Dollar surge inflates Matarbari port costs, derails timeline

The Matarbari Port Development project, one of Bangladesh’s flagship initiatives, is facing significant cost and time overruns, primarily due to the rising value of the US dollar against the Taka.

Tk6,841.52 crore has been proposed to be added to the project, bringing the total project cost to Tk24,648.96 crore, extending the project timeline by two years, an official of the Planning Commission told the Daily Sun.

The Project Evaluation Committee (PEC) chaired by Dr Mohammad Emdad Ullah Mian, member of the Physical Infrastructure Division of the Planning Commission, discussed the project in a meeting held at the commission on 6 May.

The PEC sent back the project to the authorities concerned for further revision.

If everything goes well after revision, it will be placed before the Executive Committee of the National Economic Council (ECNEC) meeting for its approval, the official said, adding that the project jointly executed by the Chittagong Port Authority and the Roads and Highways Department.

During a recent PEC meeting, Dr Mohammad Emdad Ullah Mian said the proposed expenditure hike and time extension were deemed excessive and questionable.

The commission has called for a detailed justification of the cost revisions and has stressed the need for a re-evaluation of the project’s feasibility study conducted by the Japan International Development Cooperation Agency (JICA), the official said.

Initially estimated at Tk17,777.16 crore, the project includes Tk12,892.76 crore in foreign loan assistance from JICA, Tk2,671.15 crore from the Bangladesh government, and Tk2,213.25 crore from the project’s own funds.

Recent dollar appreciation substantially impacted project’s financial estimates, rising from Tk85 per dollar in 2020 to Tk98 by November 2022 and further increasing by 27% by August 2023, as stated in the project proposal.

The project director at Chittagong Port Authority mentioned that project costs align with current market prices, resulting in a Tk2,513.89 crore increase in port construction expenses.

The project director also said that the cost of package-1 of the project has increased by about Tk1,350 crore due to the increase in the value of the dollar against the taka.

Besides, expenditure on several revenue sectors including CD-VAT, port charges, land acquisition, contingency, and consultancy services has also increased.

The project director of the Roads and Highways Director part cites cost factors – Tk461.87cr due to dollar appreciation, Tk674.64cr scope changes, Tk1,914.16cr rate schedule update, and Tk907.36cr high difficulty zone access – totaling Tk3,958.03cr.

However, the Planning Commission has urged a review and rationalisation of expenditures in both revenue and capital sectors, senior official of the commission said.

They have emphasised the importance of proper feasibility studies, noting that many projects suffer from inadequate initial assessments, leading to inflated costs and delayed timelines.

The proposed project revision includes the construction of 27.518 kilometres of roads and bridges including 20.64 km roads and 7.06 km bridges, which was later modified to 16.53 kilometres of roads and 10.670 kilometres of bridges. These changes, along with updated construction schedules and cost adjustments, have contributed to the budget increase.

Despite challenges, Matarbari Port is crucial for Bangladesh’s economic future. It will enhance cargo capacity and international trade position, with two terminals for large ships and a 28-km road with 17 bridges.

Chittagong Port Authority aims for main port completion by 2026 and full project, including infrastructure, by 2029.