Bangladesh is expecting IMF to disburse $141 million and this may not materialise if Hasina government fails to amend the VAT Act and Banking Companies Act in November incorporating the lender’s recommendations for a more level playing field.. Last year the lender gave $ 987 million to help Bangladesh to overcome its macroeconomic pressures and build a buffer reserve.
Primarily, the IMF favours more autonomy and powers to the Bangladesh ban. This inter alia means clipping the wings of the Banking Division of the Finance Ministry. The exposure of commercial banks to the stock market is at present limited to 10 percent of its deposits. An IMF mission, which visited Dhaka in September, suggested that the limit be increased to 25 per cent.
On the Value Added Tax, the IMF and the government don’t appear to be on the same page. There are variations in the proposals that were presented to the IMF and the final bill that has been tabled in parliament. Original draft to the amendment kept VAT at 15 percent in all stages of value addition but the rate was 5 percent in some cases in the final proposal. The IMF also objects to the planned VAT exemption to different sectors, though the government seeks to justify the move in public interest.
The World Bank is sending a team to oversee the probe into the alleged corruption in the Padma bridge project. It will coordinate with the Anti-Corruption Commission which is seized of the allegations that Canadian firm SNC-Lavalin, consultant to the Bridge had offered huge bribes to at least six influential Bangladeshi officials, including two former ministers to win the contract.
The bank cancelled its $2.9 billion credit for the project after the scam hit the headlines in June this year.
“This will be an initial introductory visit, and the first in a series of regular visits aimed at assessing adequacy of the investigation into the alleged corruption under the Padma bridge project,” the Dhaka office of World Bank said in a statement.
Two top executives of the Canadian company, Toronto based SNC-Lavalin, were arrested in February. Formal charges against vice-president Ramesh Shah (61) and director of international projects, Bangladesh born Mohammad Ismail (48) were framed in April.
WB has since agreed to revive its credit for Padma Bridge. And on its part the government will send on forced leave all officers involved in the scam till the probe is completed.
That the World Bank means business is clear from the appointment on October 5 of three member panel on Padma. Luis Moreno Ocampo, former chief prosecutor of the International Criminal Court heads the team. Timothy Tong, former commissioner of the Independent Commission Against Corruption of Hong Kong Special Administrative Region, and Richard Alderman, former director of the UK Serious Fraud Office are the members. Anti-Corruption Commission of Bangladesh has set up its special probe body comprising four deputy directors.
It is not a rub off effect but Delhi also is impressing upon Dhaka to ensure ‘the highest level of transparency and fairness’ in utilising its $1 billion Line of Credit (LoC) for procurement of buses and railway wagons, and infrastructure development projects. The credit line was offered in August 2010 but implementation of the projects has been delayed ‘due to frequent changes of guidelines and various other complexities’ according to local media reports.
Officials of the two countries reviewed the pace of the programmes on October 10; it was the third review. Both sides agreed to expedite the implementation of the projects by maintaining transparency.
Joint Secretary (Development Partnership Administration) of the Ministry of External Affairs Radhika Lokesh led the Indian delegation while Economic Relations Division (ERD) Joint Secretary Ashifuzzaman led the Bangladesh side.
The credit has since been divided into two components – credit of $800 million and grant of $ 200 million. As many as 12 projects aggregating to $ 655.10 million have so far been included under the line of credit. Most of these are designed to strengthen communication infrastructure.
India contributed no less for the delay in launching these projects. For instance its guidelines on utilisation of $200 million grant component were not finalised yet though the grant amount was announced five months back. Indian side admits the delay in finalising guidelines. Some of these infrastructure projects are highly complicated ventures with lot of technical aspects and this demands eagle at every stage so as to avoid flaws cropping up at a later stage. These guidelines apply only to the works taken up with Indian grants. There would be no such conditions on projects under LoC, according to Radhika Lokesh and Ashifuzzaman.
Bangladesh has already awarded contract in respect of seven India aided projects. The remaining five are in an advanced stage of bidding process. Procurement of 300 double-decker, 100 single-decker and 50 articulated buses, procurement of 180 broad gauge oil tank wagons and six brake vans, construction of second Bhairab and second Titas bridges with approach rail lines and Khulna-Mongla rail line, and procurement of railway locomotives are among the India aided projects for which contracts have been awarded.
