China decides not to fund projects as proposed costs get revised
Three “special priority” railway expansion initiatives have plunged into uncertainty as China has decided not to fund the projects following a downward re-evaluation of the proposed costs.
According to sources, one of the main reasons behind China’s newfound reluctance is that once completed, these projects will boost Bangladesh’s trade with India.
China has hinted that it is India which has influenced the local authorities to reevaluate the construction prices in order to make them “substandard.”
The projects in question are Joydebpur-Ishwardi dual-gauge double-line project, Akhaura-Sylhet dual gauge project and Joydebpur-Jamalpur dual-gauge project.
They were listed in a memorandum of understanding (MoU) signed during Chinese President Xi Jinping’s visit to Bangladesh in 2016 to the tune of $3.337 billion.
According to the MoU, the Chinese government would pay for the construction of the projects, which amount to roughly 80% of the total cost.
The rest of the expenses were to be borne by the Bangladesh government.
Re-evaluation of costs
The Joydebpur-Ishwardi dual-gauge double-line and Akhaura-Sylhet dual gauge rail expansion projects got the approval of the Executive Committee of the National Economic Council (Ecnec) in 2018 and 2019 respectively.
However, a committee, formed by the Prime Minister’s Office (PMO), after an investigation, found the estimated prices to be quite high and directed Bangladesh Railways (BR) to cut down the costs.
As per the committee recommendations, the expected $1.045 billion costs for the Joydebpur-Ishwardi rail link development were to be shaved by 12.91%, and the $1.272 billion proposed budget for the Akhaura-Sylhet dual gauge project was to be brought down by 20.8% – leading to savings of nearly $572 million.
Following these developments, the Chinese government, through its embassy in Dhaka, said it would not fund the Joydebpur-Ishwardi double-line project owing to a “lack of in-depth preliminary work and insufficient feasibility study.”
Officials, seeking anonymity, said that the embassy had recently shared its decision with the railway authorities through the Economic Relations Division (ERD).
Meanwhile, the Chinese contractors for the Joydebpur-Ishwardi double-line and Akhaura-Sylhet dual gauge rail projects informed the local authorities that they would also not work on the projects following the PMO’s downward revision of costs.
Speaking to Dhaka Tribune, BR Director General Dhirendra Nath Mazumder said: “The future of these projects is now uncertain as the Chinese construction companies have already informed us that they don’t agree with the revised expenditures and they would like to opt out from the development works.”
He said that the PMO would be informed in this regard immediately for further instructions.
Mohammad Golam Mostafa, project director of the Joydebpur-Ishwardi double-line, told Dhaka Tribune that the authorities would send a letter to the construction firms again to have them “reconsider their decision.”
“After getting their opinion we will send a letter to the PMO listing all concerns,” he added.
China Civil Engineering Construction Corporation (CCECC) was selected for constructing the Joydebpur-Ishwardi double-line at a contract price of $1.158 billion and China Railway Construction Bridge Bureau Group Company (CRBG) was selected for Akhaura-Sylhet dual gauge project with $1.497 billion as contract price through direct procurement method without any competitive bidding.
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Contacted by Dhaka Tribune, CCECC officials said that they had already written to the local authorities justifying their “reasonable” proposed costs.
The PMO also directed the relevant authorities to revise the cost of the $1.061 billion Joydebpur-Jamalpur dual-gauge conversion rail project.
The project, which is yet to be approved, was also supposed to be funded by China under a G2G arrangement.
Following the PMO orders, the revision committee suggested reducing the cost of the billion-dollar project by Tk1,851.28 crore.
In G2G projects with China, conditions for appointing contractors, project cost evaluation processes, and funding are more or less the same, said BR officials.
Thus the Joydebpur-Jamalpur dual gauge project may also lose funding from China if the proposed costs are revised and slashed by Bangladeshi authorities, they added.