The loan was approved in Manila yesterday to finance Chittagong Port Trade Facilitation Project, the first external assistance to the country's port sector in more than two decades.

Modern computer system will be installed under the project to expedite cargo processing, which is expected to lower shipping and port-handling charges and foster greater international trade, according to a statement.

The total cost of the project, expected to complete by July 2008, is about $ 41.3 million. The government will provide $ 10.7 million as local component of the cost.

The loan, 74 percent of the total project cost, is approved for a 25-year term, including a grace period of five years, at a LIBOR-based lending facility.

The Chittagong Port is an "integral part of the sub-regional transport and logistics chain connecting Bangladesh and northeastern India, Bhutan and Nepal to Europe, North America and Southeast Asia", the ADB statement said.

Around 80 percent of the trade flows of Bangladesh pass through Chittagong Port. But high shipping and port costs are "severely undermining the competitiveness of Bangladesh in international trade".

A major cause of the high charges is congestion in the container yard, paper-based terminal management and document processing, and limited road access to the container terminals.

"Several procedural and operational improvements are needed to realise the full potential of planned and ongoing investment in infrastructure and cargo-handling equipment at the port," says Prianka Seneviratne, an ADB senior project specialist and mission leader for the project.

They include enhancement of personnel skills, a strategic plan for increasing productivity and cutting costs, support for the preparation of an anti-corruption strategy, modernisation of procedures, revisions to tariffs, and better environmental management.

The current customs clearance process requires documents to be manually moved through several stages requiring 48 endorsements, opening up opportunities for "corruption".

Average container dwell time has remained almost unchanged over the past few years at about 18 days against about 10 to 12 days at comparable container terminals in the region, the donor agency noted.

These delays and informal payments to expedite the flow of documents have contributed to higher maritime cost for Bangladesh's textile exports to the US as compared with exports from the People's Republic of China, India, Thailand, and Taipei, China.

In addition to speeding up operations, the ADB thinks a transparent and quick computerized system will minimise opportunities for corruption.

The ADB project has three components that will be carried out by three agencies - the Chittagong Port Authority (CPA), the Customs House of Chittagong (CHC), and the Roads and Highways Department (RHD).

Its CPA component includes the installation of a computerized container terminal management system (CTMS), improvement of port area's water quality, investment in spill-clean up equipment and oil-waste treatment facility, and improvement of intra-port roads and bridges.

The CHC component consists of the activation of an automated system for customs data management with connections to the CTMS, and installation of container scanners needed to meet new international security standards in detecting human and drug trafficking.

The RHD component is the construction of an access-controlled link from Chittagong port access road to the two container terminals inside the port.