Bangladesh moves forward with US$735 million highways programme

A massive highways development programme is being planned in Bangladesh
August 5, 2021 4 mins Read
By Gordon Feller
Capital Dhaka suffers from heavy traffic congestion as well as air pollution, made worse by vehicle exhaust fumes  © Nuvisage | Dreamstime.com
Capital Dhaka suffers from heavy traffic congestion as well as air pollution, made worse by vehicle exhaust fumes © Nuvisage | Dreamstime.com

A new US$735 million national highways in Bangladesh programme is focused on upgrading 260km of existing highway corridor. The aim of the project is to improve regional connectivity, logistics efficiency in the western region, and road sector management in Bangladesh. It is also focused on upgrading and rehabilitating feeder roads; making complementary logistics infrastructure improvements; and pushing for road sector modernisation and capacity building. The programme will also see the laying of optical fibre/utility duct along the corridor and along selected feeder roads. The Beijing-based Asian Infrastructure Investment Bank (AIIB) is supporting the programme and financing the upgrading of 160Km (Jhenaidah-Bonpara–Hatikumrul) of the program corridor - through a parallel financing arrangement. This programme’s sponsors and organiser believe that this objective can be achieved over a 10-year period. There are several key indicators which are being used by the programme. The first is for a percentage change in the efficiency of transportation on highway corridor of the programme (measured using value of time and vehicle operating cost savings). The second is for a better average transport time to programme markets from the closest intersection with the highway for targeted value chains. The third is for an improvement in the condition of the overall national road network.

The construction of the elevated expressway in Dhaka has gone some way to address the city’s traffic congestion and road safety issues © courtesy of Ruby Kitching
The construction of the elevated expressway in Dhaka has gone some way to address the city’s traffic congestion and road safety issues © courtesy of Ruby Kitching

The programme addresses several long-standing transport sector challenges, and these are relevant not only to the Western Region, but to all of Bangladesh. The country has a congested and unsafe road network, resulting in excessively high logistics costs that is constraining Bangladesh and the western region from leveraging its strategic geographical position as a major trade and transit hub for South and South East Asia. There are also substantial post-harvest losses especially among small farm families in rural areas because of limited connectivity, market access and agro-logistics facilities. Bangladesh also suffers from weak road sector management in terms of planning, implementation, and operation maintenance  

The programme is being implemented in three phases. The first phase finances the upgrading of national highways from Jessore to Jhenaidah (48km) and associated feeder roads and rural market infrastructure along this part of the corridor, and road transport sector modernisation interventions. In parallel with phase 1, AIIB finances the upgrading of national highways from Bonpara to Hatikumrul (52km).

Bangladesh has made some big strides in developing an extensive transport system, particularly road transport which enjoys a modal share of 70% for passenger traffic and 60% for freight. The total road network size of the country is roughly 375,000km (road density of roughly 250km/100km2), reflecting the tremendous progress in improving connectivity, particularly at the sub-national level. The rural road network makes up 94% of the network and Bangladesh has one of the highest scores on the Rural Access Index.

Bicycle rickshaws are still a common sight in towns and cities in Bangladesh  (© Tomi Tenetz | Dreamstime.com)
Bicycle rickshaws are still a common sight in towns and cities in Bangladesh  (© Tomi Tenetz | Dreamstime.com)

The primary road network of Bangladesh is under the responsibility of the Bangladesh Roads and Highways Department (RHD), Ministry of Road Transport and Bridges. It extends more than 21,000km, of which 7,000km are national and regional highways, and 13,100km are Zilla (district) roads. Improvement of regional road connectivity to boost trade and commerce is a key priority for RHD, who is pursuing a policy of corridor-based road development with a view to accommodate regional as well as international traffic. RHD is participating in different regional connectivity initiatives, including the Asian Highway Network, South Asia Sub Regional Economic Cooperation (SASEC) Road Corridors, Bangladesh-China-India-Myanmar Economic Corridor (BCIM-EC), Bay of Bengal Initiatives for Multi-Sectoral Technical and Economic Cooperation (BIMSTEC) Road Corridor, SAARC Highway Corridor, and the BBIN MVA dialogue.  

Bangladesh’s rural road network is under the responsibility of the Bangladesh Local Government Engineering Department (LGED), Ministry of Local Government, Rural Development & Cooperatives. It consists of 37,800km of Upazila Roads, 44,750km of Union Roads, and 215,750km of Village Roads. Bangladesh’s rural road network is essential for improving the livelihoods of about 66% of the country’s people. Rural access connectivity to the country’s main transport corridors is a key priority for the government. LGED aims to double-lane high volume Upazila Roads and Union Roads that are predominantly used by commercial vehicles and connect to the main transport arteries. It will also invest in other rural infrastructure, such as rural markets to promote inclusive growth by expanding economic opportunities to the poorer rural communities.

On-road haulage in Bangladesh can be slow and costly, due to the poor state of the roads (© Manfred Thuerig | Dreamstime.com)
On-road haulage in Bangladesh can be slow and costly, due to the poor state of the roads (© Manfred Thuerig | Dreamstime.com)

Despite improvements in developing an extensive road network, the overall quality of the road network remains poor. Only 27% of the rural roads and 40% of the main roads are paved, half of which are in good condition. Bangladesh needs to move away from the “build, neglect, rebuild” mindset and improve its asset management practices across policy, institutional and operation level including reviewing its Axle Load enforcement regime.

The transport sector faces institutional fragmentation, weak co-ordination and capacity constraints.  At the national level, there are five ministries and 21 agencies responsible for the transport sector with overlapping mandates, and conflicts between service provision and regulatory responsibilities. The capacity of various agencies needs considerable enhancements in vast areas of emerging needs (PPPs, climate change, gender risks) as well as traditional road sector management and operations (such as innovative contracting methods, cost and resource efficiencies, road safety). Transport infrastructure projects are most often identified and selected independently along modal lines through separate ministries without a comprehensive, coordinated and continuous planning process. In the absence of a multisectoral mechanism or platform that can facilitate an integrated approach to infrastructure development, large transport projects tend to primarily focus on the physical investments with little consideration for how these investments impact the local and regional economies and how the benefits may be deepened through complementary interventions (such as logistics infrastructure and services).

The government and program sponsors have agreed that the road network needs to be built “Greener” and “Resilient.” Bangladesh faces a significant challenge in developing and maintaining the transport system because of its unique geographic conditions. Situated in the delta of three major and highly active rivers, Meghna, Jamuna, and Padma, Bangladesh is one of the most disaster-prone and climate vulnerable countries in the world and frequency as well intensity of floods and cyclone has been increasing. The damage to the country’s infrastructure, particularly the transport network from such events can be extremely detrimental to the economy. According to Multi-Hazard Risk Assessment reports by the Bangladesh Ministry of Disaster and Relief (MRVAM), more than 50% of all road types are exposed to different levels of flooding. To increase resilience, there is a need for a transformational shift towards policies and institutions that enable climate resilient investments.

Road conditions in the major urban areas can be poor also (© | Mahtab Prattus, Dreamstime.com)
Road conditions in the major urban areas can be poor also (© | Mahtab Prattus, Dreamstime.com)

The transportation system is congested across all modes, resulting in excessively high logistics costs and constraining Bangladesh in playing a more active role in regional integration despite its strategic geographical location. Many parts of the regional road network are narrow, operating at or near maximum capacity and there are sections incapable of handling more freight vehicles. The average speeds on these corridors are low; 2018 speed surveys carried out by the World Bank show the average speeds at strategic locations on regional trade corridors in Bangladesh the were 28km/h. According to the “Logistic Performance Index”, Bangladesh ranks 100 out of 167 countries, and is below the regional average for South Asia.

One recent World Bank report estimated that pervasive congestion across the national logistics system of Bangladesh increases standard trucking costs by 100%. The overall logistics costs in Bangladesh are high due to significant inventory carrying costs. An in-depth study of 10 products revealed that just monetary logistics costs range from 2-33% of revenues. These costs can be especially high for agricultural products. For example, the average monetary logistics costs for horticulture are 33% of total revenues and for milk are 12.5% of revenue. Within direct logistics costs (transportation, storage and handling, and trade facilitation) transportation costs represent the largest share for most value chains. Average road transport tariffs in Bangladesh are relatively high at USC9.5/tonnekm. There are several reasons for this including limited competition in the trucking sector, high incidence of accidents on the road, need for facilitation payments, excessive congestion on the roads, and a large share of empty hauls.

Flooding remains a serious problem for transportation in low-lying Bangladesh  (© | Remon Remon, Dreamstime.com)
Flooding remains a serious problem for transportation in low-lying Bangladesh  (© | Remon Remon, Dreamstime.com)

Logistics costs are further aggravated by many road crashes, which represent about 11% of truck operating costs. It is estimated more than 20,000 people are killed and 200,000 seriously injured every year in road traffic crashes, which is estimated to cost Bangladesh 2-3% of GDP/year. Road traffic crashes are responsible for 12% of all deaths among men in the 15-49 age bracket, for whom transport injuries in 2016 was the second-highest cause of death - up from 11th in 1990.

Dangerous roads throughout the country are evident with alarming annual death rates per kilometre of highway. The World Bank’s own analysis revealed that the annual fatalities/km at two key road corridors in Bangladesh - Jessore to Kanchpur and Kanchpur to Akhaura – averaged 0.40 and 0.98, respectively from 2014 to 2017. The low but rapidly growing rates of motorisation (2.5 times increase, from 2014 to 2017) provides the best crude marker of what to expect in future road safety terms. Unless rapid, scaled-up road safety investments are made, a continued upward trend in fatalities and injuries must be expected.   

The highways and roads sector’s financing needs are enormous. A rough estimate suggests that the road sector alone would require annual investment of $11 billion over the next 25 years to meet the aspiration of the country to become upper middle-income country by 2041. While there is a realisation among policymakers that such investments cannot be supported through budgetary allocation and ODA envelopes are shrinking, ensuring sustainable road sector financing, is an urgent need of the sector. The government clearly needs to explore models to leverage public/MDB resources with alternative financing such as private/commercial financing. The PPP regulatory framework has been established and the pipeline of projects include road sector projects. However, progress in this area has been discouraging in parts due to the absence of a national toll policy and road fund, which have been established but not operationalised. Furthermore, Bangladesh has no established Project Finance market in local currency which calls for a pronounced need for credit enhancement tools.

The programme has the following components:

Component 1: Upgrading Highway Corridor.
This component aims to upgrade the following 260km of national and regional highways: (i) Bhomra-Satkhira-Navaron; (ii) Jessore- Jhenaidah; and (iii) Jhenaidah-Bonpara–Hatikumrul. This will encompass upgrading of existing two-lane road to four lanes. Separate Slow-Moving Vehicle Traffic (SMVT) lanes are to be introduced on both sides of the main carriageway. The physical segregation of SMVT from normal motorised traffic is anticipated to decrease the potential for serious accidents. The presence of a central median and safety barrier also reduces the potential for head-on collisions. This component also finances the laying of Optical Fibre Cable (OFC)/utility duct alongside the road corridor. Laying duct at the time of road construction would allow for significant cost savings.

	More new road and bridge links are needed for Bangladesh as the country has insufficient major bridge connections for its transport needs (© | Manfred Thuerig, Dreamstime.com)
More new road and bridge links are needed for Bangladesh as the country has insufficient major bridge connections for its transport needs (© | Manfred Thuerig, Dreamstime.com)

Component 2: Upgrading and rehabilitating feeder connectivity infrastructure.
This component finances the upgrading of priority Upazila and Union roads that connect to the programme corridor, schools, health facilities, and local markets. The selection of roads to be supported by the project is guided by an assessment of connectivity needs of the programme corridor to markets to hinterland that are undertaken during the programme's preparation. In addition, the component also finances the optical fibre cable ducts under a select group of Upazila roads.

Component 3: Complementary logistics infrastructure improvements.
This component finances complementary logistics infrastructure improvements, including development of community market structures (with a focus on female participation) for fresh produce (fruits, vegetables, dairy, and poultry). The World Bank support LGED to carry out an in-depth analysis of agro-logistics needs along the project corridor during project preparation with a view of identifying ancillary logistics infrastructure needs such as storage, processing, selling/distribution facilities as well improving drainage and waste management of existing facilities. An important by-product of these investments will be improved hygiene of these value chains.

Component 4: Road sector modernisation and capacity building.
This component is designed based on a comprehensive sector diagnostic to identify the gaps in policy, regulatory, institutional and operation level including review of ongoing institutional reforms (both in RHD and LGED) as part of the projects financed by ADB and JICA; and government’s own institutional reforms. The component has the following elements:

  • Addressing Policy Gaps:
    This element identifies sectoral policy gaps (for example, the lack of a road sector masterplan, sector financing strategy, lack of road safety lead agency). It aims to improve Asset Management and Resilience: This component is focused on strengthening and institutionalising better asset management practices in both institutions to ensure sustainability of investments under this programme but more importantly, government’s own road sector investments.
  • Organisational Transformation and Capacity Building:
    The focus is on mainstreaming innovative and good industry practices in the identified areas. The capacity building activities include not only government agencies but also local industry.
Transport in Bangldesh can be basic, which has restricted its economic growth (© | Matyas Rehak, Dreamstime.com)
Transport in Bangldesh can be basic, which has restricted its economic growth (© | Matyas Rehak, Dreamstime.com)

Component 5: Contingent Emergency Response.  
This component aims to improve the government’s ability to respond effectively in the event of an emergency in line with World Bank procedures on disaster prevention and preparedness. Following an eligible crisis or emergency, the Recipient may request the Bank to reallocate project funds to support emergency response and reconstruction. This component would draw from other project components to cover emergency response.

The total project cost is pegged at $735 million, with the World Bank providing $400 million. A guarantee of $180 million is being provided by the IDA. The national government is providing "Counterpart Funding".
Non-guaranteed financing from commercial financing institutions is providing $120 million. And guaranteed financing from commercial financing institutions is providing $180 million.


New bridge funding secured

Funding has been secured for the project to build the new Kewatkhali Bridge in Bangladesh. The Asian Infrastructure Investment Bank (AIIB) is providing a loan of US$260 million for the project.

Construction of the new bridge will help reduce journey times in Mymensingh and the project is of note as the link will be the first arch steel bridge in Bangladesh. To ensure the proper maintenance and longevity of the structure it will feature bridge health monitoring technology, providing data on its condition in real time.