Bangladesh: Strengthening the Capacity of Infrastructure Development Company Limited

Sovereign Project | 55328-001

The knowledge and support technical assistance (TA) will support knowledge development and capacity building of the Infrastructure Development Company Limited (IDCOL), a public sector financing company mandated by the Government of Bangladesh to provide long-term financing of public-private partnership (PPP) projects. The TA will help lay the groundwork for the transformation of IDCOL into a more market-oriented entity, particularly by transforming its funding sources and capital structure, and strengthening its risk management, business process automation, and portfolio diversification. The TA will also enable IDCOL to take a leadership role in facilitating climate finance in Bangladesh. The TA is included in the Bangladesh Indicative Country Pipeline and Monitoring Report (2022-2024).

Project Details

  • Project Officer
    Zhang, Dongdong
    South Asia Department
    Request for information
  • Country/Economy
    Bangladesh
  • Sector
    • Finance
Project Name Strengthening the Capacity of Infrastructure Development Company Limited
Project Number 55328-001
Country / Economy Bangladesh
Project Status Active
Project Type / Modality of Assistance Technical Assistance
Source of Funding / Amount
TA 6873-BAN: Strengthening the Capacity of Infrastructure Development Company Limited
Technical Assistance Special Fund US$ 750,000.00
Strategic Agendas Environmentally sustainable growth
Inclusive economic growth
Drivers of Change Gender Equity and Mainstreaming
Governance and capacity development
Partnerships
Private sector development
Sector / Subsector

Finance / Infrastructure finance and investment funds

Gender Equity and Mainstreaming Some gender elements
Description The knowledge and support technical assistance (TA) will support knowledge development and capacity building of the Infrastructure Development Company Limited (IDCOL), a public sector financing company mandated by the Government of Bangladesh to provide long-term financing of public-private partnership (PPP) projects. The TA will help lay the groundwork for the transformation of IDCOL into a more market-oriented entity, particularly by transforming its funding sources and capital structure, and strengthening its risk management, business process automation, and portfolio diversification. The TA will also enable IDCOL to take a leadership role in facilitating climate finance in Bangladesh. The TA is included in the Bangladesh Indicative Country Pipeline and Monitoring Report (2022-2024).
Project Rationale and Linkage to Country/Regional Strategy

Rapid economic growth has increased the demand for energy, transportation, and urban development. However, infrastructure deficit remains a bottleneck and prevents the economy from reaching its full potential. Public-sector-driven infrastructure development is constrained by resource availability with the budget deficit, rising to 5.6% in 2020. Moreover, the coronavirus disease (COVID-19) pandemic has resulted in increasing fiscal pressure. The government has highlighted PPP as an important tool to mobilize private sector resources into infrastructure investments to supplement public investment and to achieve better value-for-money.

As part of its efforts to mainstream PPP, the government set up IDCOL in 1997 to address long-term funding challenges of infrastructure projects, especially in PPP projects. Since then, it has become the leading domestic financial institution in catalyzing long-term funding and promoting private sector in investment in infrastructure projects. By December 2020, its outstanding loan and advances was at Taka (Tk) 79.1 billion, rising from Tk41.0 billion in 2016. Its shareholder equity grew to Tk9.2 billion from Tk6.0 billion in 2016. It is one of the few financial institutions that have the technical and managerial capacity to appraise, structure and execute infrastructure project financing in Bangladesh.

ADB has had a long-term engagement with IDCOL. Through Public Private Infrastructure Development Facility (PPIDF), PPDIF2 and Tranche 1 of PPIDF3, ADB provided $535 million project financing. With the support of two ADB TAs, IDCOL has developed a PPP policy framework, set up a dedicated risk management unit led by senior officers, established a corporate recovery unit, formulated a corporate strategy with a focus on infrastructure investment and advisory services, strengthened ICT capacity and compliances, and developed a capable social and environmental safeguard team. Currently, IDCOL is led by a strong 8-person Board including independent directors and staffed with experienced executives and professionals. With its rapid growth in operations and enhanced capacities, IDCOL is ready to take major steps to become more effective in achieving its missions, with ADB's support.

First, IDCOL remains a state-owned institution, relying on multilateral loans, guaranteed by the government. As of December 2019, the outstanding amount of multilateral loans stood at Tk75.5 billion (ADB's share is 39%). With its growing operations and stronger capacity, IDCOL is considering diversifying its funding sources gradually. Funds can be raised in the capital market, either through a combination of domestic and international bond issuances, potentially a green bond issuance, partially guaranteed by ADB or through an offshore-taka linked bond. Tapping the capital markets will help IDCOL improve its long-term financial sustainability and adopt good practices in project appraisal, risk management, and corporate governance. Furthermore, IDCOL will be encouraged to adopt global Green Bond framework in its investment.

Second, IDCOL needs to strengthen its capital base to ensure long-term sustainability and to support its expanding operations. One of the options is to bring on board a strategic partner, possibly an international infrastructure financing company or a development financial institution. This will not only strengthen IDCOL's capital base, but also provide IDCOL access to international project appraisal systems and processes, management know-how, improved risk management and corporate governance practices. This will also establish a good precedence in the reform of the State-Owned Enterprises in Bangladesh.

Third, as a leading infrastructure finance company, IDCOL is expected to take the lead in supporting the country's agenda for a low carbon and climate resilient economy and developing new sectors with its financing and advisory services. So far, IDCOL's main role has been limited to being a financier of infrastructure projects including some renewable energy and energy efficiency projects, but more needs to be done. Bangladesh is highly susceptible to the impacts of climate change. Ranked 7th in the Global Climate Risk Index, the country is most vulnerable to extreme weather conditions and climate change. The government has committed to reducing greenhouse gas emissions by 21.85% below, business-as-usual, in the industrial sectors by 2030 of which, 6.73% reduction is targeted as unconditional using only domestic resources and remaining 15.12% is targeted with a condition to receive sufficient and appropriate assistance from the global community. IDCOL shall play a bigger role to spearhead emerging areas of green technology to support climate change adaptation projects.

Transformations in all these areas, require advanced expertise and introduction of best practices in capital market, climate financing and green technology. Experiences gained through the process will be beneficial not only for IDCOL but for the country. A technical assistance addressing these areas was requested by the government, and the outline of the TA was agreed on during the fact-finding mission for the processing of the Third Public-Private Infrastructure Development Facility-Tranche 2.

The TA is closely aligned with ADB's Strategy 2030 and will contribute to achieving the following operational priorities: (i) Operational Priority (OP) 2 of Gender Equality and Women's Empowerment (by strengthening IDCOL's gender inclusive project implementation capacity); (ii) OP3 of Tackling Climate Change, Building Climate & Disaster Resilience & Enhancing Environmental Sustainability (by developing new sectors or subsectors for climate financing); and (iii) OP6 of Strengthening Governance and Institutional Capacity (by strengthening IDCOL's capital and financing structure, and risk management and operation capacities

Impact Financial institutions supporting PPP infrastructure and climate finance strengthened
Project Outcome
Description of Outcome Capacity of IDCOL to support infrastructure investments, and climate financing enhanced
Progress Toward Outcome
Implementation Progress
Description of Project Outputs

A medium-term resource diversification plan supporting the implementation of the corporate strategy developed.

IDCOL's capacity for financing potential new areas of climate finance and social infrastructure expanded.

IDCOL's operation control and management enhanced.

Status of Implementation Progress (Outputs, Activities, and Issues)
Geographical Location Nation-wide
Summary of Environmental and Social Aspects
Environmental Aspects
Involuntary Resettlement
Indigenous Peoples
Stakeholder Communication, Participation, and Consultation
During Project Design
During Project Implementation
Business Opportunities
Consulting Services ADB will recruit a consulting firm with international and national consultants. The firm will be engaged by ADB through quality- and cost-based selection with a quality-cost ratio of 90:10, because of the highly specialized expertise needed, using a simplified technical proposal in accordance with the ADB Procurement Policy (2017, as amended from time to time).
Procurement The TA-financed equipment will be procured following ADB's Procurement Policy (2017, as amended from time to time) and associated TA staff instructions.
Responsible ADB Officer Zhang, Dongdong
Responsible ADB Department South Asia Department
Responsible ADB Division Public Management, Financial Sector and Trade Division, SARD
Executing Agencies
Finance Division, Ministry of Finance
Bangladesh Secretariat, Dhaka-1000
Bangladesh
Ministry of Finance
Economic Relations Division (ERD), MOF
Sher-e-Bangla Nagar, Dhaka_1207
Bangladesh
Timetable
Concept Clearance 08 Nov 2021
Fact Finding 03 Nov 2021 to 10 Nov 2021
MRM -
Approval 13 Dec 2021
Last Review Mission -
Last PDS Update 13 Dec 2021

TA 6873-BAN

Milestones
Approval Signing Date Effectivity Date Closing
Original Revised Actual
13 Dec 2021 29 Dec 2021 29 Dec 2021 30 Jun 2024 - -
Financing Plan/TA Utilization Cumulative Disbursements
ADB Cofinancing Counterpart Total Date Amount
Gov Beneficiaries Project Sponsor Others
750,000.00 0.00 0.00 0.00 0.00 0.00 750,000.00 17 Jun 2022 0.00

Project Data Sheets (PDS) contain summary information on the project or program. Because the PDS is a work in progress, some information may not be included in its initial version but will be added as it becomes available. Information about proposed projects is tentative and indicative.

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Safeguard Documents See also: Safeguards
Safeguard documents provided at the time of project/facility approval may also be found in the list of linked documents provided with the Report and Recommendation of the President.

None currently available.


Evaluation Documents See also: Independent Evaluation

None currently available.


Related Publications

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The Access to Information Policy (AIP) establishes the disclosure requirements for documents and information ADB produces or requires to be produced in its operations to facilitate stakeholder participation in ADB's decision-making. For more information, refer to the Safeguard Policy Statement, Operations Manual F1, and Operations Manual L3.

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Tenders

Tender Title Type Status Posting Date Deadline
Strengthening the Capacity of Infrastructure Development Company Limited - Consulting Firm Firm - Consulting Closed 21 Jun 2022 28 Jun 2022

Contracts Awarded

No contracts awarded for this project were found


Procurement Plan

None currently available.