Bangabandhu Industrial City: Green project rejected twice for inflated cost estimation

A fresh project aimed at developing Bangabandhu Sheikh Mujib Shilpa Nagar in Chattogram as a green city has been turned down twice on account of overestimated costs.

For instance, the project proposal has sought Tk14 crore for per kilometre road construction, while the allocation for a similar road under an ongoing project in the industrial city is Tk6.5 crore.  

Interestingly, the Bangladesh Economic Zones Authority (Beza), which is implementing a similar project at much lower costs, has made the proposal for the new project, seeking way more than what was allocated in the ongoing one.

The proposed cost for the 30-kilometre road construction under the new project is Tk219 crore higher than that of the current one.  

Beza asked for Tk255 crore for the development of 1 crore cubic metres of land in the proposed project, which is Tk87 crore more than the allocation for the same work under the ongoing project.

The Project Evaluation Committee (PEC) sent back the Development Project Proposal (DPP) of the Beza's green city project last June owing to such additional expenditure proposals in different sectors, a lack of allocation distribution, and copy-pasting proposals from old projects.

Beza then submitted the revised DPP, which also was rejected by the PEC for the same reason.

Beza did not reduce costs in various sectors, as recommended by the Planning Commission. Instead, it added additional expenditure in some sectors.

The revised proposal includes unusual hikes on costs for buying SUVs, fuel, and mosque construction.

Paban Chowdhury, executive chairman of Beza, told The Business Standard, "The PEC had met twice after sending the DPP to the Planning Commission. Work is now underway to restructure the proposal based on the recommendations of the second meeting. It is an ongoing process."

Meanwhile, the World Bank has expressed concern over the delay in approving the project. The global lender will provide a loan of Tk3,970 crore for the proposed project involving Tk4,368 crore. The government will provide the rest of the money.

The project has been taken up to transform Bangabandhu Sheikh Mujib Shilpa Nagar-2 zone into a green city. It has four zones being developed on about 30,000 acres of land in Mirsarai, Sitakunda and Sonagazi upazilas of Feni, Chattogram.

The amount of land allotted for the green city is about 1500 acres. About 2,000 acres of land in the remaining three zones of the industrial city have already been readied for setting up factories.

The proposed project includes land development, construction of 30-kilometre four-lane road, water supply and sewerage system, administrative building, desalination plant, steam network, solid waste plant, biogas plant, canal excavation, power and gas distribution network, installation of solar panels.

The project is scheduled to start in January and to be completed by December 2025. But its implementation is likely to be delayed as the project is yet to get approval.

Rising costs

In the first DPP, Beza had proposed to spend Tk12.49 crore, including Tk7 crore for vehicle rental and Tk5 crore for vehicle purchase. In the revised second proposal, Tk27.65 crore has been sought for the purchase of 24 vehicles.

According to the PEC meeting on the revised proposal, the project is supposed to appoint eight drivers. So, there is no opportunity to buy more than eight SUVs.

"We felt the need to buy a few more SUVs. But they felt in other ways. That could happen," said Paban Chowdhury, executive chairman of Beza.

The revised proposal seeks an allocation of around Tk10 crore for the purchase of petrol and lubricants for the vehicles of the project. In the first DPP, the allocation proposal was Tk2 crore.

It also seeks an allocation of Tk12 crore for investment promotion, training and study tours abroad, which is eight times higher than in the first proposal.

The first proposal proposed to allocate Tk50 lakh for venue rental, but in the next proposal, it has been increased eight times to more than Tk4 crore.

Beza's first proposal allocated Tk8 crore for constructing a mosque in the green city, but the revised proposal increased it to Tk20 crore. The PEC meeting objected to this and advised Beza to estimate the expenditure in accordance with the rate schedule of the Public Works Department, considering the number of people who could gather at the mosque.

According to the project proposal, six types of infrastructure, including common effluent treatment plant, desalination plant, steam network, solid waste management, biogas plant, rooftop and floating solar plant will be constructed in PPP. Private sector entrepreneurs will invest in all these sectors. But there is no detailed plan for it.

Beza has proposed to spend Tk595 crore from the government fund in the rooftop and floating solar plant sector. The project verification committee meeting held at the Prime Minister's office has mentioned that this expenditure is unusual.

The meeting, chaired by Tofazzal Hossain, secretary to the Prime Minister's Office, also questioned the rationale for such spending at a time of increased power generation capacity in the country.

Paban Chowdhury, in this regard, said, "The World Bank is funding this project to create a world class economic zone. It wants everything in this project to maintain international standard. The solar electricity was proposed to make the project sustainable."

The World Bank concerned over delay

At the end of last fiscal year, the World Bank approved a loan proposal of $467 million to implement the Green City project. But it has expressed concern over the delay in the approval of the project proposal.

According to Implementation Status & Results Report of the World Bank, the project was approved by the World Bank Group's Board of Directors on 19 June 2020. But it is yet to be approved by the Executive Committee of the National Economic Council (Ecnec). The delay in the approval process can impact the project's timely implementation.

Sources at the government's Economic Relations Department (ERD) said the loan is not a soft loan on easy terms. The interest rate on the loan is 3.87%.

The loan agreement with the World Bank will be signed once the project is approved by the Ecnec. The loan has to be repaid in 34 years with a grace period of four years."

Beza Executive Chairman Paban Chowdhury expressed his hope that the project proposal will get final approval from Ecnec this month.