A consortium of Chinese companies – Sichuan Road and Bridge Group, Shamim Enterprise Ltd., and UDC Construction Limited – has signed a concession contract with the Government of Bangladesh to upgrade the Dhaka Bypass under a public-private partnership (PPP) arrangement.
The Asian Development Bank (ADB) acted as financial advisor on the transaction to the Public-Private Partnership Authority (PPPA) of Bangladesh, said an ADB press release yesterday.
This project marks the first successful collaboration between ADB's transaction advisory services and AP3F.
Under the contract signed with the Ministry of Roads and Bridges, a four-lane tollway and a two-lane service road will be added to the Joydevpur-Debogram-Bhulta-Madanpur Road (N-105) section of the expressway.
The 48km project will provide a major arterial connection between the industrial zone northeast of Dhaka and national highway N1 connecting to Chattogram city, as well as to N2, N3, and N4 highways leading to other major cities.
The consortium will design, build, finance, operate, and maintain the tolled expressway over a 25-year concession period, and will be able to charge tolls based on vehicle type.
“This project brings a new dimension to public service delivery in Bangladesh. It is the first access-controlled expressway in the country,” said chief executive officer of PPPA Syed Afsor H Uddin.
“This landmark transaction will pave the way for a pipeline of national expressways across Bangladesh,” he added.
Head of ADB's Office of Public-Private Partnership (OPPP) Yoji Morishita said, “ADB aims to accelerate road development in Bangladesh while minimising the financing and operational burden and bringing in a diverse set of internationally renowned infrastructure developers, operators, and financial institutions.”
“The Government of Bangladesh establishes the objectives of the infrastructure as well as some credit supports to tackle the traffic challenge, while the private sector takes responsibility for meeting the objectives. The Dhaka Bypass is the first step in our strategy to bring Bangladesh roads to the global market based on the PPP model,” he added.
ADB's OPPP also provided legal support for this transaction and helped develop a concession contract template for road PPPs through the Asia Pacific Project Preparation Facility (AP3F), a multi-donor trust fund managed by ADB.
The Government of Bangladesh will offer viability gap funding of Tk 3.1 billion and a minimum revenue guarantee to the consortium to optimise the cost of financing. The contract also provides the government with a share of revenues generated by the consortium over a certain threshold.
ADB has been working with the Government of Bangladesh for over five years to transform the country's roads by making them a bankable asset class attractive to international investors, as has happened in other sectors such as the independent power producer sector.
ADB's OPPP is also the transaction advisor to PPPA on the 13.5km Rampura-Amulia-Demra Expressway in Dhaka, and in December 2018 was appointed transaction advisor for the approximately 210km Dhaka Chattogram Expressway, the busiest road artery for passenger and freight in the country.
ADB has long supported PPPs and in 2014 established the OPPP to provide independent transactional advice and develop broader PPP knowledge and expertise in the region.
ADB has also pioneered the AP3F, a $73 million trust fund supported by the governments of Japan, Canada and Australia, to provide project preparation, project definition, and capacity-building support to governments for PPP projects.