The debt problems facing the society, largely arising from financing mega-projects are largely manageable, but the underlying strategy to develop society this way raises serious questions and is based on serious faults:
Railway: The investment in a large extensive railway system was a great error. Despite the great enthusiasm for the railways by most, Bangladeshis facilities will never earn enough to pay their costs; if not closed down the railway will require indefinite government subsidies. Bangladesh cannot afford a major transport system that requires growing subsidies. The road-based transport system works well both for freight and passengers; witness the heavy use of intercity bus travel available at several quality levels. Most freight moves by truck and there is little interest in using the trains which are slower. The railway loses money for both.
Profitable freight movement on railways requires haul lengths of more than 1000km. The Indians and the Chinese have promoted railways as they wish to incorporate Bangladesh into their own long-haul railway systems. For lines that are running now, a calculation should be done to determine if the route is making money with the existing investment. All work on the railways that does not meet this test should be stopped at once.
What to do with the railways? For routes that are profitable run them until they are not profitable. Sell the tracks to the steel industry. Use the cement sleepers in riverbank protection schemes. Sell the locomotives and wagons to whomever will take them. Build a series of solar plants on the large holding of railway land. Work out a retirement deal for the workers.
Bridge and road infrastructure: Infrastructure has been constructed and located to serve the public. But the cost is excessive due to corruption involved. This results in higher debt that must eventually be repaid. The cost of the road should be recovered from user fees -- taxes on gasoline, vehicle registration fees and duties on vehicles. Toll collection is really not needed if user fees are correctly set. Most important for the future is good maintenance, free of corruption, of the roads and bridges. On main highways weigh stations should be established and load limits seriously enforced.
For Bangladesh, road transport is the most efficient for both passengers and freight. To improve the road system there are two essential government policies: First is to charge user fees to cover the costs of the road and maintenance; second is to increase the efforts of the highway police to stop vehicles from using the right of way to park; use of the road to dry paddy; and buses stopping at unauthorized stopes. These actions create great side friction and slow down the flow of traffic.
Ports: The various port projects should be finished and foreign operators hired for the ports with the expectation that in future Bangladesh private companies can take over. This includes both the ocean ports and the land ports. But the government should not try to operate the ports, instead open tenders should be used to select the operator who must demonstrate considerable experience. There must be clear agreement on responsibility for capital equipment and additional structures.
In improving port operations, the role of customs is particularly important; corruption associated with the clearance of goods is a major retarding factor for the growth of the economy. Return of the Pre-Shipment inspection system is necessary and would have a powerful positive impact on customs, reducing corruption, speeding clearance times, and increasing revenues.
What to do with the railways? For routes that are profitable run them until they are not profitable
Nuclear power: This overpriced white elephant is a monument to corruption. The contract should be canceled. The Russians can take the reactors back. The whole area set aside for this project can be turned into a large solar power station. The funds in the escrow account should be seized and returned to the Ministry of Finance. The plant is overpriced by $4-6bn. But one should look carefully for the best plant alternatives and procure the facility through open bidding. A worldwide renaissance of interest in nuclear energy is taking place and Bangladesh should join this.
Power generation. The fuel requirements available from domestic resources are all utilized and will soon be exhausted. The only exception is the Phulbari coal reserves; these, if developed, will provide about half of the requirements for the coal plants for the next 30 years; significantly reducing the cost of coal for the several power stations.
Exploration for gas should be pressed but one cannot predict what will happen. A land-based LNG de-gasification terminal should be built through tenders. Whatever happens in gas exploration, new gas from domestic sources will not be available for years; a real squeeze in gas availability looms. LNG is the solution. Agreements were made with the Indian Government to import electricity; this was a sensible response to the shortage faced in 2008; however contracts were poorly drawn not allowing concentration when such imports were no longer needed. One or more foreign companies should be engaged to invest and manage transmission and distribution systems.
It will take years to accomplish this but a shift to the private sector is the only way to provide low-cost electricity.
Dhaka transport: The problem with Dhaka transportation is one of the more important development issues in the country -- the Hasina government tackled this by undertaking a series of major investment projects: The Metrorail system; the Dhaka Elevated Expressway; the Rapid Bus project; These projects cost billions and, so far, have made the traffic problems worse rather than better.
As I have written elsewhere, there are two important actions that will create benefits: First is to improve sidewalks -- a high percentage of trips are carried out on foot and conditions are terrible. Repair sidewalks, provide alternative market sites for vendors, improve drainage, build escalators for the crossings over major highways. and adjusting traffic lights for the benefits of the pedestrians rather than the car owners, would greatly improve the life of residents of Dhaka. Second is to build a bus system that works in a coordinated way throughout the city, sticks to the assigned routes, treats passengers -- particularly women -- with courtesy, and is kept clean. The planners might be better focused on the 85% of the people who walk and use the buses.
Forrest Cookson is the Research Advisor to the Research and Development Centre. In Bangladesh, he led the central bank component of the Financial Sector Reforms; was the Team Leader of the study of Northwest Area Development of Bangladesh; and served as the Statistical Advisor of the Legal and Judicial Capacity Building Project.