South Korea’s willingness to offer a $1 billion loan to support the construction of Dhaka Mass Rapid Transit Line 5 (MRT-5) southern route has increased the likelihood of commencing the construction of another major metro rail route in the capital city in January 2024. South Korea has agreed to collaborate with the Asian Development Bank in funding the $5.5 billion transportation project, marking their second metro rail project financing commitment after agreeing to provide loans for MRT Line 4.
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The Asian Development Bank had previously pledged 2.5 billion dollars for the 17.-kilometer MRT-5 south line, stretching from Gabtoli to Dasherkandi in the city. This interest from South Korea is particularly significant since the technical assistance funding for the project from the Asian Development Bank is set to expire on June 30 next year.
Officials from the Department of Economic Relations have indicated that discussions are ongoing between the governments of Bangladesh and South Korea to establish the terms of the loan.
Md Abdul Wohab, the project director of the MRT-5 Southern Route, mentioned that negotiations regarding co-financing with South Korea are currently in progress, with the ERD handling the discussions with their Korean counterparts.
The Dhaka Mass Rapid Transit Line 5 and Estimated Cost
The Dhaka Mass Rapid Transit Line 5 (MRT-5) Southern Route is one of the two segments of the Dhaka Metro Rail’s approved MRT Line 5, with the other being the Northern Route. At present, the Southern Route is in the planning phase, but construction is set to begin in June 2024, with operations anticipated to commence by 2030 or 2031.
Total length of the MRT-5 southern route -17.40 kilometers, with 12.80 kilometers running underground and an additional 4.60 kilometers elevated. This new metro line will comprise a total of 16 stations, with 12 situated underground and the remaining stations elevated above ground level.
The Asian Development Bank (ADB) has committed $3.5 billion in funding to facilitate the expansion of Dhaka’s metro system, specifically focusing on the MRT-5 southern route. This financial support comprises a $2.5 billion loan from ADB and an additional $1.0 billion in credit provided by foreign lenders serving as co-financers. The Dhaka Mass Transit Company Limited (DMTCL) is tasked with the responsibility of overseeing the construction of the MRT-5 southern route, which will extend from Gabtoli to Dasherkandi, encompassing several strategically significant areas. The overall project is projected to cost approximately $5.05 billion.
Loan Process of South Korea in (MRT-5)
As per information from the Ministry of Finance’s Economic Relations Department, Bangladesh has secured the most favorable interest rate loan from South Korea.
Korea will fund this project using the Economic Development Cooperation Fund (EDCF). The loan terms include an interest rate ranging from 0.01 to 0.05 percent, a 40-year repayment period, and a 15-year grace period. The sole requirement for obtaining the EDCF loan is that exclusively Korean contractors may engage in projects supported by this funding.
Challenges in Project Implementation
The Dhaka Mass Transit Company Limited has a target to obtain approval for the main project proposal by December 2023 and secure the full foreign loan within that timeframe. If funding is not secured by January 2024, either through the ADB providing the entire amount or co-financing from another source, the project’s implementation will be delayed, putting the ongoing support projects at risk.
Furthermore, adhering to the government’s action plan for 2030, the project may encounter challenges in meeting the specified time frame.
Bangladesh-South Korea Relations: Recent Trends
Diplomatic relations between Bangladesh and the Republic of Korea (ROK) were formally established on December 18, 1973, marking a significant milestone in their bilateral relationship. In today’s ever-changing world of politics, it’s clear that both Bangladesh and South Korea play essential roles within the intricate web of Asian geopolitical dynamics.
Over the past decade, it’s undeniable that the relationship between Bangladesh and South Korea has significantly strengthened, especially in the fields of politics, economics, and socio-cultural exchanges.
- The economic partnership between Bangladesh and South Korea has seen remarkable growth, with bilateral trade exceeding the $3 billion threshold. According to the Korea International Trade Association’s 2022 report, the volume of bilateral trade reached $3.035 billion, marking a substantial 38.19% increase from the previous year’s $2.188 billion. Notably, Korean exports to Bangladesh experienced a significant surge of 44.1%, reaching $2.357 billion in 2022, up from $1.636 billion in 2021, while the value of Bangladeshi exports to Korea saw a 22.9% increase, climbing from $552 million to $678 million. This growth has been consistent since surpassing the $100 million mark in 2007, steadily increasing to $200 million in 2011 and $300 million in 2013.
- Since the inception of diplomatic ties between the two nations, Bangladesh has seen the participation of 110 Korean firms in over 200 infrastructure development projects, collectively valued at over $8 billion.
- The connection between the two nations has transcended mere economic ties, as the appeal of K-pop and various facets of Korean culture has surged in Bangladesh in recent years. In response to the country’s escalating cultural influence, South Korea has intensified its cultural diplomacy efforts within Bangladesh.
- The number of Bangladeshi tourists coming to Korea has consistently increased in recent years. Analyzing the data, it’s evident that there is a significant trend in the demographics of Bangladeshis traveling to Korea. To be more specific, the numbers show a notable jump from 15,482 individuals in 2016 to 18,340 individuals in 2019, signifying a remarkable growth of around 20% over three years. Additionally, when it comes to labor migration, it’s important to highlight that Korea has been actively attracting expatriate workers from Bangladesh since the early 2000s.
In conclusion
South Korea’s commitment to providing a $1 billion loan for Dhaka’s Mass Rapid Transit Line 5 Southern Route, in collaboration with the Asian Development Bank, signifies a significant step towards advancing Dhaka’s metro system. This financial support is crucial to ensure the timely commencement of construction and bolster Bangladesh-South Korea relations, which have seen remarkable growth in various sectors over the past decade. However, timely project implementation and securing the required funding remain critical challenges to meet Dhaka’s transportation goals by 2030.
