Loan 2156-BAN(SF): Emergency Flood Damage Rehabilitation Project major change in project scope and implementation arrangements due to grant funding provided by the governments of the Netherlands and Sweden

Report
from Asian Development Bank
Published on 24 Nov 2005
I. Introduction
1. The Board approved Loan 2156-BAN(SF): Emergency Flood Damage Rehabilitation Project (the Project) for Special Drawings Rights 117,195,000 ($180.00 million equivalent) from ADB's Special Funds resources on 20 January 2005 to finance emergency flood damage rehabilitation in Bangladesh. Loan 2156-BAN(SF) became effective on 2 May 2005; the loan closing date is 31 July 2007. The Project has five major components (i) rural infrastructure, (ii) roads, (iii) railways, (iv) water resources, and (v) municipal infrastructure. The Project is financed with $180 million equivalent from ADB and $60 million equivalent from the Government. This paper seeks approval by the Board of a major change in project scope and implementation arrangements due to grant funding provided by the Governments of the Netherlands and Sweden.

II. Background

2. During preparation of the Project, the Government of the Netherlands and Sweden through Swedish International Development Cooperation Agency (SIDA), expressed interest in providing about $25 million cofinancing for the Project. The ADB loan was approved on the basis that ADB will provide its loan under an umbrella or standby financing mechanism, whereby ADB commits for an $180 million loan but cancels a portion of its loan when grant financing becomes available from the Netherlands and/or Sweden. Similarly, the piggy-backed TA 4562-BAN: Early Warning Systems Study (the TA) for $250,000 financed under ADB's TA funding program was approved on the basis that it will be replaced by a corresponding grant from the Government of Netherlands when such financing becomes available and be administrated by ADB.

3. The Project is being implemented by four executing agencies (i) Part A: rural infrastructure -- Local Government Engineering Department (LGED), (ii) Part B: roads -- Roads and Highways Department (RHD), (iii) Part C: railways -- Bangladesh Railway (BR), (iv) Part D: water resources -- Bangladesh Water Development Board (BWDB), and (v) Part E: municipal infrastructure - LGED. Project implementation is progressing well according to schedule and agreements and there are no major issues or problems. As of 30 September 2005, overall progress of project completion was 25% and contracts awarded amounted to $83.5 million while disbursements amounted to $14.7 million.

III. The Proposed Changes

4. The Government of the Netherlands has advised ADB on its approval of a grant in the amount of Euro 10.79 million ($13 million equivalent) for the water resources component (Part D of the Project), and another grant in the amount of $250,000 equivalent covering the entire piggy-backed TA 4562: Early Warning Systems Study. Similarly, the Government of Sweden has advised ADB on its approval of a grant in the amount of SEK 120 million ($14.7 million equivalent) for the rural infrastructure component (Part A of the Project). Both the Government of the Netherlands and Sweden have requested ADB to administer these grants on their behalf in accordance with the agreements on cofinancing between the Government of the Netherlands and ADB, and the Government of Sweden and ADB, respectively.

5. For Part D of the Project, the total cost is $42.8 million equivalent. Under the proposed change in financing plan, $13 million equivalent would be financed by the Government of the Netherlands to cover a portion of the cost of civil works, $18.83 million equivalent by ADB to cover a portion of the cost of civil works and consultants and the remainder by the Government of Bangladesh.

6. The total cost for Part A of the Project is $73.9 million equivalent. Under the proposed change in financing plan, $14.7 million equivalent would be financed by the Government of Sweden to cover a portion of the cost of civil works, $40.5 million equivalent by ADB to cover a portion of the cost of civil works and consultants, and the remainder by the Government of Bangladesh.

IV. Assessment

7. Given the flexible project design and its implementation arrangements, cofinancing can be accommodated without any delay. There would be no change in project goal, objectives, or achievement of targets and outputs under the Project. The Government will benefit from lower financing cost for the Project. The change of scope of the Project will enable return of $27.7 million to ADB's Special Funds resources. The change will strengthen ADB's cooperation with bilateral development partners active in Bangladesh.

V. The President's Recommendation

8. The President recommends that the Board approve the proposed change in the financing plan and ADB administering

(i) the funds in the amount equivalent to $13 million to be provided by the Government of the Netherlands on a grant basis for financing Part D of the Project; and

(ii) the funds in the amount equivalent to $14.7 million to be provided by the Government of Sweden on a grant basis for financing Part A of the Project.

9. If the Board approves the proposed changes, the corresponding portions of the loan proceeds, allocated for category civil works under Parts A and D of the Projects will be subsequently cancelled.

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