WB's $1.5b stuck in procurement row

Implementation of 26 projects involving $1.5 billion financed by the World Bank (WB) has been stuck after the government amended the Public Procurement Act (PPA) despite objection by the WB.
As the WB objection was ignored in amending the PPA, the WB put temporary hold on release of the funds for the 26 ongoing projects.
The WB sent a letter to the finance minister in the first week of November giving a list of 26 projects to put on hold all local procurement temporarily until the financing agreements are amended with agreed new parameters.
The government in the last parliament session amended the PPA and made provision for dropping the clause requiring experience for getting work up to Tk 2 crore and introduction of a lottery system.
Sources in the planning ministry say works of many projects of public interest like those under the health and education ministries now remain stuck.
According to the information available from the WB and the Economic Relations Division (ERD), the total signing amount in the 26 projects was $2.37 billion. Of the amount, the government has already disbursed 38 percent, while the rest $1.5 billion has yet to be spent.
The WB officials say the projects have been suspended temporarily and after the agreement is revised the money would be disbursed again. The WB would soon send a draft agreement, the officials add.
Sources say the WB had earlier followed the PPA, and the agreements between it and the government were signed accordingly regarding any project. But now in case of work of up to Tk 2 crore, the WB will follow their own guidelines revising the agreements.
A planning ministry source says once the WB sends the draft agreement, several months would require finalising it at the government level. As a result, implementation of the projects would be hampered or delayed.
However, the entire amount of the $1.5 billion would not be spent during this fiscal year and some amount would be carried over to the next fiscal years, the sources add.
Like the WB, the Asian Development Bank (ADB) also in a letter to the finance minister last month expressed their objection to the amended PPA but has not suspended any project yet.
Insiders at ERD say the ADB in most cases followed their own guidelines instead of the procurement guidelines of Bangladesh. In cases where they followed Bangladesh guidelines, the agreement mentions that the agency would follow their own rules in case of any mismatch.
The ERD officials say the ADB has informed that if the agency gets a procurement proposal from the finance ministry which violates their guidelines, they would not approve it.
However, after the Public Procurement Regulation (PPR) and the PPA were passed in 2003 the WB started following those. But as the government amended the PPA in 2009 the agreements with them were signed following the amended version.
A substantial chunk of the amount for the 26 projects approved by the WB has not yet been spent.
The original amount in the Clean Air and Sustainable Environment Project was $62 million, Higher Education Quality Enhancement Project $81 million,
Dhaka Water Supply and Sanitation Project $149 million, and Siddhirganj Peaking Power Project $350 million.
The full amounts in these projects have yet to be disbursed.
The Emergency 2007 Cyclone Recovery and Restoration Project had approval for $109 million and 97 percent of the amount remains unspent.
The original amount and undisbursed percentage of the Secondary Education Quality and Access Enhancement Project are $130 million and 81 percent, Additional Financing for Social Investment Programme Project $25 million and 67 percent, Disability and Children-at-Risk Project $35 million and 95 percent, Additional Financing for Rural Transport Improvement Project $210 million and 31 percent, Additional Financing for Municipal Services Project $25 million and 26 percent, Additional Financing for Social Investment Programme Project $8 million and 67 percent, and the National Agricultural Technology Project $62 million and 87 percent.
The original amount and unspent percentage of the Water Management Improvement Project are $102 million and 93 percent, Public Procurement Reform Project-II $23.6 million and 80 percent, Avian Influenza Preparedness and Response Project $16 million and 96 percent, Local Governance Support Project $111.5 million and 57 percent, Investment Promotion and Financing Facility Project $50 million and 27 percent, Health, Nutrition and Population Sector Programme $300 million and 25 percent, Economic Management Technical Assistance Project $20 million and 70 percent, Reaching Out-of-School Children Project $ 51 million and 29 percent, Water Supply Programme Project $40 million and 28 percent, Enterprise Growth and Bank Modernization Project $250 million and 28 percent, Power Sector Development Technical Assistance Project $15 million and 50 percent, and Second Primary Education Development Programme $150 million and 25 percent.
The Project Preparation Facilities in two proposed projects -- the Padma Multipurpose Bridge Project and Railway Modernisation Project -- have been allocated $3 million, but 90 percent of the money is yet to be spent.