China may commit to a five-year comprehensive cooperation plan, including assistance in several billion-dollar projects, during the Chinese president's Bangladesh visit in the middle of next month.
Already, the Chinese government has expressed initial interest in giving around $23 billion in soft loan for 20 projects to be implemented between 2016 and 2020. A Memorandum of Understanding (MoU) is likely to be signed in this regard when Xi Jinping comes to Dhaka on October 13 or 14, finance ministry officials said.
The comprehensive plan may also include a commitment for increasing Chinese grant and long-term cooperation in disaster management.
All the line ministries will hold a meeting at the Economic Relations Division (ERD) to discuss the latest about the 20 projects on October 2. The projects will later be finalised at an inter-ministry meeting, said one official.
Before that, on September 28 and 29, the ERD will sit with officials of the Chinese Exim Bank over signing of loan agreements for two of these projects. The two projects involve purchasing six ships from China with a loan of $184 million and setting up Dasherkandi Water Treatment Plant with a $280-million loan.
The loan agreement is likely to be signed during the Chinese president's visit, said an ERD official.
Bangladesh has already selected some Chinese companies to implement seven to eight of the 20 projects, said the finance ministry official, asking not to be named.
Bangladesh will try to sign the loan agreements within the next two years and start implementing the projects.The cabinet committee on economic affairs has given the go ahead to the line ministries for implementing the projects through those companies.
Since taking office in 2009, Prime Minister Sheikh Hasina visited China twice, the last time in June 2014.
After that Bangladesh sent lists of dozens of projects to the Chinese government for soft loan. The Chinese side also made verbal commitment for giving assistance of $10 billion, $20 billion and $30 billion. But there was no written response.
During the Chinese president's visit, Bangladesh expects big pledges from him, the ministry official said. According to primary indications from China about the projects it wants to fund, seven are in the power and energy sector, which would cost about $7.7 billion.
The projects include a 1,320 megawatt coal-based power plant in Kalapara upazila at Payra Seaport. An MoU was signed in this regard during Hasina's last visit to China and the government is already acquiring land there to set up the plant.
Another project involves a 350MW coal-fired thermal power plant at Gazaria in Dhaka's Munshiganj, where China will provide $433 million. China may also give a soft loan to build an industrial park for setting up garment factories in Gazaria, where Chinese businesses will invest.
In the rail sector, China has shown interest in funding four projects costing around $6.21 billion, including the 172km Padma Rail link project.
The three other projects involve upgrading the rail lines from Joydevpur to Mymensingh, Joydevpur to Ishwardi and Akhaura to Sylhet.
In four projects under the Roads and Bridges Division, Beijing may offer $6.65 billion. The projects include Dhaka-Ashulia Elevated Expressway, Dhaka-Sylhet four-lane highway and Sitakunda-Cox's Bazar Marine Drive Expressway.
To attract Chinese investment, the Bangladesh government has already allocated two economic zones in Gazaria and Anwara in Chittagong.
China may offer soft loans to develop these zones as well, said another finance ministry official.
Over the years, China has invested trillions of dollars against treasury bonds in the US and countries in Europe. As interest rates on those bonds continue to fall, China is now eager to invest in developing countries which will bring it profits through interest and also help it expand its businesses.
And Bangladesh wants to take this opportunity, but on easier borrowing terms, officials said.
At present, China charges two percent interest on soft loans with a repayment period of 15 years plus five years of grace period. The loan also carries 0.2 percent commitment fees and 0.2 percent management fees.
In case of such loans, the Chinese government selects the contractor, and stipulates that all materials for the projects be purchased from China.
Bangladesh will try to get the loan at 1 percent interest and introduce limited tender system, which is done in case of bidder selection under Indian soft loan.
Under the limited tender system, bidders from the loan-providing country participate in the tendering process, instead of being handpicked by the government.
About the limited tendering process, China has already given its primary consent, sources said.
Since independence, China has provided Bangladesh $1,519 million in soft loans and grants. Of the sum, $916 million came in the last seven years from FY10 to FY16 alone.
It was $303 million in the preceding seven years from FY02 to FY09.
