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In recent years, Bangladesh has witnessed the inauguration of multiple mega projects, most notably in the dynamic urban center of Dhaka. Much anticipated projects like the Padma Multipurpose Bridge, Dhaka MRT Line-6, Bangabandhu Sheikh Mujibur Rahman Tunnel, Dhaka Elevated Expressway, Payra Thermal Power Plant, etc have garnered significant attention during their development and after becoming operational.
Despite the substantial investment of time, money, and resources, the outcomes have been mixed. Some projects have gained massive popularity, while others are struggling to meet expected revenue targets. Now, with the repayment of debts looming, the country is struggling to keep the economy afloat. This disparity raises a critical question: Is the tradeoff between growth and debt truly beneficial for Bangladesh’s economy?
Bangladesh boasts a highly resilient economy that has withstood numerous internal and external shocks. When Bangladesh gained independence in 1971, it was the second poorest country in the world. However, in a relatively short period, the nation has transformed from a predominantly agrarian subsistence society into a global manufacturing hub, especially in the apparel sector.
Additionally, the services sector has grown in tandem, contributing 51.04% to the GDP in FY 2023-24. These transformations have highlighted Bangladesh as one of the great development success stories.
A look at the annual growth rate of Bangladesh in comparison to its neighboring countries, shows that while other nations saw a fluctuation in their rates, Bangladesh maintained a steady growth throughout the years. Even in 2020, when the world took a downturn due to COVID-19, Bangladesh did not face any major setbacks and handled the wave better than most nations. ,
In addition to that, Bangladesh’s economy is expected to outshine the economies of Malaysia, Hong Kong, and Singapore with its presence as the 20th largest economy in the world by 2038.
Globally, there has been significant emphasis on the importance of infrastructure development, especially in developing countries like Bangladesh. According to the seventh ‘Five Year Plan’, Bangladesh needs more than five percent of GDP as additional investment in major infrastructure projects per year to sustain growth at a higher level.
The ‘Sustainable Development Goals’ framework highlights the need to invest approximately USD 57 trillion in infrastructure by 2030 to achieve the desired global GDP growth.
Bangladesh recognized the importance of large-infrastructure megaprojects even before the adoption of ‘Agenda 2030,’ aiming to position the country as an investment hotspot in South Asia. Improving access to infrastructure services will boost our economic activities and produce spill-over effects in its various productive sectors.
The potential economic impact for Bangladesh could be as high as USD 35.5 billion by 2030. Since 2009, Bangladesh has prioritized enhancing its transport network, undertaking numerous infrastructural development projects to boost connectivity.
The country’s first long-term development strategies, the ‘Perspective Plan 2010-2021’ and the ‘Perspective Plan 2021–2041,’ also identified infrastructure as a key driver of sustainable growth. In alignment with these plans, Bangladesh has steadily progressed from constructing rural infrastructure to now building ambitious megaprojects.
Table: Recent Mega Projects Undertaken by Bangladesh Government
In Bangladesh, mega projects were launched with the goal of speeding up economic growth and enhancing social benefits. Currently, transportation demand in Bangladesh is growing by about 8% per year, driven by population and economic development.
To meet this rising demand, the government is focusing on eight major infrastructure projects, named “fast-track projects,” which aim to lay the foundation for a sustainable future. Among the most talked-about projects are the Padma Bridge and Rail Link, Metro Rail, Chattogram-Cox’s Bazar Rail Link, Rooppur Nuclear Power Plant, coal-fired power plants at Matarbari and Rampal, and the Payra Sea Port.
Investing heavily in these significant projects has sparked the biggest investment surge in Bangladesh’s development history. These projects are expected to transform the country’s economy by opening up new business opportunities and driving development.
For example, the Padma Bridge will connect 21 southern districts with the capital, ensuring a steady supply of raw materials needed for industrialization and is expected to boost GDP by 1.2 percent. The Matarbari port will enhance cross-border trade by providing efficient port services and better connectivity. If managed well, these key projects will effectively address Bangladesh’s infrastructure gaps, transport issues, and power shortages in a sustainable way.
Following the success of these projects, the construction of the first subway in Dhaka, the Dhaka-Ashulia Elevated Expressway Project (DAEEP), MRT Line-1 and Line-5, a high-speed train between Dhaka and Chittagong, and the Cox’s Bazar runway extension are all set to begin soon.
Despite thorough feasibility studies conducted before project approval, there is always a lingering fear that these initiatives may derail due to over-complexity, over-optimism, and poor execution.
Moreover, issues like cost overruns, environmental degradation, and mounting external debt are significant concerns, often exacerbated by irregularities, corruption, and flawed project planning. For example, The Cox’s Bazar Rail Link Project saw an increase of almost ten times more than the project cost approved in the 2010 meeting of Ecnec. This cost overrun occurred due to inflation, the construction of various tourism-centric facilities, and major decision changes later in the project.
Moreover, inadequate project planning frequently leads to design errors being discovered after project initiation, necessitating modifications at later stages, which invariably delay the project and increase costs. For example, though a feasibility study on constructing the Payra Sea Port project’s jetty was undertaken by the Bangladesh University of Engineering and Technology (BUET), no hydrological survey was conducted because of a lack of funds.
Additionally, it was not clear what types of vulnerabilities the jetty faced, later, steps were taken to overcome the vulnerabilities – these changes inevitably increased the costs of the project. Another example is the Bus Rapid Transit project, where it took four years just to hire a consultant and prepare the detailed design for the BRT project, highlighting the inefficiencies that can plague these ambitious undertakings.
However, there are some rare instances of conducting extensive cost-benefit analysis before undertaking any large project and canceling those that are not economically viable or environmentally sustainable. One example is the scrapping of the Sonadia deep seaport plan, due to environmental and geopolitical concerns. But in most cases, lack of supervision and feasibility analysis problems are common in almost all megaprojects, with no one held accountable, leaving taxpayers to bear the burden.
When it comes to cost, Bangladesh’s megaprojects have seen a mix of internal and external financing. Many of our ongoing and proposed projects rank among the most expensive construction endeavors globally. To meet the infrastructure-related SDG targets, the additional cost for infrastructural development has been estimated to be 5.67 percent for the fiscal year 2030 (GED, 2017).
The capital cost of Independent Power Producers (IPPs) selected without competitive bidding is 44–56% higher than those chosen through competitive bidding in developing countries, including Bangladesh. Additionally, the cost of road construction per kilometer in Bangladesh is two to nine times that in India and China, and as much as double the cost in Europe, despite Bangladesh’s relatively low labor costs. These significant cost differences are attributed to prolonged project timelines, inefficient logistics, negligence of implementing agencies, corruption, and flawed designs.
To fund these expensive projects, Bangladesh’s government relies on both internal and external financing. These megaprojects were undertaken based on economic studies by local and foreign experts, with many being implemented through foreign partnerships and various multilateral or bilateral sources. While Bangladesh has self-funded the Padma Bridge, it primarily relies on loans, grants, and aid from development partners such as China, Japan, Russia, and India for other projects.
For example, the World Bank, through its concessional lending arm—the International Development Association (IDA)—currently has a total IDA commitment of USD 16.4 billion for 57 ongoing projects in Bangladesh. Furthermore, many agreements have been made to ensure the smooth implementation of these projects.
A notable example is the Rampal Power Plant, financed through a joint venture between the Bangladesh Power Development Board (BPDB) and the National Thermal Power Corporation (NTPC) of India, known as the Bangladesh India Friendship Power Company (BIFPC).
Internally, the government allocates a portion of its annual development program (ADP) budget to implement megaprojects aimed at strengthening the country’s communication, power, logistics, and energy sectors. The ADP allocation has consistently increased each year due to the slow pace of project implementation and other challenges.
In recent years, the percentage of funds allocated to megaprojects in the ADP has taken up the lion’s share, putting a strain on sectors such as education and health. To further support these goals, the Bangladesh Infrastructure Development Fund (BIDF) was established in March 2021 to finance development projects within the country. However, so far, the Payra Port project is the only initiative funded by the BIDF.
Bangladesh is expected to gain significant economic and productivity benefits from its numerous megaprojects, but these initiatives have also resulted in economic and environmental losses. The balance is delicate, and the full impact of these projects is yet to be realized.
These megaprojects were undertaken with the goal of strengthening our economy. For instance, the MRT Line-6 is projected to save 88.3 million BDT in daily travel time costs and 11.8 million BDT in vehicle operational expenses, amounting to annual savings of 34.89 billion BDT. Additionally, the Padma Multipurpose Bridge is estimated to increase the annual GDP of the southern region by 2%.
However, we are yet to reach breakeven. Most of these projects will take 15-20 years just to repay the loans from external sources. While the long-term outlook may seem promising, current data paints a grim picture. The contract for the Rooppur Energy Project exceeded the total development budget for the fiscal year 2015-2016 when the deal was signed.
Rising coal and LNG prices due to the Russia-Ukraine conflict have further increased the operating costs and stranded asset risks for coal or LNG plants, casting doubt on the viability of the Matarbari project. Project delays exacerbate these issues, such as the ongoing delay in the Bus Rapid Transit (BRT) project, which is estimated to result in nearly a billion dollars in lost economic benefits—enough to construct two such BRT corridors even considering the escalated project cost.
According to project documents, the government anticipated immediate financial returns from toll collections, fares, freight charges, and various economic benefits including reduced vehicle operating costs, time savings, passenger and freight advantages, traffic diversion, fuel cost reduction, accident prevention, and pollution mitigation. However, data from just six mega projects in the transportation sector indicate a loss of potential economic benefit amounting to BDT 503.87 billion.
Environmental threats also pose significant challenges. The Rampal Power Plant project, for instance, is feared to have negative and irreversible impacts on the Sundarbans by emitting toxic gases and contaminating waterways. The plant’s carbon dioxide emissions could contribute to smog, acid rain, and global warming.
In the coming days, Bangladesh must prepare to repay the loans taken to finance these projects. In just 10 years, the country’s outstanding foreign debt has more than tripled. Moreover, the debt-to-GDP ratio is expected to rise from 32.4% in FY21 to 38.5% in FY26.
This projection may be even more concerning due to doubts about the integrity of the country’s official data. In addition to loans from the IMF, World Bank, JICA, ADB, and others, the deferred letters of credit (LCs) of commercial banks have become an additional burden of short-term debt. Combined with internal loans, the total debt-to-GDP ratio could exceed 50%.
As Bangladesh moves towards becoming a strong economic presence globally, it is crucial to maintain a balanced approach for long-term economic stability. The importance of proper planning, evaluation, and implementation cannot be emphasized enough.
While the current investments in megaprojects are expected to yield significant benefits, sustaining the economy amidst these challenges remains a challenging task. Only time will tell if Bangladesh can navigate this phase successfully, as it has done in the past.
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