[Bangladesh] Payra port dredging

[Dredging360.com]

Payra port dredging: Negotiations for Tk 8,643cr Belgian loan at final stage

The government’s negotiations for borrowing Tk 8,643 crore from Belgian Export Credit Agency for dredging Payra Port’s main channel Rabnabad is at the final stage.
The Belgian Export Credit Agency would provide the credit through HSBC.
The loan, carrying 1.52 per cent annual interest has to be repaid in half-yearly instalments in 10 years, Payra Port Authority member for Harbour and Marine activities Commodore Md Saidur Rahman told New Age on August 10.
The repayment would start within six months of completion of dredging by Payra Dredging Company Limited, a subsidiary of Jan De Nul Group of Belgium, he said.
The dredging would take 40 months for completions.
Saidur Rahman said that they had submitted terms and conditions of the loan deal to the ministry of finance for vetting.
He said they expected positive response from the ministry of finance as the terms and conditions of the loan were easier compared to hard-term loans taken from different foreign sources including China and India.
He said they expected to start the dredging of the channel in the 4th quarter of the current year.
In January, the Payra Port Authority signed a deal with the Belgian company to start the capital dredging as well as maintenance of the Rabnabad channel for 10 years.
In August 2016, prime minister Sheikh Hasina inaugurated the Payra Port.
The government wants to turn Payra into a deep sea port on priority.
Many experts, however, expressed doubts about the viability a 3rd sea port at Payra in Patuakhali with such high dredging and maintenance costs.
Former Chittagong University economics teacher Mainul Islam said it could be difficult to make the Payra Port viable.
He also said that the Payra Port would not serve as a deep sea port as the government wants after dumping the idea of building a deep sea port at Sonadia Island with Chinese financial assistance because of geo-political reasons.
Because of a last minute persuasion by Delhi, Dhaka did not award the construction contract of the Sonadia Deep Sea Port to China during the prime minister’s visit to China in June, 2014, he added.
In 2015, British firm HR Wallingford conducted a feasibility study for the Payra Port and estimated that $20 billion would be needed to build the port, much of the amount for dredging.
Big ships cannot enter the port, inaugurated three years back, due to siltation.
The Payra Port officials said vessels with draught up to 12 metres would be able to anchor at the port during high tides even after the dredging would over to make channel 75 km long, 100 to 125 metres wide.
According to a statement, Jan De Nul Group posted in its website in January, nine dredgers including the world’s most powerful Cutter Suction Dredgers would be used to dredge the channel.
During the maintenance period, Payra Port Authority and Jan De Nul would develop the Payra Sea Port into a deep-sea port in accordance with a master plan under preparation.
In February, Payra Port Authority signed an agreement with Bureau of Research, Testing and Consultation, BUET and Royal Haskoning DHV of the Netherlands appointing them as consultants for making the master plan.
The deal requires the consultants to prepare the master plan in 18 months.

[Dredging360.com]

India has always watched China’s involvement in developing neighboring Bangladesh’s ports with suspicion. In April 2019, Indian news agency ANI published an article warning that Bangladesh’s Payra Seaport could fall into Chinese hands and become a part of China’s so-called “string of pearls.” Located in southern Bangladesh, Payra Seaport is a $15 billion Belt and Road Initiative project that will be constructed by China Harbor Engineering Company (CHEC) and China State Engineering and Construction Company (CSCEC), two Chinese state-owned enterprises that also oversee construction of Gwadar and Hambantota ports in Pakistan and Sri Lanka, respectively. Despite Indian fears of Chinese maritime encirclement in the Indian Ocean, Payra Seaport will likely never become a Chinese asset because of the unfeasibility of its location, poor supporting infrastructure, and the positive outlook of Bangladesh’s external debt.

The proposed location of Payra Seaport is naturally shallow in depth and requires a tremendous amount of dredging for cargo ships to be able to approach its berths. Jan De Nul Group, headquartered in Luxembourg, secured the contract for capital and maintenance dredging for the port for 10 years. In order to make Payra Seaport approachable by water, Jan De Nul must dredge a 75-kilometer path through the Rabnabad Channel to the Bay of Bengal. Initial dredging will cost $963 million. This would involve the removal of over 100 million cubic metric tons of sediment over the course of several years. Additionally, natural tidal currents will constantly bring sediment back into the channel, which will require nonstop dredging to ensure that the channel maintains an adequate depth to accommodate ships. Even a single cyclone, an occurrence that regularly ravages Bangladesh’s coastline, could completely fill the channel and trap ships. The richest countries in the world wouldn’t be able to afford the constant dredging required to keep the Rabnabad Channel open for passage, and Bangladeshi scholars have compared the venture to “literally throwing money into water.”

This challenge posed by nature not only affects the feasibility of Payra Seaport, but also threatens the adjacent $1.6 billion Payra 1320 MW Coal Fired Power Plant, which is supposed to generate electricity to power the port. Funded by China’s Export-Import Bank and constructed by a consortium of Chinese state-owned enterprises, Payra Power Plant requires coal that needs to be unloaded from ships that dock at Payra Seaport in order to generate electricity.

Like the adjacent seaport, Payra Coal Fired Power Plant has had its own issues. While the first 660 MW unit was expected to commence operations in April 2019, North-West Power Generation Company Ltd. (NWPGCL), a part-owner of the project, reports that construction of the plant is only 81 percent complete, while only 57 percent has been financed. Additionally, transmission line projects that feed power generated by the plant into Bangladesh’s electric grid have been repeatedly delayed, which NWPGCL blames on poor coordination. Aside from poor project management, there have been security concerns: riots by Bangladeshi workers at Payra Coal Fired Power Plant in June 2019 resulted in the bludgeoning death of a Chinese worker and suspension of construction on the plant for a week. Hence, aside from the same natural challenges faced by Payra Seaport, Payra Coal Fired Power Plant also faces other issues that put Payra Seaport’s future in jeopardy.

Bangladesh’s risks for external and overall debt distress have continually been low, with total external debt estimated to be 14.3 percent of GDP at the end of fiscal year 2017. Multilateral creditors like the World Bank and the Asian Development Bank hold a combined 60 percent of Bangladesh’s external debt, followed by Japan (9.2 percent) and China (2.9 percent). Also, Bangladesh has an average time period of 31 years to pay off its external debt, with an average grace period of eight years, according to the Bangladeshi government, which is confident that it will be able to pay off all loans, even if its annual GDP growth rate drops to 5 percent. Compared to Sri Lanka, whose Hambantota port has become the posterchild of so-called Chinese debt-trap diplomacy, Bangladesh is not at risk of China acquiring its critical infrastructure.

If Payra is unlikely to become a Chinese “pearl,” there is another possible explanation for China’s investment in these projects. China’s state-owned enterprises poured more cement between 2011 and 2013 than the United States did during the entire 20th century. The only alternative to massive layoffs and reduced output for these companies is to continue building, regardless of the feasibility of the projects. On the other hand, Bangladesh desperately needs infrastructure, specifically in the areas of ports and electrification, yet maintains a poor credit rating from every major credit rating agency. When China is the only willing financier of major infrastructure projects, Bangladesh has little choice but to take them up on their offer. From China’s perspective, these projects provide outlets for its bloated state-owned enterprises and even nurture dependence from the host country. Ultimately, the host country’s dependence on China for the future of its infrastructure benefits Beijing much more than pearls can.

To be sure, developing Asia has a serious need for new and modern infrastructure. The Asian Development Bank estimates that the continent will need to invest $1.7 trillion per year until 2030 to maintain its growth momentum, tackle poverty, and respond to climate change. Still, governments must be diligent about not picking “any” project that comes their way. Instead, they should ensure that they invest in the right projects that will generate long-term returns and face minimal obstacles. We should assess Payra Seaport through this lens.