Bangladesh Services defaults on BICC rental deal with Public Works Department

The Bangladesh Services Limited (BSL) – a state-owned hotel management company – has violated a rental deal for the Bangabandhu International Conference Center (BICC) by not paying the rent of Tk391 crore including interest.

BSL, listed on local stock exchanges, took the lease of BICC for ten years from the Public Works Department (PWD) at Tk460 crore.

The company did not pay the rent on the pretext of incurring losses.

According to PWD sources, the company has paid full rent for the first three years and partial rent for the fourth year but has not paid a single penny since then, all of which are in arrears.

Since the agreement, BSL paid only Tk117.50 crore to PWD, the owning authorities of BICC, PWD said in a letter to authorities concerned.

In this situation, the rental deal with the BSL and PWD will end on 30 June this year, and the PWD has decided not to renew the deal.

BSL had no income after the renovation of the InterContinental Hotel, which is a major source of income for the state-owned company, started in 2016. 

The hotel resumed operation in 2018 but again suffered a setback after the coronavirus outbreak in 2020.

The company has not been able to pay any dividends to the shareholders due to losses for years. 

The Public Works Department has sent a letter to the company on 16 May to pay the arrears before the expiry of the contract.

The letter said the Ministry of Housing and Public Works has asked the company to pay the rent but the arrears have not been paid.

An official of the Finance and Accounts Department of Bangladesh Services said on condition of anonymity, "Basically, there was no income since the beginning of the reforms. The crisis started when there was no income to meet the necessary expenses, due to which the rent could not be paid."

Bangabandhu International Conference Center

BICC was built with the technical and financial support of China and opened in 2001.

As of 1 July 2012, Bangladesh Services Limited, owner of Ruposhi Bangla Hotel, currently InterContinental, was looking after the operation, maintenance and management of BICC.

According to BSL financials reports, before the pandemic, Bangladesh Services earned well from BICC but could not reach the breakeven point. It counted huge losses.

Revenue from BICC has drastically dropped after the pandemic, making the losses even higher.

In the five years from 2016-2017 to 2020-21 fiscal years, BICC has earned Tk161 crore from running the centre.

And in the four years of this period, it has suffered a loss of Tk92 crore. The company has made a profit of Tk4.75 crore in one year.

Ending lease agreement and management of BICC

After a 10-year rental contract, PWD has decided to run the state-of-the-art convention centre on its own.

On 20 February, the Department of Public Works informed the Ministry of Housing and Public Works that it was able to run BICC on its own without renewing the contract with Bangladesh Services.

It could not be confirmed whether the housing ministry has made any final decision in this regard.

The letter said that Bangladesh Services Limited has not only breached the payment of arrears as per the agreement but has also failed to maintain the five-star standard management and architectural beauty.

It is serving food to guests by setting up a kitchen on the water body at the back of the building, which conflicts with the agreement and is detrimental to the building's existing infrastructure.

Bangladesh Services at a glance

Bangladesh Service Limited, which got listed on the capital market in 1984, owns InterContinental, the country's first five-star hotel.

The InterContinental started its journey in the mid-sixties, subsequently, it operated as Dhaka Sheraton and Ruposhi Bangla.

With the management agreement for 30 years between InterContinental Hotels Group (Asia Pacific) Pte Ltd and Bangladesh Service Limited, the hotel was named InterContinental Dhaka.

BSL also operates the Balaka Executive Lounge at Hazrat Shahjalal International Airport and two other complexes.

In fiscal 2020-21, BSL incurred a loss of Tk180.65 crore. In that fiscal year, the occupancy rate of the hotel was 16.73%.

Due to the decrease in the number of guests, the company's revenue dropped by 49% to Tk49.83 crore in that financial year. The retained earnings of the company became negative by Tk366.79 crore.