Infrastructure Boom in Bangladesh Could Herald a New Era for Development

25 July 2018 Liam Carmody, Research Assistant, Indian Ocean Research Programme

Background

The development of a number of infrastructure projects in Bangladesh represents a positive shift in the country’s future progress. Construction work for a second nuclear power plant will begin soon, with the Bangladesh Atomic Energy Regulatory Authority (BAERA) granting a design and construction license to the Bangladesh Atomic Energy Commission for Rooppur Unit 2. The Rooppur Nuclear Power Plant project includes two 1,200 MWe VVER-1200 reactors on a site located 160 kilometres from the capital, Dhaka. The two nuclear reactors at the Rooppur project are expected to come on line in 2023 and 2024, respectively, and have an estimated cost of US$12.6 billion ($17 billion).

On 10 July 2018, Bangladesh Railways also announced the construction of a dual-gauge railway line between Pabna’s Ishwardi and the Rooppur Power plant. In accordance with a signed agreement with an Indo-Bangladeshi joint venture company, the project will include the construction of a railway station, 13 level crossings and seven box culverts. That project is expected to be completed within 18 months, with a total estimated cost of 297.55 crore taka ($48 million).

Comment

In 2008, Bangladeshi officials claimed that investments worth US$20 billion ($27 billion) would be required to develop a much needed high-quality infrastructure system in the country. Bangladesh had been considering creating a sovereign wealth fund for domestic infrastructure since 2015 and, as of 2017, had US$32 billion ($43 billion) in foreign reserves. In March 2018, US$2 billion ($2.7 billion) of those foreign reserves were moved into the newly-established wealth fund, to finance improvements to the country’s poor infrastructure.

Infrastructure systems, such as efficient water sanitation, reliable power supplies and transportation networks, are lacking throughout Bangladesh, in spite of sustained economic growth. The World Bank approved US$59 million ($80 million) in funding to help improve the power sector in Bangladesh. With only 70 per cent of rural households having consistent access to electricity and power outages causing output losses equivalent to three per cent of Gross Domestic Product, an influx of funding will aid the country’s development. Increased exports and growing domestic demand look likely to drive economic growth into the future. Whether that economic activity translates into improved socioeconomic conditions is, however, yet to be seen.

In a further development, Bangladesh launched its first commercial satellite, named Bangabandhu-1, into space from Florida on 11 May. The launch of the satellite represents the next stage in the digitalisation of Bangladesh, which is only the fourth South Asian country with its own satellite. Aiming to boost economic growth, connectivity and national pride, the successful launch of the satellite is another positive development in the recent series of significant infrastructure and technological projects.

At a cost of US$248 million ($336 million) the Bangabandhu project is equal to 0.0052% of the country’s annual budget of US$47 billion ($63.7 billion). The government of Bangladesh borrowed US$205 million ($278 million) from HSBC Holdings for the development and launch of the Bangabandhu satellite. The project was carried out in the face of criticism that technological investment should not be a priority for Bangladesh, a country of 163 million predominantly poor rural people. With average annual household income at around US$600 ($814) in Bangladesh in 2016, the prioritisation of projects such as the Bangabandhu satellite launch could even have a divisive effect on Bangladeshi society.

The satellite project brings unique challenges and opportunities to Bangladesh, where more than
3.3 million people still live in extreme poverty. While the project has brought increased investment and market demand for technical and software development, subsequently reducing the unemployment rate, the satellite coverage from Bangabandhu is still minimal. Breaking into the satellite communications market could prove difficult considering that it faces competitors such as India, which has 84 satellites, and China, which has 244. The government of Bangladesh must maintain relations with existing satellite providers if it is to reap the expected benefits of economic growth in the telemedicine, research, agricultural and telecommunications sectors. The Bangabandhu satellite currently covers 40 per cent of the earth’s land area, but cannot provide coverage to Middle Eastern countries, where more than three million Bangladeshi migrants are living.

Bangladesh currently spends US$14 million ($19 million) on providing satellite coverage to its citizens, by renting satellite bandwidth from foreign operators. The launch of the Bangabandhu satellite should change that situation and Bangladesh is expected to save US$210 million ($285 million) during its 15-year lifespan. Bangladesh could earn up to US$1 billion ($1.35 billion) from leasing out the transponders and other related services to surrounding states, such as Nepal, Myanmar, Bhutan, Indonesia, the Philippines, Turkmenistan, Kyrgyzstan and Tajikistan.

Infrastructure projects such as the Bangabandhu satellite and the Rooppur Nuclear Power Plant have the potential to transform the Bangladeshi economy. The extent to which the projects can stimulate the economy will depend on the ability of the government to contain the costs involved in their development, not to mention an increasingly competitive satellite communications market. The ability of Bangladesh to translate expected incomes into increased societal development will also require a careful balancing of the interests of regional rivals and its growing economic ties with neighbouring states.

Any opinions or views expressed in this paper are those of the individual author, unless stated to be those of Future Directions International.

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