Another avenue for infrastructure funding has opened up for Bangladesh as the country becomes a member of the New Development Bank (NDB), also known as BRICS bank.
Bangladesh is one of the first three countries to be members of the new global lender apart from its five founders – Brazil, Russia, India, China and South Africa, a group of major emerging economies, BRICS in short.
Economists say Bangladesh needs to formulate bankable sustainable projects to avail funding from the bank.
The UAE and Uruguay are two other countries to join the $50 billion development bank headquartered in Shanghai, China.
"We are delighted to welcome Bangladesh, one of the world's fastest-growing economies, into the NDB. Bangladesh joining us in the year it celebrates the 50th anniversary of its independence is an important milestone," NDB President Marcos Troyjo said in a statement yesterday.
Finance Minister AHM Mustafa Kamal said, "Membership of Bangladesh to NDB has paved the way for a new partnership at a momentous time of the 50th anniversary of our independence."
He thanked the NDB board for the quick approval of the membership.
Terming Bangladesh's membership of the NDB a new window of opportunity towards development, economists and experts identified a lack of capacity to formulate bankable development projects as a major challenge to grab the opportunity.
Dr Ahsan H Mansur, executive director of the Policy Research Institute, told The Business Standard that it will be a great opportunity for Bangladesh to develop infrastructure, considering the deficit of infrastructure investment.
"The Asian Infrastructure Investment Bank provided a huge amount of support within just a few years into its inception. The China-based infrastructure bank provided remarkable support to combat Covid-19 and recover the economy from its adverse effects," he said, adding Bangladesh will benefit from India and China as both countries are members of the new venture.
He also said the benefit depends on how fast the bank will start its operation in Bangladesh.
"The main focus of the new window is the sustainable infrastructure and they will invest two-thirds of their portfolio for environment-friendly sustainable green projects," Dr Zahid Hussain, former lead economist of the World Bank at the Dhaka office, said, adding that the formulation of the bankable sustainable project will be required to ensure investment from this bank.
Bangladesh achieved the eligibility to apply for support from the bank, but it will take a long time to get disbursements.
"The NDB is highly interested in financing renewable energy, but we have fewer opportunities in this field as solar power requires huge areas of land," Dr Zahid pointed out.
The economist said there is the possibility to get support from the bank in road and other infrastructure projects to a lower extent as the bank has offices in a few countries.
The NDB board of governors took the decision to include Bangladesh in a meeting held on 20 August 2021.
In the virtual summit on 17 December last year, Indian Prime Minister Narendra Modi invited Bangladesh to join the BRICS bank. Prime Minister Sheikh Hasina had also expressed her interest to be a part of the five-nation initiative.
Bangladesh has been on the prospective members' list since then until the bank's board approved the membership.
Earlier, Bangladesh joined the World Bank and the International Monetary Fund (IMF) in 1972, the Asian Development Bank (ADB) in 1973, the Islamic Development Bank in 1974 and the Asian Infrastructure Investment Bank (AIIB) in 2016.
The World Bank's portfolio in Bangladesh now stands at $14 billion, while that of the ADB is worth $12.3 billion. Approved and proposed projects of AIIB are worth $4.2 billion in five years of its partnership with Bangladesh.
Accession into the NDB has opened a fresh window for Bangladesh to become a member of a premier development institution for emerging market economies towards achieving the goals focusing on the development agenda of Bangladesh, the NDB said in its announcement.
Bangladesh will have in NDB a new platform to foster cooperation in infrastructure and sustainable development with BRICS and upcoming new members.
"It is an important step forward in meeting the development vision of our Honorable Prime Minister Sheikh Hasina. We look forward to working closely with the NDB to build together a prosperous and equitable world for our next generation as dreamt by our Father of the Nation Bangabandhu Sheikh Mujibur Rahman," the finance minister said in a statement yesterday.
Recalling Vision 2041 of the government and the goal to achieve the sustainable development goals (SDGs) set by the UN, the finance minister expressed a deep commitment to elevate the status of Bangladesh to the level of developed countries within the next 20 years by improving the economic and social standards.
The minister highlighted that the Bangladesh economy, which has been moving ahead at a tremendous pace for the last decade, will need a substantial amount of external financing required to sustain the development initiatives.
"Membership of the NDB will give us a significant channel for that," he added.
Prior to the inception of its office in Bangladesh, the NDB will provide project support with other development partners such as the World Bank, the ADB, Islamic Development Bank and the AIIB in the form of co-financing.
Bangladesh fails to manage lenders for large-size development projects as the development agencies have to comply with several types of ceilings. The co-financing arrangement with the NDB would help implement such a larger project.
The NDB was established in 2015 to mobilise resources for infrastructure and sustainable development projects in BRICS and other emerging economies and developing countries.
Since its establishment six years ago, the NDB has approved about 80 projects in all of its member countries, totalling a portfolio of $30 billion.
Projects in areas such as transport, water and sanitation, clean energy, digital infrastructure, social infrastructure and urban development are within the scope of the Bank.
The lending rates spread between LIBOR+ 0.68% and 1.03% for maturity periods ranging from 8 to 19 years.