DHAKA, Nov. 5, 2017 – The government of Bangladesh today signed two financing agreements totaling $457 million with the World Bank to help develop private sector-led infrastructure projects, as well as diversify exports in labor-intensive and globally competitive industries such as leather goods, footwear, plastics, and light engineering. Both projects will help Bangladesh create more and better jobs for its population.
The $357 million 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 8 – 20 years, beyond the usual term of 5 to 7 years.
“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,” said 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 other project signed today, a $100 million 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 labor-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. These improvements will help Bangladesh increase the number of exporting firms in target sectors by around 30 percent.
Nine out of 10 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, average wage is expected to grow by 33 percent.
The project will establish technology centers to allow firms access shared technologies and shared services that are unavailable locally. Firms will be able to utilize common machinery for design, mold making, casting, and prototyping where purchasing is not an economically viable option for a single firm, particularly small ones.
“The 7th Five-Year Plan estimates that about $410 billion 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,” said Kazi Shofiqul Azam, Secretary, Economic Relations Division, Government of Bangladesh. “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), the World Bank’s grant and no or low interest credit arm. The credits are interest-free and repayable in 38 years, including a 6-year grace period, and carry a service charge of 0.75 percent. The IPFF II also includes $100 million credit from IDA’s scale-up facility that has a 30-year term, including a nine-year grace period.
The World Bank was among the first development partners to support Bangladesh following its independence. Since then the World Bank has committed more than $26 billion in grants and interest-free credits to the country. In recent years, Bangladesh has been among the largest recipients of the World Bank’s interest-free credits.