Asian Development Bank (ADB) has announced a loan of $1.7bn to Bangladesh, $1.5bn for the Trans-Asian Railway and $200m to boost existing railway capacity.
ADB and Bangladesh will finance the construction of 102km of railway connecting Cox’s Bazar to the railway network of Bangladesh and then connecting with Myanmar as part of the Trans-Asian Railway.
The Trans-Asian Railway is an initiative by United Nations Economic and Social Commission for Asia and the Pacific (UNESCAP).
Saifuddin Ahmed, joint secretary of the Finance Ministry’s Economic Relations Division and Yoshinobu Tatewaki, Officer-in-Charge, Bangladesh Resident Mission of ADB, signed the agreements on behalf of Bangladesh and ADB respectively, at a ceremony at the Economic Relations Division office in Dhaka.
The declared project involves building nine rail stations between Dohazari and Cox’s Bazar. The total cost is estimated to be $2.012bn with Bangladesh putting up $512m. ADB will provide a further $1m to ensure technical and safety protocols. Bangladesh government is also overhauling the 47km stretch of rail between Chittagong and Dohazari.
In order to develop domestic railway capacity, the project will also finance about 250 passenger carriages, 10 locomotives, and state-of-the-art maintenance equipment. It will also provide training facilities for train drivers.
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The railway is one of ADB’s Railway Master Plan to develop Bangladesh Railway domestically and internationally by connecting it to the Trans-Asian Railway through Myanmar. The domestic target is to increase Bangladesh Railway’s freight market share to 15% and passenger share to 10% by 2021 from 4% each.
Bangladesh aims to use this opportunity to develop Cox’s Bazar as a tourism hub. According to statistics, Cox’s Bazar gets 1.9m tourists per year, which is expected to grow by 5% annually after the completion of the railway.
“It will provide a key boost to local and regional tourism by providing both safe and environmentally friendly connectivity from Dhaka and Chittagong” said Markus Roesner, Principal Transport Specialist, South Asia Department ADB.
He added: "With Bangladesh located at the heart of the Trans-Asian Railway, efficient rail lines and services will put the country in an excellent position, in the future, to tap markets both east and west."
The rail project will be further developed in another phase to connect it to Myanmar and a planned deep-sea port on Matrabari island off the Cox’s Bazar coast. Another ADB project will work on converting the Dhaka-Chittagong railway lines to dual-gauge.
The $1.5bn loan will be disbursed in four instalments, each carrying a 25-year term with 5-year grace periods. The interest rate will be set by Libor [a benchmark rate that some of the world’s leading banks charge each other for short-term loans], save for the $90m in the first instalment which will be charged at 2% per annum.
It is the largest ADB investment in Bangladesh and the biggest railway investment by ADB till date.