documents

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Evaluation Documents

See also: Independent Evaluation

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