Two Jica project proposals under scrutiny for not being aligned to development priorities

Highlights:

• Agencies question need for new Jica loans and projects
• Proposed Jica loans now costlier than World Bank and ADB
• Large unused funds from FDIPP Phase I raise concerns
• Power Grid project criticized for poor consultation and assessment
• FDIPP Phase II needs verified private-sector demand before approval
• Chattogram–Cox's Bazar Highway Phase II loan discussions ongoing

Government agencies have questioned whether two proposed projects – funded by the Japan International Cooperation Agency (JICA) – are actually needed, particularly since previous loans were not fully utilised and the new loans would be costlier. They said the proposals, prepared without sufficient assessment of actual needs, "seem supply-driven" and are not aligned with Bangladesh's development priorities.

Economic Relations Division (ERD) officials said Jica proposed an interest rate of 2.35%, including 0.80% for consulting services, for the two projects, up from 2% it offered in June. If approved, Jica loans would be costlier than comparable loans from the World Bank and the Asian Development Bank (ADB).

According to ERD officials, a Jica delegation recently visited Bangladesh to prepare loans for three new projects. Following the visit, a 16 October meeting chaired by Md Mizanur Rahman, additional secretary and wing chief (America & Japan) at ERD, reviewed the progress of Jica's fact-finding mission.

Meeting minutes, seen by TBS, show that ERD and the Power Division raised objections to two of the projects: Foreign Direct Investment Promotion Project (FDIPP) Phase II and the Power Grid Stabilisation Project.

ERD sources said that although Tk240 crore remained unused in FDIPP Phase I, Jica now proposes another loan of 60,053 million Japanese yen (around Tk 4,703 crore) for Phase II. The project is being implemented under the Bangladesh Investment Development Authority (Bida) and Bangladesh Economic Zones Authority (Beza). ERD officials argued that the unused funds should be utilised first.

Meanwhile, the Power Division officials present in the meeting objected to the Power Grid Stabilisation Project, saying it was pushed forward without sufficient consultation or a comprehensive assessment of the country's actual needs.

When contacted, Jica's Dhaka office said the project proposals are under discussion and refused to comment further.

Infograph: TBS

FDIPP Phase II 

ERD sources said the FDIPP Phase-II plans to expand Bangladesh Special Economic Zone (BSEZ) in Narayanganj, strengthen Bida's central investment licensing platform BanglaBiz, and provide two-step loans (TSL) for FDI-focused industries.

Phase I completed off-site development of 480 acres in the Special Economic Zone. Eight companies are operational, but only one used the TSL facility. A customs building was constructed, with plans to buy equipment with funds from Phase II. 

ERD officials said that around Tk240 crore of Phase-I funds remain unused and suggested using them first for the customs building to ensure effective loan use.

They also questioned taking loans for BanglaBiz, a digital platform launched by Bida in 2025 to centralise investment services, as it is fully operational now.

The actual loan demand of FDI-based industries — which could justify TSL — still needs verification. ERD officials said Phase II will proceed only if private-sector demand is confirmed.

In the meeting, it was decided that Beza will complete a full Phase I evaluation to guide Phase II decisions. Using unused Phase-I funds to buy customs building equipment can also be considered.

Bida and Beza Executive Chairman Chowdhury Ashik Mahmud Bin Harun told TBS, "Our focus remains on FDIPP Phase I. Progress has not fully met expectations. Phase I aims to create support systems. Phase II work will continue at its own pace."

Beza sources said work for the first 500 acres in the Special Economic Zone under Phase I could continue until June 2027. A Beza official said that since the two phases have separate objectives, running them independently should not cause issues.

Power Grid project

Power Division representatives in the meeting said it is cautious about the Power Grid Stabilisation Project and believes further internal discussion is needed before proceeding with loans. They noted the proposal was advanced without sufficient consultation with the division or a detailed field-level assessment.

The project aims to stabilise and strengthen the national grid and improve the quality of electricity by replacing certain equipment at the Karnaphuli Hydropower Plant. 

It includes multiple sub-projects: upgrading transmission networks and substations, improving power supply and demand management (including the National Load Dispatch Centre), and primarily replacing key equipment at the Karnaphuli plant.

The division decided to conduct a thorough review of the project's necessity and will inform the ERD whether Jica's proposal should proceed.

TBS wrote to Jica for its position regarding the concerns raised by relevant Bangladeshi authorities about two proposed projects. Jica's Dhaka office responded by saying, "As the projects you mentioned are under discussion with the Government of Bangladesh, we are unable to provide specific comments at this stage."

Asked about the higher interest rate offered, the Japanese agency said terms and conditions of Japanese ODA loans are publicly available on the Jica website. "For loans extended to Bangladesh, the conditions applicable to Least Developed Countries (LDCs) are applied".

Another Jica project proposal discussed in the meeting was the Chattogram-Cox's Bazar Highway Development (Phase II) which aims to ease cargo transportation to Matarbari Port by widening National Highway-1. The loan amount might be finalised in December, with a target to sign the loan agreement by March 2026. 

Under the project, the Forest Department proposed a 10 km viaduct in Chunti and additional surveys to protect the elephant corridor.