Bangladesh - Independent Evaluation Group - World Bank

3.33 Power Sector. In addition to investment climate support, the Bank supported the
Power Sector Development Technical Assistance (FY04, $15.6 million), Siddhirganj Peaking
Power Project (FY09, $350 million), and policy conditions in the Power Sector Development
Policy Loan (FY08, $120 million). Bank support also helped ensure government transfers for
prompt payment to independent power producers. It supported the registration of the South
Zone Power Distribution Company as a public limited company, strengthened the
Bangladesh Energy Regulatory Commission, and supported increases in electricity tariffs to
reduce the gap with the cost of supply.
3.34 Relevance. The relevance of the World Bank’s work in power sector development is
substantial, given that power shortages cost the economy an estimated 2 percent of GDP.
Since the Bank’s Power Policy was adopted by the Board in 1993, the Bank’s approach to
the sector in many countries has focused on unbundling, arm’s length regulation,
competition, and privatization or corporatization. The Bank’s work in Bangladesh was
consistent with this approach. Helping spin off corporate entities from ministries in the power
sector was a relevant response to inefficiency. Yet, poor service and persistent losses
continue. Regulatory improvements were relevant as a step toward reducing the burden of
subsidies on the budget, and the risk of financial insolvency of entities such as the BPDB.
3.35 Giving the private sector leadership in power generation is contestable. By 2010, 38
percent of the country’s electricity was generated by privately-owned firms, in part as a result
of the country accepting advice from the World Bank and other development partners
regarding the desirability of private participation in the sector 15 . Yet, by comparison,
although private firms in India generated less than 15 percent of electricity, there is a closer
match between demand and supply as a result of considerable public investment in the sector.
Given the risks inherent in the sector, particularly in large generating plants with expected
lives of 20 to 30 years, it may not be reasonable for the Government to be planning such a
large and expanding role for private financing of investment in the sector in Bangladesh.
3.36 Investment Climate. World Bank Group support to improve the investment climate
was a priority. Operations approved earlier, but continuing during the period between 2004
and 2010 include: Financial Institutions Development (closed FY06), Private Sector
Infrastructure Development (closed FY07), Microfinance II (additional financing in FY07,
$15 million), Financial Services for the Poorest (closed FY08), and Central Bank
Strengthening Project (active, $46 million). New operations approved during the period
include: EMTAP (listed above), Enterprise Growth and Bank Modernization (FY04, $250
million), Investment Promotion Financing Facility (FY06, $50 million), and policy
conditions in the DSCs and TSC. Among the objectives of this wide-ranging support was to
finance the Infrastructure Development Company, Ltd., which provided subordinated foreign
currency debt to priority infrastructure projects, and the Infrastructure Investment Facilitation
Center. It provided transactions support to line ministries and private infrastructure
developers in competitive bidding, marketing subprojects, and managing the process of
structuring, documenting, bidding, negotiating, and awarding concessions. Bank support also
15 The Bank supports both small privately-owned power plants through its Investment Promotion and Financing
Facility Project, and large schemes such as Bibiyana, for which the Bank has provided advisory support. The
Bank’s largest engagement is under the Siddhirganj Power project, which is a government- owned facility.
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