China Won’t Finance Bangladesh Rail Line after Dhaka Cuts Project Costs

China has refused to fund a rail project that a Chinese state-owned company was to build in Bangladesh after Dhaka slashed its “abnormally high” U.S. $2 billion cost in an unprecedented move, the South Asian nation’s railway minister said Wednesday.

This is the first instance that the government of Prime Minister Sheikh Hasina cut the cost of a Chinese-funded project, prompting analysts to welcome the move to reduce spending for the 179-km (111-mile) Akhaura-Sylhet track project.

“The Chinese authorities regretted that they cannot implement the project to convert the Akhaura-Sylhet track from meter gauge to broad gauge. They withdrew after we reduced some 40 billion taka [about U.S. $472 million] from the total project cost,” Railway Minister Nurul Islam Sujan told BenarNews.

“Now, the Chinese authorities expressed their inability to fund the project. We are trying to persuade them to agree to provide funds for it,” he said, referring to contract negotiations for the project.

Broad-gauge tracks are wider than meter-gauge tracks and offer more stability for railroad cars. The project would add a third track to the current meter-gauge rail to allow trains of either gauge to use the tracks.

The Chinese embassy in Dhaka did not immediately respond to BenarNews requests for comments on the decision.

The cuts in expenditure for the project drew praise from a Dhaka think-tank.

“There are serious criticisms about the cost of Chinese-funded projects in Bangladesh and beyond. This is the first time we see that the government has moved to reduce the inflated cost. This is a good move,” Mustafizur Rahman, a scholar at the Center for Policy Dialogue, a think-tank in Dhaka, told BenarNews.

“This is a good start for questioning the high cost of the foreign-funded projects in Bangladesh,” he said.

Beijing apparently halted the project involving China Railway Construction Bridge Engineering Bureau Group Ltd. in recent weeks but Bangladesh authorities did not publicly comment until Wednesday.

Still, the two nations maintain bilateral relations mainly focused on development projects.

For instance, Chinese contractors have been constructing the 6.15-km (3.8-mile) bridge over the Padma River – Bangladesh’s longest – to connect the country’s south and southwestern regions to the rest of the country.

Bilateral ties warmed during the visit of Chinese President Xi Jinping in October 2016, when officials signed a memorandum of understanding (MoU) to provide about 1.7 trillion taka ($20 billion) to Bangladesh to fund development and defense projects.

Shahriar Kader Siddiky, a joint secretary of the finance ministry’s economic relations division, told BenarNews that China had provided nearly 594 billion taka ($7 billion) loans linked to nine development projects since Xi’s Dhaka visit.

In line with the MoU, the finance ministry was able to persuade Chinese authorities to agree to fund the Akhaura-Sylhet project.

Railway history

All development projects in Bangladesh must be approved by the Executive Committee of the National Economic Council (ECNEC), which is headed by the prime minister, whether funding comes from the government or a foreign source.

On April 9, 2019, the ECNEC approved the rail project.

The railway ministry then met with Chinese officials to establish a final cost of more than 161 billion taka ($1.9 billion). The Chinese authorities agreed to grant a loan of 106.5 billion taka ($1.25 billion), according to project documents obtained by BenarNews. No formal contract for the project was signed.

Salimullah Bahar, the chief planning officer of Bangladesh Railway, told BenarNews that the officials followed specific yardsticks to establish the total cost.

For instance, he said, “We have guidelines to decide the cost of a one kilometer track.”

Late last year, government leaders questioned those costs.

“But (in November 2020), the prime minister’s office examined the project cost, observed the expenditure to be ‘abnormally high,’ and asked us to reduce it,” said Sujan, the railway minister, noting the $472 million cut.

Quazi Asadullah, a former additional director general of Bangladesh Railway, told BenarNews that Assam Bengal Railway Company constructed the single-line meter gauge Akhaura-Sylhet-Karimganj railway track in 1891-96 in what was British India.

He said the track had not seen any major renovation since then.

“Due to the poor state of track, we see frequent derailments causing immense suffering for passengers,” Quazi said.

 “One derailment snaps railway communication for hours.”