ADB sees strides in utilising funds, challenges too

The amount of uncontracted and undisbursed funds in Bangladesh has decreased compared to the previous year, indicating progress in utilising these funds for various projects, according to a report of the Asian Development Bank (ADB).

However, the ADB advises Bangladesh to take significant steps to improve awarding contracts and fund disbursement, enabling greater access to the bank's funds in the future.

The report notes that over the last decade, Bangladesh's portfolio has surged from $5.3 billion in 2013 to $13.01 billion as of 31 August 2023, with a compound annual growth rate of 9.39%. This growth is expected to continue due to the ADB's increasing annual lending to Bangladesh, as highlighted in a review of its projects, to be discussed at a programme on 13-14 September in Dhaka.

As of 31 August 2023, the uncontracted balance as a percentage of the total ADB loan portfolio stands at 20.7% or $2.69 billion, down from 32% or $3.14 billion a year ago. Also, the undisbursed balance has been reduced to 40.7% or $5.29 billion from 45% in the preceding year, the ADB says.

Since the transport and energy sectors comprise more than half of the ADB's total portfolio for a few large sectors, their share of the uncontracted and undisbursed portfolio is higher than other sectors, the global lender said.

Agriculture, food, nature and rural development, and transport sectors constitute 52% of total uncontracted portfolio as of 31 August this year. On the other hand, transport and energy sectors constitute 46% of the total undisbursed portfolio.

The ADB says agriculture, food, nature and rural development sectors will include $420 million in newly committed loans for the second and third quarters of 2023. Transport sector includes over $400 million newly committed loans in Q2 2023.

There is no commitment in 2023 for energy  but there is still an 18% and 21% in uncontracted and undisbursed within the portfolio due to delayed procurement and slow performance of projects. Water and urban development sectors make 19% and 17% in uncontracted and undisbursed portfolios. This is due to the commitment of a $300 million loan in this sector in Q3 2023, says the ADB.

"Concerted efforts are needed to improve the contract awards from agriculture, food, nature and rural development, transport, water and urban development sectors; and disbursement from AFNR, energy and transport sectors," says the global lender in its assessment on ADB-funded projects in the country. "Project specific action plans are needed to improve the performance of these sectors."

ADB's ongoing portfolio in Bangladesh

The Bangladesh portfolio as of 31 August this year stood at $13.01 billion for 53 projects in six sectors. There are seven projects in agriculture, food, nature and rural development, 11 projects in human and social development, seven in energy, 12 in transport, 10 in water and urban development, and six projects in finance, and public sector management and governance. Transport and human and social development sectors comprised 45.7% of the total portfolio.

2023 portfolio performance

The achievements vis-a-vis targets as of 31 August and 2022 for contract awards and disbursement have improved. For 2023, the contract awards achieved is $793.18 million (73.7%) against the annual target of $1,076 million, and the disbursement is $940.44 million (66.5%) against the annual target of $1,414.1 million. In 2022, the achievements were 52% and 58%, respectively. Overall, the progress has improved in 2023, according to the ADB report.

Project success rates and closing on time

Overall, the project success rate for the last five years is 68%, which is consistent with the regional success rate of 68% but less than the ADB's corporate target of 80%. However, the three-year rolling project success rate is improving over the years, from 61% in 2020, 75% in 2021, and 77% in 2022. All five projects under evaluation in 2023 are expected to be rated successful.

Financial management performance rating

The Financial Management Project Performance Rating for ADB-assisted projects in Bangladesh is satisfactory with 41 (91%) projects rated "on track" and 4 (9%) "for attention".

Procurement lead time

Procurement end-to-end time for packages greater than or equal to $1 million is 311 days, which is much higher than 214 days in 2022. Transport, energy, and water and urban development sectors have taken a long end-to-end time. Investment projects took an average of 410 days.

The Power System Efficiency Improvement Projects have taken almost 600 days due to the delays in bids evaluation, DPP revision and need for contractors to demonstrate interoperability of the prepaid metres- before contracts are awarded.

Procurement challenges

Various challenges have delayed the procurement process and recruitment of consultants. These issues encompass poor design and specification quality, outdated cost estimates, unclear bid documents, subpar bids due to a lack of expertise, insufficient diligence in evaluating bids, government approval delays, and inadequate market assessment.

In 2023, the ADB aims to streamline procurement by 10%, appointing a dedicated procurement officer to oversee processes for packages exceeding $1 million. This proactive approach seeks to address these challenges, enhance efficiency, and minimise the risk of procurement failure and subsequent rebidding.