Delays, disputes: Four road projects worth $6.8b axed from PPP with Japan

Four major road connectivity projects involving over $6.8 billion have been dropped from the list of public-private partnerships (PPP) with Japan due to delays in starting, poor profitability, and disputes regarding implementation procedures.

The Dhaka Metro Line-2 project, involving $3.48 billion, was already taken off the PPP list, and three other projects were withdrawn during the 6th joint PPP platform meeting between Bangladesh and Japan held in Dhaka on 18 March, according to Road Transport and Highways Division officials.

The other three projects are – the widening of Chattogram-Cox's Bazar highway involving $1.69 billion, the construction of an outer ring road around Dhaka involving $1.2 billion and the upgradation of Nabinagar-Manikganj-Paturia road into an expressway involving $548 million.

Experts said dropping such projects reflects faulty decision-making, weaknesses in PPP management in the country, and inefficiencies in project execution.

This was a missed opportunity, they said, noting that these projects, earmarked five to seven years ago, could have yielded substantial benefits by now if construction had progressed as planned.

Moreover, they caution that transitioning the implementation modality will likely result in increased costs and delays, putting additional strain on the government's fiscal space and budget management.

Govt hopes to implement projects under ADP

ABM Amin Ullah Nuri, secretary of the Road Transport and Highways Division, however, assured that the implementation of these projects will soon start under the Annual Development Programme (ADP) or through alternative means.

Regarding the Chattogram-Cox's Bazar highway project, he told TBS that once the Matarbari deep sea port is operational, the Chattogram to Cox's Bazar highway will become crucial for the country's economy, leading to a substantial rise in road traffic.

"Considering this, the road needs to be widened quickly. There have been talks of development of the project under PPP modality for over the last seven years, but there was no progress," Amin Ullah said.

He also said that the Japanese investors offered to take the operation and maintenance of the road under PPP modality but it was not accepted by the government.

"We have sufficient road operation and maintenance capabilities. There is no scope for spending foreign currency on all these works in PPP," he explained.

The secretary said the project now has been taken off the PPP list due to the urgent need to increase the width of the road to cope with the demand.

"Initiatives will be taken to start the work with funding from any source under the Annual Development Programme," he added.

In 2018, the Cabinet Committee on Economic Affairs (CCEA) greenlit the proposal for the project. It was initially discussed during the first joint PPP platform meeting between Bangladesh and Japan in 2017, with Marubeni Corporation of Japan slated to invest $1.6 billion in the project.

The project profile developed by the Public Private Partnership Authority (PPPA) said the 136km road is imperative from the viewpoint of tourism as it connects the most popular tourist sites with the rest of the country.

Upgrading of Nabinagar-Manikgang-Paturia Road into Expressway

The upgrading of Nabinagar-Manikganj-Paturia Road into an expressway project involves $548 million. It was selected for PPP modality in the 4th joint PPP platform meeting with Japan in 2020.

The potential investor JFE Engineering Corporation of Japan withdrew from implementing the project before the approval of CCEA, saying the project would not be profitable, said Md Abul Bashar, director general of the PPPA.

RTHD Secretary Nuri said once the ongoing development of several link roads is completed, the Nabinagar-Manikganj-Paturia road will experience significant traffic potential.

He also said implementing the project under the ADP would guarantee a positive return and could be profitable for any other PPP investor.

Dhaka Outer Ring Road PPP Project

PPPA Director General Bashar said another project called "Construction of Outer Ring Road," proposed in 2017 with an estimated investment of $1.2 billion by Japan's Marubeni Corporation, has been dropped from the PPP list due to disagreements over the project's phases.

The Road Division intends to implement all three phases of the outer ring road under PPP, but the investor is interested in only one or two phases under PPP, he added.

What experts say

Professor Mustafizur Rahman, distinguished fellow at the Center for Policy Dialogue, said the failure to start work on projects identified as important seven years ago is a huge loss of opportunity.

He said every infrastructure would have been operational if the work were started on time and the people of the country would have benefited from it.

The economist said using PPP eases the government's fiscal burden, allowing more spending on education, health, social security, and human resource development while managing infrastructure financing through private investments.

He warned that if these projects were implemented under the ADP, it would increase costs and time. "Initiatives to implement these projects with foreign loans would push to pay more as interest cost, as the scope of managing concessional loans is reduced."

Shamsul Hoque, director of Buet's Accident Research Institute, said foreign investors are losing interest in PPP projects in Bangladesh due to prolonged implementation processes and various complications.

"Investors perceive a lack of project completion certainty in Bangladesh, leading to reluctance in partnership and aversion to taking loans with interest," he said.

Highlighting examples like the Dhaka Elevated Expressway and Dhaka Bypass, he mentioned issues such as unclear land availability and utility transfer problems faced by PPP investors.

To prevent such crises, he suggested completing all preparatory work, including land acquisition and utility relocation, before initiating PPP projects.