Bleak prospect for ADP execution as donors reject amended PPA
Officials say project implementation to be adversely hit, delayed

FHM Humayan Kabir

The government's annual development spending would be "hit adversely" after major lenders told the authorities to follow their guidelines in procuring goods and works in donors-funded projects, officials and experts said Saturday.

The World Bank and the Asian Development Bank gave the "highly unusual" instructions early this month after they expressed their unhappiness at the government's amendments to some key provisions of the Public Procurement Act (PPA) and related rules.

Officials and experts told the FE that the development banks' moves would badly impact the government's annual development spending, slowing down the country's Gross Domestic Product at a time when the economy has been showing signs of decline.

Former finance and planning adviser Dr Akbar Ali Khan said the ADB and WB's rejection of the amended procurement laws and rules would "jeopardize" achievement of the targeted spending in the Annual Development Programme (ADP).

"There is no doubt that rejection of amended procurement laws by donors will adversely affect implementation of the ADP.

xThe government should have thought twice before enacting the amendments," Khan said.

"The donors instructions to use their guidelines for all sorts of procurements will slow down every step of implementation in donors-funded projects. It means the government will have to seek donors' approval even in minor procurements," he said.

The government has a target to spend Tk305 billion in the ADP this financial year, the biggest development expenditure in the country's history.

Donors-funded projects account for 54 per cent of the total spending, with majority of the funds coming from the WB and the ADB.

Experts said amendments to the procurement laws such as allowing inexperienced bidders for works worth up to Tk20 million would breed corruption and harm quality of development works.

They said the newly incorporated provisions of lottery system to select bidders and rejection of the bids below or above five per cent of the official estimation would also be major hurdles to project execution.

A top finance ministry official with years of experience in development budget said almost all donor-funded projects under the ADP would be "delayed and affected" due to the "highly unusual" position adopted by key lenders.

"It's really a bad signal for the economy and the projects under implementation. If we are to follow donors' procurement guidelines there will be delay in every step of project execution," he told the FE, requesting anonymity.

The lenders have said they would not accept changes in procurement laws, particularly related to the projects funded by them. They have threatened to revise the existing financing contracts of all their funded projects.

Early this month the WB in a letter to finance minister AMA Muhith asked the government to "put on hold" local procurements for all on-going projects under its funding and said that it would revise contracts if necessary.

In another letter addressed to the finance minister, the ADB warned "under no circumstances" that it would fund government purchases, "which are not consistent with the bank's procurement guidelines".

Former finance and planning adviser Mirza Azizul Islam said the donors' tough stand would compound woes for the economy, which has already been hit by falling exports, slide in overseas jobs and a slower-than-expected imports.

"The donors decision will definitely hit implementation of the ADP. Already the size of the ADP is too big and these latest developments mean there would be no way government would achieve its spending target," he said.

"Since major donors said they would revise financing contracts with the government, the revision process of funded projects will take more time and project execution will be delayed subsequently," he added.

Planning ministry officials said the government has implemented only 10 per cent of the Tk305 billion budget in the first quarter (July-September) of the current 2009-10 fiscal, which is far below the quarterly target.

"But that was before the WB and the ADB took the tough move," said a planning official.

"If they make us use their procurement guidelines in rest of the year, I am sure we may not achieve even 70 per cent of the spending target this year," he added.