The government is taking steps to ease the conditions set by donor agencies and lending countries in order to foster more competition in procurement and drive down project costs, with the aim of sustaining the country’s development.
In a recent conversation with BSS, Sheikh Moinuddin, chief adviser’s special assistant for the road transport and bridges ministry, explained that the procurement process for foreign-funded projects has become increasingly dominated by firms from the lending countries, due to restrictive conditions and limitations embedded in tender documents. These barriers are hindering open competition.
“The government adheres to the open tender method (OTM) for all procurement activities to ensure fairness, transparency, and competitiveness. However, in the case of foreign loans, donor agencies often impose conditions that restrict the tender process. Our aim is to secure loans without these restrictive conditions,” Moinuddin said.
Faruque Ahmed, managing director of the Dhaka Mass Transit Company Limited, highlighted that the government is making concerted efforts to create a competitive environment in procurement. This, he believes, will not only lead to significant cost savings but also encourage innovation, fairness, and responsible sourcing.
“A well-managed, competitive tendering process compels suppliers to offer their best prices and quality, allowing governments to achieve sustainability and social responsibility goals through their purchasing power,” Faruque noted.
He further explained that the limitations imposed by donor agencies have led to situations where bids for certain metro rail construction packages have exceeded estimated costs due to a lack of competition.
For instance, referring to a recent tender for Package 07 under MRT Line 1, Faruque revealed that bids were approximately 27 per cent lower than the estimated costs, thanks to the competitive environment fostered by the authorities.
The pre-qualification (PQ) invitation for this package, which was issued on March 9, 2023, attracted bids from 11 companies across five countries: Bangladesh, China, Japan, India, and South Korea. By 8 June 2023, nine bidders were pre-qualified, and seven of them purchased the tender documents. Ultimately, only three Chinese companies submitted their bids.
Dr Zahid Hussain, former lead economist at the World Bank’s Dhaka office, emphasised the need for the government to negotiate with donor agencies to further reduce restrictive conditions, ensuring that the procurement process remains competitive.
He also stressed the importance of selecting the best funding options for projects while properly assessing the expenditure and return on investment for each one.
“Many of Bangladesh’s infrastructure projects rely on foreign financing. There’s ongoing debate about how much of these loans actually serve the economic development of the recipient country, and how much they are intended to promote the businesses and exports of the lending country,” Dr Zahid said.
He clarified that loans from multilateral institutions like the World Bank and the Asian Development Bank (ADB) generally do not seek to expand the business interests of multinational corporations.
However, bilateral loans often come with conditions that can benefit the lending country’s business sector, including restrictions on procurement, consultant appointments, and contractor selections.
In cases where the lending country’s agency is involved in planning, conducting feasibility studies, providing consulting services, and executing the project as a contractor, Dr Zahid pointed out, the impartiality of the profit and loss assessment is compromised. This not only increases project costs but also undermines the project’s overall value and return on investment.
“The conditions attached to foreign loans should not undermine the overall economic benefits of the projects they are intended to support. The goal must be a mutually beneficial arrangement, where the country receiving the loan also reaps the rewards of its development efforts,” he added.