Minister biggest reason for Padma Loan Negotiation Failure

Rezaul Karim Byron and Sharier Khan

The Daily Star July 4, 2012

The prime minister’s reluctance to remove the minister in charge is the biggest reason for the government’s failure in solving the Padma bridge project loan crisis with the World Bank.

Sources said the government was more or less flexible about all other outstanding issues.

According to a government letter to the bank on June 28 which was made public by the finance minister on July 1, WB high officials last October verbally asked Finance Minister AMA Muhith to remove the minister in charge and two officials to have the bank resume the project.

“The honourable prime minister was reluctant to take actions against the high-level public officials without actionable evidence, but in the larger interest of the country and in order not to jeopardise her electoral commitment she used her routine cabinet reshuffle to adjust the portfolios to meet the Bank’s demands,” says the letter.

However, the change of the said minister’s portfolio did not satisfy the WB. The issue came up again in early June when the two parties gave the issue a final try.

In another letter on June 26, the finance ministry senior secretary noted, “In deference to your [WB] request for immediate action against the ‘officials’ for the duration of inquiry, the Government of Bangladesh agreed to take immediate actions against the officials named in your referral.

“However, there appears to have been a genuine miscommunication. Your letter on June 5, 2012 referred clearly to ‘officials’ and not ‘ministers’. Our reading of the letter was confirmed by the advice we got from our colleagues in Washington DC and therefore agreed to the actions only against the ‘officials’. The actions against the ‘ministers’ would essentially await preliminary findings of the BACC (Bangladesh Anti-Corruption Commission).”

This letter reconfirmed that the said minister would not be removed. This was reconfirmed by a third letter issued on June 29, the very day the WB cancelled the loan deal.

But sources said although the letter talked about a misunderstanding over the definition of ‘officials’, the WB had categorically named the minister during talks since October last year.

The WB had been very serious about the minister’s removal as it believed a person accused of corruption cannot and should not lead such a large project, the sources added.

They said the WB integrity vice-presidency (INT) had started investigating the bridge project tender late in 2010, even before signing the loan contract in April 2011. As part of it, the INT interviewed all the bidders that had participated in the tender for project construction supervisory consultant in 2010.

The investigation was triggered by an allegation sent to the WB in September-October of 2010 stating that certain men of the minister in charge had been approaching the bidders.

This allegation landed in the INT’s report that was handed over to the government on September 21 last year. It states, “One confidential witness told INT that the company s/he worked for received a visit from an individual claiming to work for Sahco who said he was taking instructions directly from Minister Hossain. According to this confidential witness, the Sahco representative said that, in exchange for a specified percentage of the contract value, Minister Hossain would help the company in the PQ (pre-qualifying) process for the Padma Main Bridge Contract.”

On June 29, the WB cancelled its $ 1.2 billion loan stating high-level corruption in the bridge project.

The proposed 6.2-kilometre (3.8 miles) bridge over the Padma River would connect the capital with the country’s 16 south-western districts. The $2.9 billion project also had finances from the Asian Development Bank and Japan International Cooperation Agency (Jica).

Finance Minister Muhith at a press conference on July 1 gave two points where the two parties fell apart. One point was that the government had found it insulting to sign a memorandum of understanding (Mou) over possible corruption and the other was that it had found unacceptable the WB proposed Terms of Reference (ToR) with a foreign panel with the ACC.

However, in his speech in parliament the next day, the finance minister said the ACC had legal limitations for signing the ToR. That’s why the ACC through discussion with the WB had devised a way to meet the bank’s demands.

“They [ACC] agreed to send a letter to the WB detailing the manner in which they would circulate information, consider/act on advice and ensure the involvement of the development partners (DPs). What they basically meant was that they would receive advice from the DPs and share all information with them,” Muhith told parliament.

“Therefore, a panel can work on behalf of the development partners but the instructions must come from all the development partners or from their coordinator,” he added.

This implies that the government actually agreed to the WB proposal over the ACC with slight modification.

Sources said the final talks were held between WB officials and government high officials and an adviser to the prime minister and the ACC during June 23 to 26. For the first three days, they talked over removing concerned officials. During the dialogue, Bangladesh initially agreed to both the burning issues on ACC and removing the officials and minister.

But on June 26, Bangladesh declined to remove the minister. The government also suddenly became hesitant about signing the TOR for foreign panel in the ACC. The talks ended unfruitful.