The ADB advises Bangladesh to take momentous phases to progress awarding contracts and fund disbursement, enabling greater access to the bank’s funds in the future.
According to a report from the Asian Development Bank (ADB), Bangladesh has seen a reduction in uncontracted and undisbursed funds compared to the previous year (2022). This signifies advancements in the utilization of these funds for various projects.
Nevertheless, the ADB recommends that Bangladesh undertake substantial measures to enhance the process of awarding contracts and fund disbursement, with the aim of facilitating greater access to the bank’s funds in the coming years.
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The Asian Development Bank (ADB) is vital foundation of external provision for Bangladesh, providing $2 billion on regular every year since 2016. ADB’s support is associated with the country’s Eighth Five-Year Plan, 2021–2025 and the Perspective Plan, 2021–2041.
Bangladesh’s ADB loan portfolio
According to the ADB, the report highlights a significant growth in Bangladesh’s portfolio over the past decade, increasing from $5.3 billion in 2013 to $13.01 billion as of August 31, 2023, with a compound annual growth rate of 9.39%. This growth is anticipated to continue due to the ADB’s escalating annual lending to Bangladesh, as discussed in a project review scheduled for September 13-14 in Dhaka.
In August 31, 2023, the uncontracted balance accounts for 20.7% of the total ADB loan portfolio, equivalent to $2.69 billion, which is a decrease from the 32% or $3.14 billion reported a year ago. Additionally, the undisbursed balance has been reduced to 40.7%, amounting to $5.29 billion, down from 45% in the previous year.
The ADB has announced that the agriculture, food, nature, and rural development sectors will receive $420 million in newly committed loans during the second and third quarters of 2023. Additionally, the transport sector will receive over $400 million in newly committed loans in the second quarter of 2023.
In contrast, there are no commitments for the energy sector in 2023. However, an 18% share in the uncontracted portfolio and a 21% share in the undisbursed portfolio are attributed to this sector due to delays in procurement and sluggish project performance.
Furthermore, the water and urban development sectors account for 19% and 17% of the uncontracted and undisbursed portfolios, respectively. This is attributed to the ADB’s commitment to a $300 million loan in this sector in the third quarter of 2023, as stated by the ADB.
Global lender’s assessment
In its assessment of ADB-funded projects in the country, the global lender emphasizes the necessity for collaborative initiatives to enhance contract awards in sectors such as agriculture, food, nature, rural development, transport, water, and urban development, as well as to improve disbursement in the AFNR, energy, and transport sectors.
Additionally, the lender underscores the importance of implementing project-specific action plans to boost the performance of these sectors.
ADB’s ongoing portfolio in Bangladesh
This year, the Bangladesh portfolio amounted to $13.01 billion, around 53 projects distributed across six sectors. Within these sectors, there were seven projects dedicated to agriculture, food, nature, and rural development, 11 projects focused on human and social development, seven projects in the energy sector, 12 projects related to transport, 10 projects in water and urban development, and six projects concerning finance, public sector management, and governance. Notably, the transport and human and social development sectors together constituted 45.7% of the entire portfolio.
As of August 31st, 2022, and 2023, there have been notable improvements in meeting the targets for contract awards and disbursements. In 2023, the contract awards reached $793.18 million, achieving 73.7% of the annual target of $1,076 million, while disbursements reached $940.44 million, meeting 66.5% of the annual target of $1,414.1 million. In contrast, the achievements in 2022 were 52% for contract awards and 58% for disbursements. In summary, the ADB report indicates that overall progress has improved in 2023.
Project success rates and closing on time
The project success rate over the past five years stands at 68%, aligning with the regional success rate of 68%, but falling short of the ADB’s corporate target of 80%. Nevertheless, there is a positive trend in the three-year rolling project success rate, which has been steadily increasing year by year, rising from 61% in 2020 to 75% in 2021 and further to 77% in 2022. Moreover, it is anticipated that all five projects currently under evaluation in 2023 will receive a favorable success rating.
Financial management performance rating
The Financial Management Project Performance Rating for ADB-assisted projects in Bangladesh is favorable, with 91% of the projects rated as ‘on track (41 projects) and 9% as ‘requiring attention’ (4 projects).
Procurement lead time
The procurement end-to-end time for packages equal to or exceeding $1 million has increased significantly to 311 days, compared to the 214 days recorded in 2022. Particularly, the transport, energy, and water and urban development sectors have experienced prolonged end-to-end times. Investment projects, on average, required 410 days to complete the procurement process.
Notably, the Power System Efficiency Improvement Projects have encountered substantial delays, with a duration of nearly 600 days. These delays are primarily attributed to extended bid evaluation processes, revisions in the Detailed Project Plan (DPP), and the necessity for contractors to demonstrate the interoperability of prepaid meters before contract awards are made.
Several obstacles have impeded the procurement process and the hiring of consultants. These hurdles include issues such as inadequate design and specification quality, outdated cost estimates, unclear bid documents, substandard bids resulting from a lack of expertise, insufficient diligence in bid evaluation, delays in government approvals, and inadequate market assessment.
In 2023, the ADB intends to improve procurement efficiency by 10% by appointing a dedicated procurement officer to supervise processes for packages exceeding $1 million. This proactive approach aims to tackle these challenges, enhance overall efficiency, and reduce the likelihood of procurement failures and the need for subsequent re-bidding.