by Naim-Ul-Karim
DHAKA, June 16 (Xinhua) -- Energy-starved Bangladesh is eyeing the Asian Infrastructure Investment Bank (AIIB) funds for a mega power sector project, which is expected to benefit its 12.5 million rural people.
The Bangladeshi government has already requested the China-initiated international financial institution to consider providing financial support for the project, including its distribution system, its upgrading and expansion.
Mohammad Asif-uz-Zaman, additional secretary of Bangladesh's Economic Relations Division (ERD), told Xinhua Thursday: "We've already requested the AIIB to provide financial support for the project in Bangladesh."
He said Bangladesh would seek more AIIB support for its development projects while meeting the AIIB high-ups in Beijing later this month.
According to the senior ERD official, Bangladesh expects AIIB to provide 165 million U.S. dollars in loans for the project - the first batch of loan for the country from the China-led development bank.
Bangladesh's highest economic policy-making body, the Executive Committee of the National Economic Council (ECNEC) chaired by Prime Minister Sheikh Hasina, last month approved the project.
Planning Minister AHM Mustafa Kamal told reporters that the Bangladesh Rural Electrification Board (BREB) and the Dhaka Electric Supply Company Limited (DESCO) are entrusted to implement the project.
The project is designed to expand electricity coverage by providing 2.5 million new service connections in rural areas and upgrade grid substations and convert overhead distribution lines into underground cables in northern Dhaka.
The AIIB said in a website post that the project will supplement other development partner efforts by providing additional financial resources to connect more rural and urban consumers, further reduce distribution losses, and improve the quality and reliability of power supply in Bangladesh.
"The project, upon completion, is expected to benefit about 12.5 million people in rural areas," it added.
Sources said a proposal for providing financial supports to the Bangladesh project might be placed at the upcoming AIIB board meeting in Beijing for approval.
The AIIB's first annual meeting will be held on June 25 and 26. Under the theme of "Partnership for Infrastructure Development", the meeting will connect finance and development professionals to exchange ideas on Asian infrastructure development and regional connectivity.
Representatives from the bank's 57 founding members along with invited observers from international partners are expected to participate in the meeting.
Shahedur Rahman, Bangladesh's Finance Ministry spokesman, told Xinhua that a high-powered delegation led by State-Minister for Finance M A Mannan is all set to attend the AIIB annual meeting from Bangladesh.
He said Bangladesh is keenly interested in having more AIIB support for its many proposed mega infrastructure development projects in future.
Under the first AIIB loan project, according to the officials, DESCO will upgrade its two existing substations and install 33kV distribution lines underground in urban areas.
Another component of the project is to replace the BREB's small inefficient transformers and air-insulated switchgear systems at Bashundhara and Uttara grid substations in capital Dhaka with larger efficient transformers and gas-insulated switchgear systems.
Officials say terms and conditions of the loans for the first AIIB-funded Bangladesh project will be finalized through discussions.
They say that Bangladesh is looking to AIIB as the country, which has already identified inadequate electricity supply as a major constraint on GDP growth, and overall economic development, is in a dire need for more funds to develop mega infrastructure projects.
To address these challenges, Bangladesh has adopted a multipronged plan involving substantial sector investments, regional power trade, and sector reforms.
Bangladesh, which is now reportedly generating around 8,300 megawatt of power daily, has an ambitious target to achieve affordable electricity for all by 2021.
Bangladeshi Finance Minister AMA Muhith earlier this month in his national budget speech said the government has set a target of generating additional 16,086 megawatt of electricity by 2021.
Muhith unveiled a record 3.41 trillion-taka (about 42.58 billion U.S. dollars) proposed national budget targeting an economic growth of 7.2 percent for the next 2016-17 fiscal year starting in July.
According to the proposal, the overall budget deficit will be 978.53 billion taka, which is 5 percent of GDP.
Of this amount, 363.05 billion taka (1.9 percent of GDP) will be financed from external sources and 615.48 billion taka (3.1 percent of GDP) from domestic sources.
Against this backdrop, officials said Bangladesh is now keen to explore alternative sources like AIIB which is expected to offer more loan than other traditional international lending agencies.
AIIB, launched formally in December last year, is an international financial institution that particularly aims to support the building of infrastructure in the Asia-Pacific region.
The AIIB expects to lend 10 to 15 billion U.S. dollars a year to members for at least five years.
