The Government of Bangladesh has signed two financing agreements totalling US$457m with the World Bank to help develop private sector-led infrastructure projects, as well as diversify exports in labour-intensive industries such as leather goods and footwear.
Both projects are designed to help Bangladesh create more and better jobs for its population, the Bank says.
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The $357m Investment Promotion and Financing Facility Project II (IPFF II) will build local financial institutions’ capacity to provide long-term financing to private companies to undertake infrastructure projects in diverse sectors including power and energy, ICT, waste management, water treatment, energy saving equipment, container terminals, land ports, roads, and bridges.
Due to limited capacity and market constraints, local financial institutions traditionally could not meet the longer-term financing demand for building infrastructure. Built on the success of an earlier project, IPFF II will help local financial institutions to lend to private sector infrastructure ventures through the Bangladesh Bank for a longer term of eight to 20 years, beyond the usual term of five to seven.
“Bangladesh can seize the opportunity to accelerate growth and reduce poverty by leveraging private sector financing for much-needed infrastructure development, as well as by diversifying exports beyond the garment sector,” says Qimiao Fan, World Bank country director for Bangladesh, Bhutan, and Nepal. “By bringing private sector provision for infrastructure development, and expanding exports to sectors where the country has already shown comparative advantages, Bangladesh can create more and better-paid jobs and boost prosperity for its citizens.”
The second $100m Export Competitiveness for Jobs Project will help create 90,000 more jobs by focusing beyond the ready-made garment sector and diversifying exports in other labour-intensive sectors. The project will help firms access international markets, overcome technology, infrastructure and skills shortfalls, and enable them to comply with international quality standards. The aim of the project is to help Bangladesh increase the number of exporting firms in target sectors by around 30%.
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By GlobalDataAccording to the World Bank, nine out of ten Bangladeshis work in the informal sector, often in poor working conditions. The project will provide industry-specific training to students, workers, and particularly women. By the end of the project, the average wage is expected to grow by 33%.
The project will establish technology centres to allow firms access shared technologies and shared services that are unavailable locally.
Kazi Shofiqul Azam, Secretary, Economic Relations Division, Government of Bangladesh, adds: “The 7th Five-Year Plan estimates that about $410bn of investment is needed to bring the country’s infrastructure to a desired level, and the Export Policy for 2015–2018 has identified leather, footwear, plastic, and light engineering among others as growth sectors that are becoming increasingly competitive in the international markets. These two projects will contribute to the country’s vision of achieving upper-middle income status by its 50th birthday.”
Both agreements were signed by Kazi Shofiqul Azam and Qimiao Fan on behalf of the government of Bangladesh and the World Bank, respectively, at the Economic Relations Division.
The credits are from the International Development Association (IDA), are interest-free and repayable in 38 years, including a six-year grace period, and carry a service charge of 0.75%. The IPFF II also includes $100m credit from IDA’s scale-up facility that has a 30-year term, including a nine-year grace period.
The World Bank has committed more than $26bn in grants and interest-free credits to the Bangladesh. In recent years, Bangladesh has been among the largest recipients of the World Bank’s interest-free credits.
In October, the International Finance Corporation (IFC), an arm of the World Bank, invested $7m into the second phase of the Partnership for Cleaner Textile (PaCT) initiative to introduce more efficient and cleaner production practices to the Bangladesh textile industry – and has told just-style it is in touch with more donors in order to scale up the programme.
IFC invests US$7m in Bangladesh clean textile pact
