Economists against Padma bridge with local funds

The government should go for realistic plans and set its priorities on economic considerations to build the Padma bridge instead of taking emotion-driven decisions, a former caretaker government adviser said yesterday.
“In the era of globalisation, it won't be wise to take steps emotionally and go for such a big project with its own financing,” said Akbar Ali Khan.
Any decision on the Padma bridge should be made on the basis of reality, and the government should move very cautiously on the issue, he said.
He spoke at a seminar on "financing large projects in Bangladesh" co-organised by Economic Reporters' Forum and the EMBA Forum of BRAC University at the conference room of the university in Dhaka.
Khan said, if the government goes for building the bridge with its own funds, it will face several challenges.
Getting a big internationally reputed contractor for the project will be tough, while the government also lacks capacity to manage funds for the project, he said.
“Even if we want, they (the contractors) will not come if the World Bank is not involved with the project. Because they would look for trust and would want prompt decisions that the government cannot give.”
He also said, if a reputed contractor is not assigned for the task, it will take around 10 years to complete the bridge instead of the estimated three years.
“In the meantime, the river will change its course and then all these plans may turn useless,” he said, adding that project costs will also go up much.
He said, although China has a huge foreign currency reserve, it involves the WB while implementing large projects to win the confidence of the globally reputed contractors.
Khan also questioned the government's capacity for financing the Padma bridge project from the domestic sources that would cost the government 10 times higher interest than funds from abroad.
Referring to a study by the International Monetary Fund, he said Bangladesh is more capable of taking loans from the international sources than the domestic ones.
The WB cancelled its pledged $1.2 billion credit for the $2.9 billion Padma bridge project on June 29, saying it found 'credible evidence' of corruption in the project.
Later, the government announced that the biggest ever infrastructure project of the country will be built with its own funds and local aid.
AB Mirza Azizul Islam, another former adviser to the caretaker government, stressed the need to ensure a corruption-free and transparent governance system to attract money from alternative sources.
He also said the costs of the project would go much higher if the government tries to complete it through alternative funding.
In that case, the ownership of the bridge will also go to the private sector, he said, adding that private companies would collect tolls for their own benefits for which the people will suffer.
Islam also suggested the government take better strategies to attract bigger amounts of foreign direct investment.
Amir Khasru Mahmud Chowdhury, a former commerce minister, said the consequences of building the bridge with domestic financing will be disastrous like it happened with rental and quick rental power plants.
“Economy came under pressure when the government started providing subsidies for implementing the rental and quick rental power plants with funds from local banks,” he said.
“Both internal borrowing and interest rate went up; banks began to face a liquidity crisis, and inflation soared. Investment also dropped significantly. The same thing will happen with the Padma bridge project.”
In a keynote, Mamun Rashid, director of BRAC Business School, said Bangladesh should look to the Middle East and Asia to tap the Islamic liquidity pool for financing big projects, especially those in the power sector.
“Now that we have a respectable sovereign credit rating, raising money from international or commercial sources should be easier than the past. Local capital markets can also channel domestic liquidity to an extent if the transaction is structured properly,” he said.
Ainun Nishat, vice chancellor of BRAC University, said if the Padma bridge project is financed by own funds, the project's costs will overrun.
AK Abdul Mubin, director of National Credit Ratings Ltd, and Siddiqur Rahman, a former finance secretary, also spoke.