Elevated Expressway stuck in limbo

Bangladesh's first PPP project, the Dhaka Elevated Expressway, is stuck in limbo after the foreign partner found no funding and the contractor backed out.

China Railway Construction Corporation was originally hired as the engineering, procurement and construction contractor for building the highway.

“But the Chinese company now wants out,” said an official of the Dhaka Elevated Expressway Public Private Partnership Project.

The developer, Italian-Thai Development Public Company, can change the EPC contractor if it thinks that it would serve the project better, said Quazi Md Ferdous, the project director.

A South Korean firm will be appointed as the new EPC contractor, but Ital-Thai is yet to officially notify Bangladesh about the change.

Ferdous however could not say why CRCC backed off.

The 20km-long expressway will run from Hazrat Shahjalal International Airport to Sonir Akhra near the Dhaka-Chittagong Highway, with five connecting points to pick-and-drop traffic.

The change in EPC contractor added to Ital-Thai's woes. Ital-Thai has been facing trouble in raising funds from international sources since it was awarded the project six years ago.  

In 2014, three years after its ground breaking by Prime Minister Sheikh Hasina, the developer had signed a $1.062 billion contract with CRCC for the project, a senior official of the Bridges Division said.

CRCC could not be reached for comments as emails to the address stated on its website bounced back.

The name of China Development Bank as a financier had also surfaced; it was said the lender would provide $750 million for the first phase of the $1.2 billion project. Bangladesh will bear 27 percent of the cost.

Sources said the Chinese bank has also backtracked.

China Development Bank also did not respond to emails from The Daily Star.

Ital-Thai has now turned to Bangladesh to raise the amount and has even managed some funds from local lenders.

BRAC EPL Investments, the lead arranger for raising loans for the project until late last year, raised Tk 940 crore from four local banks, said one of its senior officials.  

RSA Capital, a local private capital firm, says it is in talks with Ital-Thai to raise $350 million for the developer in phases, said Sameer Ahmad, founder and a senior partner of the firm. 

Since Ital-Thai struggles to raise adequate funds on time, the construction of the expressway is moving at a snail's pace.

Government officials said there were delays on both Ital-Thai's and Bangladesh's sides.

But officials of the project said the Bangladesh side has made up for the lost time and sorted out its limitations by acquiring and handing over the land to the developer.

The developer has received all the permissions it had sought for from the Bangladesh government.

“Now it seems that the delay is more on the side of the developer,” Ferdous said, adding that the financial closure has not been carried out and Ital-Thai has not raised enough funds to accelerate the process. 

Senior officials of Ital-Thai led by its President Premchai Karnasuta visited Dhaka on August 17-18.

At that time, the visiting officials told the Bangladesh side that the Thai company had almost mobilised all the necessary funds to be required for the expressway.

Ital-Thai will complete the financial closure in October, according to Ferdous.

Once the developer completes the financial closure, it will have to finish the project in three and a half years.

Ital-Thai did not respond to an e-mail seeking clarification.

Despite struggling to raise funds from outside, the developer has carried out tasks such as design engineering and feasibility study and is continuing piling from its own funds and the funds raised from sources in Bangladesh.

Piling started in August 2015 and will continue for 30 months.

Abrar A Anwar, chief executive officer of Standard Chartered Bangladesh, which has lent heavily in the country, said if there is right structuring it is possible to raise this type of funds.

Ferdous hopes to partially open the elevated expressway in 2018, when two out of the three phases of the project is expected to be complete. The distance of the Phase I and Phase II is 13km.

The Bangladesh Bridge Authority awarded the project to Ital-Thai in January 2011, under which construction was supposed to start within six months by completing the two sides' obligations of land handover and submitting financial closure.

The project also faced a blow in 2013 when the government changed the route of the expressway, compelling the two sides to sign a revised agreement in December that year.

About the progress of the project, the website of the Bridges Division says the land acquisition for the first tranche is complete, while that of the second and the third tranches were ongoing.

The developer has prepared the construction yard. The preparatory work is ongoing, it said. The website puts the physical progress at about 7 percent.

The project holds immense importance to Dhaka city as all major highways entering the capital from Chittagong, through Padma bridge and Aricha through Ashulia will be connected with the project, making exit and entry faster.