19 March 2020
Full-Speed Ahead for the BRI-Backed Bangladesh Elevated Expressway
With the required funding finally in place, China looks to deliver on long-delayed transport infrastructure project.
Two significant financing arrangements – both within the framework of the Belt and Road Initiative (BRI) – relating to Bangladesh’s First Dhaka Elevated Expressway Project were finally agreed late last month. This sees two mainland-based companies – the China Shandong International Economic and Technical Cooperation Group (CSI) and the Sinohydro Corporation – confirmed as playing lead roles in realising this significant infrastructure development initiative.
In essence, the agreements pave the way for the release of the additional funding required to accelerate construction work on the project and come in the wake of a larger refinancing package agreed by the parties last year. At the core of the deal is an agreement to transfer nearly half the equity in the First Dhaka Elevated Expressway Company (FDEE) – the special-purpose vehicle set up to build and manage the project – to the Chinese companies. With this commitment in place, the two state-owned businesses played a key role in finalising the financing arrangements.
The Bangladesh government originally approved the development of the elevated expressway in 2011. Back then, it was conceived as a massive US$1.4 billion public-private partnership (PPP) project, with construction scheduled to be completed by 2016. Bangladesh’s Bridges Authority, the government body with oversight of the project, then signed a contract with the Italian-Thai Development Company (ITD), a private-sector company, appointing it to handle the expressway’s construction. The ITD, in turn, set up the FDEE as the special-purpose vehicle for the project.
Not long after this initial agreement, the project began to run into considerable problems. Within two years, it had stalled entirely as a number of related land-acquisition issues proved to be insurmountable. In 2013, with costs soaring and the need to incorporate a number of drastic design changes, a new deal was negotiated with the ITD.
Even after this, though, the project only progressed intermittently, with the ITD struggling to put the required funding in place. In 2015, it came close to landing a $750 million deal with the China Development Bank in order to cover the costs of the first phase. Although it was agreed that the China Railway Construction Corporation was to be appointed the Engineering, Procurement and Construction (EPC) contractor on the $1 billion project – with the Bangladeshi government covering the 27% cost shortfall – ultimately, the deal foundered.
This saw the project almost completely becalmed until July last year when the ITD agreed to sell 35% of its FDEE stake to China Shandong International and a further 14% to the Sinohydro Corporation. In exchange, the two negotiated loans with the Industrial and Commercial Bank of China (ICBC) and the China EXIM Bank for $400 million and $461 million, respectively.
With a new completion date of 2022 now agreed, this has seen the scheme finally look likely to come to fruition. The plan is now to build a four-lane 26-kilometre elevated expressway starting at the capital’s Shahjalal International Airport, which will run alongside the New Airport Road. After connecting with various key road and rail hubs to the north of Dhaka, it will ultimately feed into the Dhaka Chittagong Highway and the country’s new upgraded road network, much of which is also being developed within the framework of the BRI, China’s ambitious international infrastructure development and trade facilitation programme.
Geoff de Freitas, Special Correspondent, Dhaka