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The government has set the ball rolling to purchase nine dredgers and ancillary equipment for a public sector inland water transport agency on suppliers' credit, notwithstanding the stringent rules and the recent warning from the multilateral lenders against receiving such loans.
The finance ministry is now pushing ahead with a plan to help implement a project of the Bangladesh Inland Water Transport Authority (BIWTA) under the ministry of shipping.
The M/S Ledwood Mechanical Engineering Ltd of the United Kingdom and IHC Holland of the Netherlands are separately trying to convince the government about their respective loan proposals to implement the project, titled "Procurement of nine dredgers and ancillary equipment to maintain navigability of the inland waterways".
Highly-placed sources told the FE Sunday that Finance and Planning Minister M Saifur Rahman had already given his nod to the proposal of the shipping ministry.
Sources added that the finance minister has made it clear that the shipping ministry could secure hard term loan in the light of the rules stipulated in the circular of the economic relations division (ERD) related to suppliers' credit, issued on Jan 1, 2002 or the Public Procurement Regulation 2003.
But finance ministry officials told the FE if the shipping ministry accepted the "unsolicited offer" of the British company it must go through open international tendering procedure.
"…and later the shipping ministry can take step to get approvals of the hard term loan committee and the cabinet committee on government purchase for the best term offer," they said.
Since 1999, the United Kingdom has been lobbying hard with the government circles concerned to accept the proposal of the Ledwood, enabling it to supply the dredgers and ancillary equipment to the BIWTA.
But the BIWTA found the IHC Holland Ltd to be lowest bidder among five bidders who participated in an open bidding invited back in 2003. Ledwood did not take part in that tender invited by the inland water transport agency.
Officials said the ERD asked the shipping ministry to make a comparative analysis of the two offers made by the European rivals.
The shipping ministry forwarded its opinion based on financial and technical offers of the two companies on August 30, 2003.
According to the analysis, the proposed price of the Ledwood is Tk 2.49 billion while that of the Dutch company is Tk 1.71 billion.
The rates of interest offered by both of the companies are identical -- 2.3 per cent for 85 per cent of the total price while 3.0 per cent for the rest 15 per cent.
The credit of the Dutch company, to be provided by the second largest lending institutions of France, BNP Paribus, is repayable within three years.
On the other hand, the credit of the Ledwood, which is supported by the Export Credit Guarantee Department of the UK, is to be repaid within one year and three months.
However, the technical proposals of the two companies seemed to be suitable for consideration.
Shipping ministry officials defended the government move to procure suppliers' credit for the project, saying the ERD failed to convince the development partners or multilateral agencies to give soft loans for the project.
Moreover, the government has set aside no allocation in the annual development programme (ADP) to implement the project, they said.
But ERD officials said the government should finance the project from its own fund rather than receiving suppliers' credit, given the poor navigability of the country's river routes.
Maritime experts echoed the views of the ERD officials: "The country needs more dredgers to maintain the navigability of the waterways. But the government should finance the procurement of dredgers from its own resources rather than using suppliers' credit".
By various estimates, around 9.0 million cubic metres of dredging is required to make the country's 22000 kilometre river ways navigable throughout the year.
But Bangladesh, at the moment, has the capacity of carrying out dredging work of only 3.0 million cubic metres.
Of the total river ways, only 3800 kilometres remain navigable during the dry season while 6000 kilometres during the rainy season.
Official figures say between FY'02 and FY'04 Bangladesh took suppliers' credit worth of $534.88 million while in five years from FY 97 to FY 01 it received $ 212.15 million.
The International Monetary Fund (IMF) has recently warned that it would stop providing concessional loans to Bangladesh unless it contained the growing trend of securing suppliers' credit bearing high interest rates.
In the case of a soft loan, the interest rate is less than 1.0 per cent having repayment period up to 50 years. So far as suppliers' credits are concerned, the interest rate ranges from 3.5 to 12 per cent with repayment period not exceeding 12 years.
Besides, the goods supplied against suppliers' credit are all too often overvalued.
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