MANILA, PHILIPPINES (31 January 2005) - Following consultation with the Government of Bangladesh and donor stakeholders, ADB has cancelled the balance of its loan and two associated technical assistance (TA) grants for a conservation project in the Sundarbans Reserve Forest, it was announced today.

The decision was made because there had been inadequate progress in meeting the three conditions for lifting a suspension imposed on 4 September 2003.

ADB had approved a loan of US$37 million for the Sundarbans Biodiversity Conservation Project in November 1998 with closing date being 31 December 2006. The total cost of the project was $77.7 million, including funds from the Global Environment Facility ($12.2 million) and Government of the Netherlands ($3.5 million). The executing agency was the Forest Department of the Ministry of Environment and Forests.

The project had aimed to develop a sustainable management and biodiversity conservation system for the forest, part of the world's largest remaining contiguous mangrove area, and reduce poverty of the 3.5 million people living around the Sundarbans. It also envisaged instituting a participatory system to conserve and manage the forest and its biodiversity as a multidimensional resource, introducing modern management systems that involve all stakeholders in the 17 subdistricts around the forest.

However, during implementation the Project encountered difficulties with the design and financial management. With about three quarters of the loan period elapsed, only about one quarter of the project had been implemented as of end-December 2004 and only one quarter of the funds had been disbursed.

Following ADB's mission in October 2004, it was concluded that continuation of the loan and the grants for this project would not be the best way of utilization of ADB's assistance to Bangladesh. As requested by the Government, the balance of the loan to be cancelled (about $25.0 million) is being reallocated to the Emergency Flood Damage Rehabilitation Project, approved by ADB's Board on 20 January 2005, of which the total amount proposed for ADB financing is $180 million.

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