Bangladesh risks another year's setback in securing a coveted loan from the World Bank for the Chattogram Bay Terminal project unless several key tasks, including completing a comprehensive feasibility study and a draft environmental and social impact assessment, are finalised by December this year.
The World Bank had earlier in 2017 approved a $350 million loan for the Breakwater and Access Channel section, one of the four sections of the project. But due to a delay in securing financing for other sections of the project, the construction work could not start as planned.
Sources in the Ministry of Shipping and the Chattogram Port Authority (CPA) have revealed that the project necessitates extra funding from the World Bank due to the surge in construction material costs.
However, the exact funding quantum will be determined subsequent to the ongoing feasibility study and the revision of the master plan, they said.
Officials say two South Korean companies – Kunhwa Consulting and Engineering Company Limited and DY Engineering – are working on updating the feasibility study. The government has earmarked Tk22 crore for this study.
A senior official in the Economic Relations Division (ERD) said that a failure to meet the stipulated timelines – completing the feasibility study by year-end and obtaining the requisite approvals by May of the subsequent year – will render the World Bank's funding inaccessible for another year.
The envisaged Bay Terminal near Chattogram port holds immense promise for Bangladesh, potentially delivering substantial economic gains, contingent upon efficient execution and management.
As per a World Bank analysis released on 2 August, the terminal's optimised operation could translate into a yearly windfall of $363 million, primarily stemming from enhanced vessel turnaround efficiency.
This projection, however, barely scratches the surface. Factoring in additional efficiencies like reduced ship wait durations and improved ship service efficacy, the Bay Terminal emerges as a potent force in fortifying Bangladesh's economic growth and bolstering its competitive edge.
Despite its considerable potential, the project's implementation has been frustratingly delayed. Despite the government's decision in 2011 and the subsequent inauguration of the Bay Terminal by Prime Minister Sheikh Hasina in November 2018, tangible progress remains elusive.
The initial feasibility study for the construction of the Bay Terminal took place in 2017. This undertaking was led by the German firm Shell Horn, in collaboration with HPC Hamburg Port Consulting from Germany and KS Consultants Limited from Bangladesh. The government spent Tk6 crore towards the funding of this study.
Cost to rise
According to the initial feasibility study, the total cost of the Bay Terminal project was estimated at $2.5 billion.
Chattogram Port Authority officials say with the new estimate, the construction expenses for the Breakwater and Access Channel section of the project are projected to surpass $400 million. However, the entirety of this section's expenses will be covered through the World Bank loan.
A World Bank delegation visited Bangladesh from 5-15 February this year to explore funding options for this initiative.
Stakeholders said not only will the cost of the Breakwater and Access Channel section of the bay-container project rise, but expenses for other segments are also anticipated to increase.
The project comprises three other sections: the Multipurpose Terminal and Road and Rail connectors, along with Container Terminal 1 and Container Terminal 2.
Of these, the Multipurpose Terminal and Road and Rail connectors will be financed by the government. The remaining two terminals will be developed under a Public-Private Partnership (PPP) model.
Container Terminal 1 will be constructed through a Government-to-Government (G2G) collaboration involving Singapore's PSA, in partnership with IFC and Sumitomo. Container Terminal 2 will be constructed through a G2G agreement with the UAE's DP World.
All the terminals will be situated in Chattogram's Halishahar region, with the Chattogram Port Authority overseeing the construction and operation of one of them.
Originally slated for completion in 2021, the Bay Terminal construction schedule was derailed by the lack of available investors in the Public-Private Partnership (PPP) model, as per port authority officials.
The CPA has embarked on an effort to commence Bay Terminal construction in the upcoming year, ensuring comprehensive procedural completion beforehand.
Dr Md Rafiqul Islam Khan, Joint Secretary (Development) of the PPP Cell at the Ministry of Shipping, said the government aims to initiate the construction of the bay terminal in the coming year.
He also highlighted the fact that expenses related to construction materials have witnessed an escalation over the past five years. Consequently, the project's overall cost is anticipated to rise as a result of this situation.
Rafiul Alam, executive engineer at Chattogram Port Authority, said unless the approval process for the bay terminal project concludes by mid-May of the following year, the World Bank's financing timeline could face delays.
Additionally, two enterprises from Singapore and Dubai are poised to invest in the project through a Public-Private Partnership (PPP) framework. Once the approval process reaches completion, these PPP entities can initiate the execution of their investment proposals, he said.
He further said that to align with these objectives, the feasibility study and master plan update endeavours are set to be finalised within the next four months, facilitating the commencement of the approval process.
Target to start operation in 2029
The Chattogram Port Authority (CPA) aims to initiate the construction of the Chattogram Bay Terminal project in the upcoming year. Comprehensive preparatory efforts are directed towards presenting the project to the Executive Committee of the National Economic Council meeting for definitive approval by May next year.
According to sources in the port authority, the current annual container handling capacity of Chattogram port exceeds 30 lakh Twenty-foot Equivalent Units (TEUs). The Bay Terminal is expected to significantly amplify container handling capacity, more than doubling it by the year 2030.