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TRANSCRIPT
Document of
The World Bank
FOR OFFICIAL USE ONLY
RESTRUCTURING PAPER
ON A
PROPOSED PROJECT RESTRUCTURING
OF
BD PRIVATE SECTOR DEVELOPMENT PROJECT
CREDIT OF US$120 MILLION EQUIVALENT
March 1, 2011
TO THE
PEOPLE’S REPUBLIC OF BANGLADESH
JULY 14, 2013
FINANCE AND PRIVATE SECTOR DEVELOPMENT (SASFP)
SOUTH ASIA REGION
This document has a restricted distribution and may be used by recipients only in the performance of their
official duties. Its contents may not otherwise be disclosed without World Bank authorization.
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2
ABBREVIATIONS AND ACRONYMS
ADR Alternative Dispute Resolution
BASIS Bangladesh Association of Software and Information Systems
BEZA Bangladesh Economic Zones Authority
BEPZA Bangladesh Export Processing Zones Authority
BHTPA Bangladesh Hi Tech Park Authority
BICF Bangladesh Investment Climate Fund
BIAC Bangladesh International Arbitration Centre
BITM BASIS Institute of Technology and Management
CB Capacity Building
CCU Central Coordination Unit
CETP Central Effluent Treatment Plant
DFID (UK) Department for International Development
DPP/TAPP Development Project Proposal/Technical Assistance Project Proposal
EMF Environmental Management Framework
EOI Expression of Interest
EP Export Permit
EPZ Economic Processing Zone
ERD Economic Relations Division
EZ Economic Zone
GAAP Governance and Accountability Action Plan
GoB Government of Bangladesh
IBE Improving Business Environment
IDA International Development Association
IFC International Finance Corporation
IP Import Permit
IT/ITES Information Technology/IT Enabled Services
KHTP Kaliakoir Hi Tech Park
M&E Monitoring and Evaluation
MAR Moveable Assets Registry also referred to as Secured Lending Regime
for movable property
MTR Mid-Term Review
NASSCOM National Association of Software and Services Companies (India)
OSS One-Stop Shop
PAC Project Advisory Committee
PAD Project Appraisal Document
PCN Project Concept Note
PDO Project Development Objective
PIF Public Investment Facility
PIU Project Implementation Unit
PPP Public-Private Partnership
REOI Request for Expression of Interest
RFP Request for Proposal
RJSC Registrar of Joint Stock Companies and Firms
3
RMG Ready-Made Garments
SCP Sub-contracting Permit
SMART Specific, Measurable, Achievable, Relevant, and Time-phased
SME Small and Medium Enterprise
STR Secured Transaction Regime
TA Technical Advisory
TF Trust Fund
TNC Trans-national Corporation
UNCITRAL United Nations Commission on International Trade Law
Regional Vice President: Philippe H. Le Houerou
Country Director: Johannes Zutt
Sector Manager: Henry Bagazonzya
Task Team Leader: Manju Haththotuwa
4
BANGLADESH
BANGLADESH – PRIVATE SECTOR DEVELOPMENT SUPPORT PROJECT
CONTENTS
A. SUMMARY ......................................................................................................................................... 7 B. PROJECT BACK GROUND AND STATUS ................................................................................... 7 C. PROPOSED CHANGES .................................................................................................................... 9 D. APPRAISAL SUMMARY ............................................................................................................... 13
ANNEX 1: REALLOCATION OF FUNDS BY COMPONENT AND DISBURSEMENT ................ 15 ANNEX 2: RESULTS FRAMEWORK AND MONITORING ............................................................. 16 ANNEX 3: GOVERNANCE AND ACCOUNTABILITY ACTION PLAN .......................................... 20
5
Restructuring Status: Final Restructuring Type: Level two Last modified on date : 07/11/2013
1. Basic Information Project ID & Name P120843: BD: Private Sector Development Support
Country Bangladesh
Task Team Leader Manju Haththotuwa
Sector Manager/Director Henry K Bagazonzya/ Sujata Lamba
Country Director Johannes C.M. Zutt
Original Board Approval Date 03/01/2011
Original Closing Date: 06/30/2016
Current Closing Date 06/30/2016
Proposed Closing Date [if applicable]
EA Category A-Full Assessment
Revised EA Category A-Full Assessment-Full Assessment
EA Completion Date 04/30/2010
Revised EA Completion Date
2. Revised Financing Plan (US$m) Source Original Revised
BORR 3.00 0.00
DFID 17.41 17.41
IDA 120.00 40.00
Total 140.41 57.41
3. Borrower Organization Department Location
The Government of Bangladesh Bangladesh
6
4. Implementing Agency Organization Department Location
Bangladesh Economic Zones
Authority
Prime Minister's Office Bangladesh
Bangladesh Export Processing
Zones Authority (BEPZA)
Prime Minister's Office Bangladesh
Bangladesh High Tech Park
Authority
Ministry of Information
Communication and
Technology
Bangladesh
PSDSP Central Coordinating Unit External Resources
Department, Ministry of
Finance
Bangladesh
5. IDA Disbursement Estimates (US$m) Actual amount disbursed as of 07/11/2013 3.86
Fiscal Year Annual Cumulative
2014 9.00 12.86
2015 9.00 21.86
2016 18.14 40.00
Total 40.00
6. Policy Exceptions and Safeguard Policies Does the restructured project require any exceptions to Bank policies? N
Do the restructured projects trigger any new safeguard policies? If yes, please select from
the checklist below and update ISDS accordingly before submitting the package.
N
7a. Project Development Objectives/Outcomes Original/Current Project Development Objectives/Outcomes
The Project Development Objective (PDO) is to facilitate investment in growth centers in the emerging
manufacturing and services sectors of the economy with the aim of generating employment.
7b. Revised Project Development Objectives/Outcomes [if applicable]
7
BANGLADESH PRIVATE SECTOR DEVELOPMENT SUPPORT PROJECT (PSDSP)
RESTRUCTURING PAPER
A. SUMMARY
In view of developments in the country context, unrealistic projections in the original design, and
emerging challenges since project approval, the team is proposing practical modifications to the project
and corresponding agreements. The project team feels strongly that the original PDO can be achieved
with 41% of the originally estimated funds. Accordingly the project was right-sized with the cancellation
of SDR 51.3million of the original SDR 78 million of IDA funds on the June 26, 2013.
The Restructuring Paper (RP) seeks the Country Director’s (CD) approval for the following:
1. Revision of project scope to align it with implementation realities and the reduced financing
envelope;
2. Rationalization of the results indicators at both PDO and intermediate outcome levels to reflect
the revised project scope and to be more specific, measurable and realistic;
3. Reallocation of credit and grant funds among the disbursement categories consistent with the
downsizing;
4. Inclusion of a Governance and Accountability Action Plan (GAAP) to address governance issues.
5. Simplification of provisions on institutional arrangements in the Financing Agreement and
making it consistent with the current project scope and size.
B. PROJECT BACKGROUND AND STATUS
Project Background
The Project Development Objective (PDO) is to facilitate investment in growth centres in the emerging
manufacturing and services sectors of the economy with the aim of generating employment. Specifically,
the project has three components:
Capacity building of government institutions (including BEZA, BEPZA, HTPA, and ERD)
involved in the development of economic zones (EZ) through TA;
Public Investment Facility (PIF) to finance off-site, last-mile infrastructure to facilitate the
licensing and development of private-sector led economic zones, starting with the Kaliakor Hi-
Tech Park (KHTP) and extending to other zone projects. The Project will also meet resettlement
compensation where applicable;
Business linkages, product and process improvement of local firms supplying to or situated in
the economic zones to build better linkages between firms within the zones and related suppliers
by providing training, improving skills in the labor pool, quality standards and certification of
local firms.
The implementing agencies of the Project are the Bangladesh Economic Zones Authority (BEZA), the
Bangladesh Hi-Tech Park Authority (BHTPA), and the Bangladesh Export Processing Zones Authority
(BEPZA), all of which have mandates for zone development. BEZA and BHTPA are new agencies
8
established by GoB with project funding for building their capacity. The Economic Relations Division
(ERD) is the Central Coordinating Unit (CCU) for the Project.
The Project was initially financed by SDR 78 million credit from IDA and $17.41 million grant from UK
DFID. UK DFID grant was applied net of taxes and IDA credit was inclusive of all taxes.
Project Implementation Status:
Disbursement. The project has been effective since August 2011 and has been rated “Moderately
Satisfactory” for both achievement of PDOs and implementation progress1. The project has experienced
initial delays and slow disbursement (to date, $3.86 million of IDA funds) against original disbursement
projections (in excess of $80million). These are due to protracted delays in government of Bangladesh
(GoB) approvals, Padma Bridge legacy issues, and Project design issues.
Capacity Building within GoB. The Project has supported all the zone related institutions (BEZA,
BEPZA, BHTPA) and the CCU (ERD) to participate in important international training events which also
provide a valuable opportunity for the GoB to establish contact with potential zone developers and large
investors. The Project has sponsored the participation of GoB officials in the World Free Zone
Convention in London in December 2012, where the GoB in a side event gave a presentation for 40
potential investors, and will sponsor the GoB in the upcoming NASSCOM trade fair and roadshow for the
IT / hi-tech sectors. This international training has also been complemented by focused in-country
training by visiting experts under the PSDSP.
Business Environment and Regulation. The Bangladesh Economic Zones Authority (BEZA) was
established in 2011 and EZ Rules were drafted to implement the EZ Act 2010 in close collaboration with
the IFC. Significant environmental and social management practices have been successfully piloted
through BEPZA in the country’s EPZs, which will eventually be rolled out into the new economic zones.
As a result, labor compliance among the companies operating in the country’s EPZs has been measured at
more than 93%, while baseline data is being collected on environmental compliance. The social and
environmental systems in place include: (a) sixty social counselors funded under the project to improve
labour relationships and compliance in EPZs (b) 24 environmental counselors who will be responsible for
overall environmental management of the zones, monitoring implementation of the Environmental
Management Framework (EMF), monitoring performance of the Central Effluent Treatment Plant
(CETP) and guiding enterprises’ environmental management.
Zone Development. BEZA has identified five potential zone sites and has taken 2 of those sites/projects
(Mongla and Sirajganj) directly to the market to find a private zone developer by floating a Request for
Expressions of Interest (REOI). The EOIs have been short-listed and an RFP is being issued for final
tendering. The Project is also supporting BEZA for conducting full feasibility studies and master
planning for the three other potential EZ sites with the aim of taking them to market once the feasibility
studies are complete. The consultancy firm for these feasibilities has been chosen, and mobilization is
expected in June 2013. BEZA has initiated measures to alienate land at the five sites for developing EZs.
The Project assisted the GoB in preparing tender documents and PPP concession agreements for a private
Park Developer for KHTP. Competitive bids were received through a tender in mid-2012 to develop the
Kaliakor Hi-Tech Park. The final award of the tender is pending Ministry of Law approval.
1 Rating from Fifth Implementation Support Mission (February 3-11, 2013)
9
Capacity Building in Private Sector. The Project has supported the Bangladesh Association of
Software and Information Systems (BASIS) to develop a program on management and capacity
development of the ICT industry through its training arm BASIS Institute of Technology and
Management (BITM). The Project has embedded a PSD and Technical Industry Advisor at BASIS to
perform the necessary background research for the establishment of BITM and develop it scope of work
and training plan. The Advisor has facilitated strategic contacts with international IT/ITES companies
that may be interested in investing in the sector in Bangladesh and has completed a concept note which
includes internationally-recognized certification mechanisms for the Bangladesh IT industry.
Project Challenges
Delays with the regulatory framework for economic zones: The Project-supported draft EZ Rules
were reviewed by the BEZA Board of Governors but have been pending approval since April 2012.
Efforts to promote the new EZs among private sector developers – especially those from Japan and
Europe who require clear rules of investment – have often been hampered by the delays with the final
approval for the EZ Rules.
Delays with the GoB approval of PSDSP project proposals (DPP) for BHTPA and the final
award of the KHTP tender: For a variety of reasons, including the Padma Bridge legacy issues and
disputes with the Railways Division over railway link costs, the DPP for the BHTPA did not receive
GoB approval until February 2013. This held back implementation of the component accounting for
the majority of PSDSP funds ($77 million). The final award of KHTP to the winning bidder has been
pending for nearly a year. This has substantially affected disbursement performance.
Rotation of key GoB staff: A steady rotation of all key personnel in BEZA, including the exit of the
Executive Chairman in November 2012, has hampered proper impetus for Project activities in that
institution, although a new Executive Chairman was appointed in May 2013. The Project has
provided extensive capacity building for each successive wave of staff, including formal in-country
training in master planning for economic zones and PPPs. In addition both BEZA and the BHTPA
have received the support of an embedded expert working within the PIU to accelerate capacity
building of the GoB team and make rapid progress on key activities.
Problems with original Project design: The original cost estimates were overestimated and project
implementation timelines were unrealistic. They were made under the assumption that construction
would begin immediately, and that $83.62 million (or 69.7%) would be disbursed during the first two
full fiscal years of implementation. This profile was not consistent with international practice for
economic zone development worldwide, nor did it take into account a number of critical activities and
milestones which were prerequisites for achieving that amount of disbursement, such as; feasibility
studies being conducted on each potential zone, investment promotion to zones, land alienation for
zones, the tendering of zone projects to private sector developers, landfill (which in Bangladesh is a
major issue as it takes up to a year for land to settle), design and construction of EZs
In light of the challenges and delays mentioned above, the Government of Bangladesh and the World
Bank agreed that the project costs needed to be right-sized and the IDA financing adjusted accordingly.
Consequently SDR 51.3 million was cancelled by the Borrower on June 26, 2013. The proposed changes
described below bring the project description in line with the reduced financing envelope.
10
C. PROPOSED CHANGES
The PDO continues to be relevant for the country’s poverty alleviation efforts through private sector
investments and job creation in economic zones. Hence, no changes are proposed to the PDO itself.
However, in order to ensure the objectives are achieved, the following changes set out in Section A are
proposed:
Revision of project scope
The revision of project scope involves some changes in physical investments and advisory services with
primary emphasis on financing plan changes. The nature of the changes and rationale are described
below.
Number of Zones: The number of zones to be supported under the investment project would
increase from three to at least five with one expected to be open for business during the
implementation period with partial occupancy. However the quantum per zone will be less than
was originally estimated and some of the last mile infrastructure will be developed after the
project’s current duration. Additional funds have been added to BEZA’s allocation to reflect the
construction of last-mile infrastructure for enabling works in the additional zones.
Comilla EPZ expansion – One of the original subprojects identified for PSDSP support was the
expansion of the existing Comilla EPZ, however due to strong community opposition to the
project, a strategic decision was taken not to fund the subproject. Hence, this activity is being
dropped from the project and the provisions of Section I.C.4 of Schedule 2 of the FA (relating to
the preparation of safeguard instruments for the Comilla EPZ) will be dropped as no longer
relevant.
Other new zone in Chittagong – A zone in Chittagong is still likely to be funded under the project
and at least partially constructed in the lifetime of the project. The initially projected funding
however is in excess of that anticipated for such a new private zone in Chittagong and the project
funding has been adjusted accordingly.
Rail connections, Carriages and Landings – in the course of analyzing the project, the current
road and road transportation system were deemed sufficient for the Kaliakoir Hi-Tech Park,
especially in its early phases. Hence, the railroad and landing are no longer required under the
current project and references to this activity will be deleted from Schedule 1 of the FA.
Training and Operating Costs - TA and expertise required to assist BEZA and BHTPA, which
are two newly created institutions, was under estimated and the allocated funding has been
increased accordingly. Furthermore, in the original Financing Agreement support to ERD and the
PIUs for the day-to-day management and coordination of the Project was not explicitly included
in the description of the project in Schedule 1, therefore this support will be added as a new Part
4, entitled “Project Management,” in Schedule 1 of the FA.
Compensation for Eligible Resettlement Costs – None of the sites currently identified by the GoB
for zone development appear to require major resettlement or have livelihood issues. Thus the
original allocation of $27.5 million will not be needed and instead a minimal contingency of
$2.17 million has been provided.
11
Dispute Resolution Mechanism (DRM) and Secured Lending Regime for Moveable Property
(MAR) – During implementation it was found that the project activities related to the
development of dispute resolution mechanisms to settle commercial disputes in connection with
economic zone investments had been supported by IFC and were already in place. Similarly, the
MAR has also progressed already under IFC assistance. Therefore, IDA support is no longer
needed and will be dropped from Parts 1(a)(v), 1(b)(iv) and 1(b)(iv) of Schedule 1 of the FA.
Consulting Services – Technical assistance has been scaled up, given that the original estimates
did not take into account market rates for the feasibility studies to potential zones, nor the scope
of the transaction advisory services for zone projects nor the sector specific training and capacity
building work to be carried out by the BASIS Institute for Technology and Management (BITM)
for ICT.
Revised cost reallocation by project component and projected disbursement tables are in Annex 1.
Implementation Arrangements
The following additional changes are to be incorporated in the revised Financing Agreement to reflect
ground realities of current project implementation.
In order to enhance good governance good governance practices, a new Governance and
Accountability action Plan (GAAP) in Annex 3 has been developed for the Project and will be
incorporated in the revised FA. The GAAP is a result of numerous conversations with the
primary GoB clients, the private sector, and a wider group of stakeholders, both in the process of
preparing the original Project design as well as interactions since the Project became effective.
The version attached in Annex 3 incorporates all comments from the GoB and other stakeholders
as of June 2013.
A PAC has been constituted with the functions agreed upon with IDA, however experience has
shown that the composition needs to be flexible in order to respond to changing challenges
during implementation. Therefore, the GoB has requested that the PAC composition not be
prescribed in the Financing Agreement.
The Procurement Risk Mitigation Plan (PRMP) referred to in the GAAP and the Financing
Agreement, Schedule 2, will be finalized no later than end September, 2013 and the Financing
Agreement amended accordingly.
Reallocation of credit and grant funds among the disbursement categories
In line with the revised project scope described above, the proposed credit proceeds reallocations are
primarily in the areas of works (reduction of SDR 34.9 million) and Compensation for Livelihood
Restoration (referred to as ”Eligible Resettlement Costs” in the FA) (reduction of SDR 16.4 million).
Goods are being reduced from the original budget allocation by SDR 3.7 million, to reflect the
considerably lower allocation found under this category in the individual DPPs and TAPPs of the
implementing agencies. Consulting Services have been increased by SDR 1.4 million whilst Operating
and Training costs have been considerably augmented from original levels (increase of SDR 2.5 million).
Changes in allocation are primarily to the IDA funds. Grant allocation DFID grant allocation has been
revised to be consistent with GoB’s TAPPs and DPP. In addition, at the request of GoB, the IDA credit
will finance all taxes (DFID grant is provided net of taxes).
12
These changes by expenditure category are summarized in the following table:
Rationalization of Results Framework
With respect to the results framework, the PDO is still valid, and will not be modified under the proposed
restructuring. However, the restructuring includes modifications to both the outcome indicators and
intermediate outcome level indicators and changes in targets. These will now reflect the revised project
scope and make the indicators more specific, measurable and realistic. Specifically, Annex 3 of the PAD
had substantial quality at entry errors with inconsistencies between Table 1 and Table 2, as well as with
the original FA. The framework has now been corrected and streamlined. The discussion and rationale
Category of
Expenditure
Allocation
% of Financing
Original PAD Restructuring Paper Original Restructured
(USD) (SDR)
(USD) (SDR)
IDA
Works 76,835,000 49,900,000
22,375,057 14,930,000 94 82
Goods 10,150,000 6,600,000
4,285,375 2,860,000 100 100
Consultants
Services 5,015,000 3,300,000
7,007,248 4,680,000 30 37
Training &
Operating
Costs
500,000 330,000
4,160,446 2,780,000 33 81
Eligible
Resettlement
Costs
27,500,000 17,870,000
2,171,875 1,450,000 100 100
Sub-Total 120,000,000 78,000,000
40,000,000 26,700,000 87 70
DFID
Works 5,000,000 ---
5,000,000 --- 6 18
Goods --- ---
--- --- --- ---
Consulting
Services 11,409.930 ---
11,432,878 --- 70 63
Training &
Operating
Costs
1,000,000 ---
977,052 --- 67 19
Compensation
for Livelihood
Restoration
--- ---
--- --- --- ---
Sub-Total 17,409,930 ---
17,409,930 --- 13 30
GOB
Government
contribution
(taxes) 3,000,000 ---
--- --- --- ---
Grand Total 140,409,930 ---
57,409,930 --- --- ---
13
for the change in each indicator as well as the new results framework are set out in Annex 2 of the RP.
For the purpose of this restructuring, the team has based the revised Results Framework on Table 2 (from
page 37 of the PAD), as this was the most technically consistent basis for projections and monitoring. In
addition, to streamline the FA and enhance operational flexibility, the KPIs will be removed from the FA,
and, if needed, revised by common agreement between the Government and IDA.
D. APPRAISAL SUMMARY
Technical and Fiduciary: The Project team has assessed the re-sized project, and with the
resources and timeframes indicated, believes that the project implementation plan can be
completed and objectives as defined can be achieved within the remaining time period. However,
project implementation should be revisited closer to the closing date to assess progress and the
need for further revisions. The Technical capacity, procurement capacity and financial management
capacity remains unchanged within PIUs.
Institutional arrangements remain unchanged. As per the original PAD, it was agreed that at the time of
the Mid-Term Review (MTR), scheduled for FY14, implementation arrangements would be revisited, in
terms of moving the Central Coordination Unit (CCU) from its current location in the Economic
Relations Division (ERD) to BEZA. This arrangement will be revisited at the MTR and will have to be
reevaluated to ensure that BEZA has the required capacity and personnel to effectively carry out the
duties of the CCU. Currently, there are significant capacity issues surrounding BEZA’s ability to
adequately manage a private zone regime, but a permanent Chairman has been appointed, and BEZA has
begun to engage with investors interested in developing economic zones. The capacity building
incorporated in the project should be sufficient to implement the restructured project as defined.
Financial and Economic Analysis: The original financial and economic analysis of the project
remains valid under the current restructuring. The assumptions which the original analysis relied on
assumed 3 sites - KHTP, Comilla and a site in Chittagong. Changes in the pipeline of potential sites were
anticipated even under the original design. Comilla site will now be replaced by a new site from GoB’s
current short list of 5 priority EZs. Chittagong will now have 2 sites. KHTP remains at the core of the
analysis. In fact the efficiency of the project has improved under the restructured scenario as it achieves
the same outcomes and PDO in the long run with a considerably smaller investment. It will facilitate the
development of as many zones (value added through land development) and at least as many jobs with the
reduced investment in a shorter time horizon, making the IRR and NPV more attractive.
Social and Environment: The project continues to be Category A. The safeguard instruments -
Environmental Management Framework (EMF) and Social Management Framework (SMF), prepared for
the project remains relevant even after restructuring. During the next planned update of the EMF and
SMF it will be updated by end September 2013. This update will incorporate: (i) provisions to support all
categories of encroachers, if adversely affected (ii) Setting up of “Green Cell” at BEPZA. The updated
EMF and SMF will be disclosed in the web sites of GoB, BHTPA and BEZA.
Safeguards and Risk: The critical risks evaluated during the original appraisal are not elevated under
the restructured scenario and overall risk remains at “moderate”. Indeed three of the risk dimensions have
reduced since original appraisal (PPP knowledge, procurement and fiduciary capacity of PIUs are now
built up to an acceptable standard). At least one zone has already had private sector participation (in the
tender for KHTP). No additional BPs or OPs are triggered under the restructured project. The project
team has also recently developed an ORAF (not part of the RP package) which addresses the risk
dimensions in more detail.
14
The table below summarizes the risk profile for PSDSP:
Type of Risk Rating
Project Stakeholder Risks Substantial
Operating Environment Risks
Country Risk Substantial
Sector/multi-Sector Risk High
Implementing Agency Risks
Capacity Risks High
Project Risks
Design Risks Substantial
Social and Environmental Risks Moderate
Program and Donor Risks Low
Delivery Monitoring and Sustainability Risks High
15
ANNEX 1: REVISED ALLOCATION AND DISBURSEMENT
The following is a component-wise breakdown of the proposed reallocation:
The new disbursement projections under this restructuring are detailed in the table below:
Fiscal Year
Original IDA
Projection from
PAD
Revised IDA
Projections
DFID Trust
Fund
Total Revised
(IDA + TF)
FY 2011 3.10 0.00* 0.00* 0.00*
FY 2012 33.26 0.53* 0.27* 0.80*
FY 2013 50.36 3.33* 3.76* 7.09*
FY 2014 8.17 9.00 6.34 15.34
FY 2015 12.61 9.00 7.00 16.00
FY 2016 12.50 18.14 closed 18.14
Total 120.00 40.00 17.37 57.37
*represents actual disbursed
Project Costs
(USD Millions)
Original Proposed
Components / Activities IDA DFID Total IDA DFID Total
Component 1: Technical
Advisory and Capacity
Building
3,120,000 10,084,930 13,204,930 6,286,063 6,447,491 12,733,554
Sub-component 1.1:
Capacity Building for
Zone Related Institutions
970,000 9,474,930 10,444,930 4,699,188 6,090,991 10,790,179
Sub-component 1.2:
Creating a Conducive
Business Environment
within EZs
2,150,000 610,000 2,760,000 1,586,875 356,500 1,943,375
Component 2: Public
Investment Fund
111,865,000 5,000,000 116,865,000 24,546,932 5,000,000 29,546,932
Compensation for livelihood
restoration
27,500,000 ---- 27,500,000 2,171,875 --- 2,171,875
Component 3: Business
Linkages and Product /
Process Improvement
5,015,000 1,325,000 6,340,000 5,006,559 4,985,387 9,991,946
Training and Operating
Costs
1,000,000 1,000,000 4,160,446 977,052 5,137,498
Sub TOTAL 120,000,000 17,409,930 137,409,930 40,000,000 17,409,930 57,409,930
16
ANNEX 2:
Results Framework and Monitoring
The changes to the Results Framework (RF) and rationale are described below. The original RF in
Annex 3 of the PAD could significantly benefit from more “SMART” (specific, measurable, attributable
and realistic) indicators relevant to ground realities during the implementation phase of the Project. The
following RF will replace table 1 and 2 in Annex 3 in the PAD.
PDO Indicators
The PDO indicators have been rationalized down to 3 from the original 6 indicators. The new indicators
are designed to be achievable in the remaining 3 years of the project and relevant to how economic zones
contribute to the project PDO.
The first indicator - “Direct private investment by zone developers in new zones” measures private
investor interest and quantum of investment targeted towards zones in Bangladesh. It makes specific
reference to zone developers as opposed to individual companies locating in the zone.
The assumptions which explain the numbers in the first indicator are as follows: At least 1 zone will be
50% complete by FY15 and 100% complete by FY16. Total cost of the zone development (phase 1 of
200 acres at KHTP or similar site) estimated at $70million and at least 20% of this is funded by private
equity ($14 million). Therefore $10 million at completion in FY16 is a prudent 72% of this estimate.
Two other zones are also expected to be substantially complete but not taken into account in the indicator
as there is risk of delay in their execution.
The second indicator - “Direct private investment by zone tenant companies located within new zones”
measures take up of tenant space within zones and more directly the quantum of investment by tenant
companies. The investment calculations assumes at least one zone is expected to be partially occupied
with about $5million in equipment invested by the private tenant company and another $5 million for
50,000 square feet of covered space developed and paid for by the tenant companies (i.e. 2 to 4 tenant
companies).
The third Indicator - “Number of jobs created (% female)”, is directly addressing the of job creation
dimension within zones of the PDO, focusing also on female employment %. The indicator is specific
and measurable. The projected employment figures are consistent with the assumptions in the second
indicator where 50,000 square feet of tenanted space could accommodate a work force of 1000. Current
experience in the targeted sectors indicates that 30% or more of those employed being female as a
realistic estimate.
Intermediate Result Indicators
The existing results monitoring framework is too numerous, complex, unrealistic in its design, with a high
number of indicators attempting to capture results which will not be attained within the remaining project
lifetime.
17
Component One – Technical Assistance and Capacity Building
The first new Intermediate Results Indicator (IRI) - “Cumulative number of firms receiving a license to
develop an economic zone” will measure the capacity of implementing agencies (HTPA and BEZA) to
attract and regulate private sector participation in zones.
The second IRI - “Cumulative number of completed site assessments, feasibility studies, master plans,
EIAs or SIAs in new zones (cumulative number)” demonstrates a well-planned zone program which
offers investors a pipeline of projects following sound analysis, with adequate safeguards for social and
environmental issues.
The third IRI measures savings to companies located within economic zones in time (and potentially
costs) of obtaining key licenses and permits such as, “Time (days) to process business registration in a
zone” (IRI 4). The baseline is taken from the Doing Business Report, 2010 for firms located outside the
Bangladesh Zone regime. This will be contrasted to those firms registered through the Zone regime.
Component Two – Public Investment Facility (PIF)
The two existing Intermediate Results (“Access to industrial serviced land”, and “Provision of improved
infrastructure services”) were originally designed to address these 2 binding constraints the private sector
faces in Bangladesh. The revised IRI embodies these twin objectives into a single indicator by measuring
the “Development of new economic zones”.
This RFI will count the zones partially and fully developed with private sector participation. At least 1
zone is expected to be open for business and partially tenanted by the time the project closes.
Component 3: Business Linkages and Product/Process Improvement
This component is focusing on providing direct support to develop the private sector and maximize the
spillover effects to the local industry from FDI and business activity within the zones. Developing the
local private sector to be more competitive, innovative with their products/services, which will also
satisfy international standards of quality and certification will help these enterprises to integrate into the
supply chain of firms within the zones.
Increasingly the skill level of the work force in key industry segments such as the ICT sector. This will
impact this objective and is measured through the IRI – “Cumulative number of people receiving industry
specific training or certification”.
Compliance with ISO and other internationally recognized quality and environmental standards will also
enhance the opportunities for local firms to participate in the economic activity associated with the zones.
This is therefore measured by the IRI – “Cumulative number of firms located in economic zones
complying with relevant environmental standards (ISO 14000 or equivalent)”. Another IRI measures firm
level quality assurance by measuring “Incremental number of firms complying with Quality standards
(ISO 9001 or equivalent)” attributable to the Project.
18
Revised Results Framework, PSDSP
Outcome Indicators
Base-line
FY11 2013 2014 2015 2016
Frequency & Reports
Data Collection
Instruments
Responsibility for Collection
PDO Direct private investment by zone developers in new zones* (US$ millions)
0 -- -- 5 10 Annual Reports
BEZA, BEPZA, HTPA report
BEZA, BEPZA, HTPA
Direct private investment by zone tenant companies located within new zones (US$ millions)
0 -- -- -- 10 Annual Reports
BEZA, BEPZA, HTPA report
BEZA, BEPZA, HTPA
Number of jobs created (% female)
0 -- -- -- 2000 (30%)
Biennial for each zone
BEZA, BEPZA, HTPA report
BEZA, BEPZA, HTPA
Component 1 TA & Capacity Building
Cumulative number of firms receiving a license to develop an economic zone*
0 -- 1 3 5 Annual Reports
BEZA, HTPA records
BEZA, HTPA
Cumulative number of completed site assessments, feasibility studies/master plans, new zones – Cumulative No.
1 -- 4 5 6 Ongoing tracking by the Authority
BEZA, BEPZA, HTPA report
BEZA, BEPZA, HTPA
Time (days) to process business registration in a zone.
44**
-- 19* - 9 Ongoing tracking by the Authority
BEZA, HTPA report & 3
rd
part Survey
BEZA, HTPA & CCU
Component 2 Investment Facility (PIF)
Development of new economic zones* (in-progress)
0 -- 1 2 3*** Annual Reports
BEZA, BEPZA, HTPA report
BEZA, BEPZA, HTPA
19
Component 3 – Business Linkages & Product-Process Improvement
Cumulative number of people receiving industry specific training or certification
0 -- 200 800 2000 Quarterly Reports
BEZA, HTPA, BITM report
BEZA, HTPA, BITM
Cumulative number of firms located in economic zones complying with relevant environmental standards (ISO 14000 or equivalent)
0 -- 6 10 15
Quarterly Reports from environmental counselors
BEZA, HTPA environmental counselors
BEZA, HTPA
Cumulative number of firms complying with Quality standards (ISO 9001 or equivalent)
19 19 23 27 30 Quarterly Reports
BEZA, HTPA, BITM report
BEZA, HTPA, BITM
NOTES:
*GoB already has one private developer awaiting his license to develop a zone under a PPP concession.
** Baseline – Prevailing norms outside Zone regime as reported in the Doing Business, 2010.
*** At least 1 zone will be open for business (even partially completed) and a tenancy agreement signed.
20
ANNEX 3:
GOVERNANCE AND ACCOUNTABILITY ACTION PLAN
Purpose
This Governance and Accountability Action Plan (GAAP) for the PSDSP has been prepared to highlight
the governance risks of the program and to establish a plan to address these risks. This GAAP is being
retrofitted to the PSDSP which was approved by the World Bank Board in March 2011. However, given
that the project is placed in the highest risk category because the project includes extensive physical
works (Component 2 of the project) which are typically a target for fraud and corruption, a GAAP is
warranted for the project at this time.
This document will contain five sections:
1. Context for Risk Assessment
2. Governance Risks
3. Actions to Mitigate Risks
4. Monitoring, Remedies and Sanctions
5. GAAP Implementation Matrix
1. Context for Risk Assessment
Bangladesh is a high risk environment. It scores poorly on international corruption monitoring indices
although there have been some improvements in recent years. Its efforts to bolster its legal framework to
counter corruption, including the empowerment of an Anti-Corruption Commission, passage of an Anti-
Money Laundering Act, a soon-to-be adopted law protecting whistle-blowers, and joining the UN
Convention against corruption have not yet yielded substantial gains. These capacity and governance
shortcomings in the public sector, combined with the susceptibility of large civil works projects
worldwide to fraud and corruption, underline the importance of an action plan that utilizes a robust range
of tools to mitigate corruption and poor governance risks. This GAAP seeks to achieve these objectives,
and will be adjusted as is necessary to new circumstances and to challenges and risks throughout project
implementation.
The Bank’s strategy for improving governance in Bangladesh, laid out in its 2011-2014 Country
Assistance Strategy, focuses on developing accountability mechanisms in public sector operations,
especially through increased transparency. The Bank seeks to align with Government priorities in
developing the means of accountability, especially strengthening of public financial management, support
for local government, and use of information and communication technology (ICT) and the adoption of a
Right to Information (RTI) regime.
The Bank maintains a strong policy on integrity, and presses for sanctions on those who engage in corrupt
practices. Similarly, the Bank recognizes the importance of strengthening country systems to prevent
corruption from occurring. Unfortunately, the corruption allegations in the case of the Padma Bridge
construction and withdrawal of the loan request have now formed the backdrop of heightened sensitivity
for all projects requiring construction and infrastructure.
The Project Development Objective (PDO) of the PSDSP is to increase employment through the
facilitation of investment in selected emerging growth centers in the manufacturing and services sectors
of the economy. The primary PSDSP mechanism for achieving this is by enabling the environment for
21
privately-owned, developed and operated economic zones which will harness numerous tracts of land all
over the country for industrial and commercial purposes, thus creating the growth necessary to achieve
the PDO.
Given that the PSDSP involves construction of buildings, roads, and infrastructure, it contains heightened
integrity risks, hence the GAAP focuses on ensuring that every potential opportunity for corruption is
identified and specific mechanisms established for heightened multi-party scrutiny. Complementing this
GAAP is the Bank’s regular system of investigation and potential sanctions for fraud and corruption
operated by its Integrity (INT) Vice Presidency (including cross-debarment provisions with other
multilateral development banks). INT’s preventive services unit was consulted in defining this project’s
GAAP.
As part of the Project Appraisal Document (PAD), the team identified risks and established mitigation
measures (See Annex 1: Matrix of Risks and Possible Controversial Aspects from the Project Appraisal
Document).
2. Description of Governance Risks
Among the possible risks in this project – political, fraud and corruption, institutional and capacity,
procurement, contract execution and project management, financial management, etc. – the following four
are the most likely to be significant factors going forward in project implementation:
Procurement risks
Possible risks include fraud, corruption, collusion, and coercion amongst parties involved in the
procurement process. For example: collusion among the bidders; corruption involving bidders and
government officials; fraudulent documents; corruption between the bidder and the engineer; and
corruption between the winning bidder and the approving authority. Conflicts of interest may present a
serious problem, most notably through relationships with government and given that many government
officials have ties with business through family members.
The program will include the procurement of goods, services and works:
Goods: Office outfitting, furniture, computers, supplies
Services: Consulting services from both international and local firms and individuals (ranging
from a few thousand dollars to millions of dollars in the case of feasibility studies), transaction
advisory services, capacity building, strategic planning, guidelines for drafting rules, regulations
and procedures.
Works (the largest component of PSDSP funds): Construction materials, land fill, construction
of last-mile infrastructure (program / GoB funds will primarily be used for off-site infrastructure;
the private partner will generally be responsible for on-site infrastructure, although as an extra
incentive to attract the zone developer it is customary internationally for the public sector to
provide certain components of on-site infrastructure, for which Project funds may also be used).
Large infrastructure projects are prime candidates for corruption. In the process of negotiating contracts
behind closed doors, agreements can be reached that are not transparent, and under-the-table payments
can be made which are difficult if not impossible to detect. When looking into allegations of corruption,
investigators often have to rely on indirect sources of information and procedures and detect subtleties in
the bidding process in order to ferret out fraud and corruption.
22
The frequent rotation of government officials at all levels is another cause of concern under the topic of
procurement. In the life of the PSDSP project, all implementing agencies have seen at least one turnover
of personnel assigned to the project. This not only lends itself to discreet incidents of fraud, but also it
has often occurred that a GoB official is assigned to the PSDSP, gains considerable experience with and
knowledge of Bank guidelines, and is rotated out again. Since an understanding of World Bank
procurement practices and procedures is essential for the proper implementation and documentation of the
project and for avoiding practices which the Bank considers to be incorrect, the rotation of staff presents a
risk to governance.
A final source of possible concern is the performance of the private sector entity/ies chosen to either
develop the economic zone projects under the PSDSP or the individual infrastructure components within
the zones. For example, the private sector developer could fail to develop the zone according to the
master plan they have submitted when applying for an EZ license. The result could be a failed economic
zone project, valuable industrial land tied up in an unsuccessful project, and a bad reputation for
Bangladesh’s economic zones among potential investors. This is a governance issue because it requires an
effective regulatory agency to monitor the development of zone projects.
Financial Management in Implementation Risks
In the course of project implementation and monitoring the work of consultants and providers of the kinds
of goods, services and works described above, collusion is also possible between the contractor and the
PMU, including but not limited to aspects related to quality assurance, extension of time, variations to
contract and price adjustment.
For example:
[Goods] A company chosen as the principal supplier of office supplies can begin to use cheaper
supplies while being paid the same amounts in collusion with the PMU.
[Services] The GoB office supervising a feasibility study can agree to multiple time extensions
without significantly changing the scope of the work.
[Works] Two or more construction companies can collude in the bidding process for the
construction of an economic zone in order to pre-rig the bidding
Collusion can also involve the independent Construction Supervision Consultant (CSC) retained to serve
as engineer on the contracts and oversee technical implementation.
Regulatory Framework Delay Risks
A final major risk for the PSDSP project will be further delays in the GoB approving a fully-operational
regulatory framework for economic zones in Bangladesh.
The Economic Zones Act was approved in August 2010, and it took a full year (September 2011) before
the regulatory authority (Bangladesh Economic Zones Authority or BEZA) was operational, and to date a
set of implementing EZ Rules has yet to receive its final approval. They are currently with a specially-
appointed committee in the PMO, but have been through multiple desks in the GoB. They must
eventually be approved by the Board of Governors of BEZA. As of July 2013, the EZ Rules have been
pending for 22 months, since the first draft was completed in September 2011.
23
The reason for this delay is probably a combination of factors including (a) economic zones are a new
concept in Bangladesh, so GoB officials often delay the regulatory approvals because they do not
understand them; (b) it is often politically more popular to tout the sufficiency of local investors rather
than talk about attracting foreign investment which is normally associated with economic zones; (c) usual
government bureaucracy.
Similarly, the Hi-Tech Park Authority (HTPA) lacks implementing rules and regulations under the Hi-
Tech Park Authority Act of 2010; hence it lacks the necessary procedural framework for licensing private
economic zones. These delays have been due both to political economy issues as well as capacity issues.
Although economic zones play a prominent and important role in the manifestos of both political parties,
and most government agencies support the concept of economic zones, there have been considerable
differences of opinion as to how best to implement economic zones. For example, given the Digital
Bangladesh initiative, some factions of government and agencies favor concentrating on IT Parks; hence
the Hi-Tech Park Authority Act of 2010 was enacted in a far shorter time period than the EZ Act 2010.
Others believe that Bangladesh’s main competitive advantage is in traditional, labor-intensive industries,
and are therefore supporting the expansion of zones in traditional areas of textiles and garments. This
lack of unity of vision in terms of implementation is a major factor in the delays in the regulatory
framework as different visions for economic zones compete for prominence.
Lack of awareness in the GoB is another major factor in this delay, given that economic zones are a new
concept in Bangladesh. The government-owned, developed, and operated export processing zones are the
only zone model well-known in Bangladesh. Hence, when regulations and laws come up with the new
concepts of private-led zones, sales into the local market (as well as export markets), and the ability to
perform any commercial or industrial activity in the economic zones (as opposed to just manufacturing),
some officials may stall the process because they aren’t familiar with these concepts, in spite of WBG
efforts to train and familiarize over many years.
The PSDSP will continue to assist the GoB with developing the draft rules and regulations and
accompanying forms and applications for these, but when the WBG has assisted with this in the past, it
has not always guaranteed a speedy approval process.
In addition, the PPP Law which will play a major role in enabling the individual components of
infrastructure in the new economic zones has also experienced delay and to date has not been enacted.
These delays give a bad signal to the private sector, which seeks assurances that the rules of the game will
be clear, promises respected and that foreign and domestic investors are on an even playing field. Further
delays may turn away good investors from zone projects.
3. Actions to Mitigate Risks
In General:
GAC concerns will be addressed through a combination of project design and special measures to reflect
three basic principles: maximum transparency and provision of information about every step or action
undertaken including the individuals or entities involved; ensuring that multiple parties are in place to
provide external assessment of the actions that are undertaken in order to have a robust system of scrutiny
and checks; and enhanced use of mechanisms for feedback from individuals outside the implementation
of the project, particularly through use of ICT.
24
These risks are addressed through the overall design of the project and through enhanced transparency, in
addition to following Bank ICB guidelines with its requirements for firm timelines, transparency, and
other mechanisms to guard against corruption.
This section contains a summary of the actions to be undertaken followed by a matrix summarizing the
actions, responsible entities, timelines, and warning signs to trigger additional review through Bank
supervision and/or investigation. It is important to stress that these measures are not meant to be
exhaustive. Depending upon emerging risks highlighted by more intense project monitoring, additional
measures may be necessary.
Cross-cutting Measures
For all of the risks mentioned above, there are strategies that the program has used and will continue to
mitigate the potential impact of these risks:
Comprehensive communications campaign: From the IFC’s successful communications campaign on
economic zones which was able to get significant buy-in from both major political parties (economic
zones now being on both party manifestos), government agencies, the private sector and the public at
large, the PSDSP has learned that a comprehensive communications campaign can go a long way to get
buy-in for initiatives and approaches. The World Bank currently has a communications strategy on
corruption and governance, and the PSDSP will carry out communications activities as part of the overall
WBOD strategy. This will include:
Presentations and workshops for the private sector on governance and economic zones (two
have already been given by Ellen Goldstein with inputs from the project)
Enlisting private sector and government individuals to write op-eds each year on zones and
governance.
Capacity building on procurement and financial management: The WBOD’s procurement and financial
management team have already given several training sessions for the implementing agencies of the
PSDSP on correct procurement and financial management procedures. Further training sessions are
planned and talks with WBOD procurement are designed to come up with a program of training to ensure
that officials in the agencies are well aware of what constitutes procedures and behaviors that are above
reproach in the implementation of the PSDSP. The program of training – both beginners and advanced –
will also be given several times a year to cover new personnel, thus tackling the turnover problem, as well
as reinforcement for existing personnel.
Procurement Risks – Mitigating Measures
Specific mitigation measures:
The PSDSP Financing Agreement in Schedule-2 Section-III part-E (Other Undertakings) mentions a
number of measures for minimizing procurement related risks:
Employ a full-time procurement expert for the duration of the Project acceptable to the
Association. Experience from the first 22 months of the program demonstrates that the two keys
to a successful procurement are (a) having a qualified person in this position, and (b) ensuring
that they receive the necessary training to understand World Bank procedures. The program will
25
ensure that all four of the implementing agencies have qualified, trained procurement specialists
which will minimize the opportunity for conflicts of interest (according to World Bank rules),
Establish a suitable and functional webpage for HTPA23
and BEZA featuring project-related
procurement information accessible to the public, including selection criteria and processes. This
will be a deterrent to corruption, as the public will be able to scrutinize all available tender-
specific documents and will be able to spot whether correct procedures were followed in the
selection process.
Establish within HTPA, BEPZA and BEZA – the three organizations which will actually have
physical works under the PSDSP – a suitable and functional complaint handling system. Again,
this will give any party the opportunity to flag non-transparent practices, even those that are most
difficult to identify.
Establish an adequate database for recording, monitoring and following-up on all procurement
activities under the Project. As information on procurement activities is gathered systemically, it
will allow anyone wishing to investigate specific procurement matters to easily recreate whether
the procurement was conducted properly.
Establish a Procurement Risk Mitigation Plan by each agency for review by the Bank, including
the preparation and submission to the Association, on a quarterly basis, of reports on procurement
activities undertaken during the quarter preceding the quarter in which the report
In addition, the PSDSP will incorporate the following measures into the procurement process:
Both GoB officials and Technical Evaluation Committee members shall be required to submit
declarations of no conflict of interest in these procurements. These declarations shall specify that
there is no conflict of interest between bidding organizations and their personnel and (a) TEC
members or their close relatives, or (b) other officials of the Ministry of Communications,
Bridges Division, and the BBA involved with the procurement process or their close relatives.
The declarations will be submitted prior to the commencement of evaluation of bids. The BBA
will maintain these declarations on file as well as provide them to the Bank. If during the
procurement process a TEC member is found by any Project oversight entity or by the Bank to
have concealed a conflict of interest, that individual shall be immediately replaced on the TEC.
The GoB is aware that if such information is revealed following the conclusion of the
procurement process the Bank will consider appropriate remedies.
For the example of a private sector zone or zone-related infrastructure developer with sub-
standard performance, there are two measures that the PSDSP will take: (1) The GoB authority
overseeing the individual zone projects will hire transaction advisors with PSDSP funds to
oversee not only the initial tendering stage of each project, but also “Phase II” activities such as
the construction of the zone, the promotional efforts of the zone and the investor after-care that
the private zones offer; (2) the Project will treat the zone or infrastructure project as they would
any other project which is publicly procured and has performance issues – simply revoke the
2 Project “support” is defined as PSDSP funding of site assessments, feasibility studies, master plans, investment
promotion, last-mile infrastructure, and on-site infrastructure for specific economic zone projects. 3 Originally the BCC which was originally to have developed the Hi-Tech Park
26
license of the zone developer, for which specific procedures have been established in the EZ
Rules.
Financial Management in Implementation Risks – Mitigating Measures
Specific mitigation measures:
The PSDSP Financing Agreement in Schedule-2 Section-II part-B (Financial Management, Financial
Reports and Audits) mentions a number of measures for minimizing procurement related risks:
Submission of interim unaudited financial reports for the Project each quarter no later than 45
days after the end of the calendar quarter. This will provide a third-party inspection of invoices,
financial documents, and bank statements to catch any documented financial and other anomalies,
such as the example mentioned above of changing to a cheaper, lower-quality of office supplies
under the same contract.
Auditing of financial statements annually no later than 6 months after the end of each annual
period. This will provide a more thorough review of the above mentioned.
The complaints handling system mentioned above in the Financing Agreement in Schedule-2
Section-III part-E (Other Undertakings) – this would also be used during the project
implementation phase for grievances relating to improper implementation.
In addition, the PSDSP will incorporate the following measures into the project implementation process:
Establish a suitable and functional webpage for HTPA and BEZA featuring project-related
implementation information including contracted specifications, methods for accessing project
services, implementation status with expenditure data, monitoring procedures and reports,
grievance procedures, etc. This webpage with full information would also include any contract
extensions, and would thus flag the situation described in the example above of extending a
contact without materially changing the scope of work.
The PSDSP is considering facilitating third-party monitoring practices involving the
communities surrounding the construction and works of the economic zones. This would entail
visiting those communities, making sure they have available information on the works to be
conducted in the areas contiguous to their community, and providing a mechanism (probably by
cell phone) for communicating with the GoB agency supervising that particular construction
project in case of anomalies and lack of compliance. All materials would be in Bangla and
English to ensure that all stakeholders understand the documents. This would address incidents
of corruption such as the example cited above where a construction company chosen to construct
a road cuts on costs and splits the savings with a government official. A third-party monitoring
system will deter this from happening.
Regulatory Framework Delay Risks – Mitigating Measures
Specific mitigation measures:
The PSDSP has developed the complete set of forms, guidelines, and other documents necessary
to fully implement the EZ Act. In the absence of an approved regulatory framework, these
documents have already been used as a de facto regulatory regime or code of practice, especially
27
the application for a zone developer which has been used by 6 private zone developers to apply
for pre-qualification as zone developers. To further enhance BEZAs procedural handling of
applications and transparency, it can make all these forms and the procedures – whether finally
approved or not – available on their website. The PSDSP will work closely with the
implementing agencies to use the forms and guidelines to provide a mechanism and assurances
to potential private zone developers in the absence of a regulatory regime. This activity also
ensures that once the regulatory framework has been approved, BEZA can move quickly on its
prime activities of licensing and promoting.
The Project will provide economic zones-specific capacity building for a wide group of
government stakeholders (e.g., PMO, Ministry of Law, Immigration, DoE, Department of Labor,
Local Government, in addition to BEZA, BEPZA, and the HTPA) for economic zones to reduce
the possibility that they would reject or delay specific policies, guidelines and regulations simply
because they don’t understand them. In reality, both the IFC and the PSDSP have had an
aggressive program of capacity building since 2007 that have included some of the following (not
an exhaustive list):
o Sponsoring GoB participation in the World Free Zone Conventions and pre-event
workshops every year from 2007-2012
o 10 BICF-sponsored stakeholder consultations on the provisions of the draft EZ Policy
from Feb – April 2008
o A resident advisor to assist with developing an EZ promotional strategy for the EZs
together with BEPZA in 2008
o Free Port Master Planning Class in Rotterdam in 2009
o 3-day IFC Deep Dive on Economic Zones in Dhaka in March 2009
o Seminar on why the country needs economic zones with press conference in
collaboration with the MP Chowdhury from Sylhet in 2010
o 2-day seminar on economic zone site selection, master planning and feasibility study in
2011
o Stakeholder review of the EZ Regulations in 2012 (two sessions – Dhaka and
Chittagong)
o Procurement and FMS training on several occasions since the Project was
operationalized.
Given the rotation of personnel within the GoB, this constant capacity building is deemed
necessary as new GoB officials come into zones institutions and are not familiar with the
concepts around economic zones. The PSDSP will continue to provide this kind of capacity
building throughout the life of the project.
4. Monitoring, Remedies and Sanctions
The Padma Bridge experience has provided some pilots, procedures and policies on what to do in the case
of an allegation of corruption that will serve the PSDSP in case that fraud and corruption occurs or there
are allegations of fraud and corruption. The Project team is fully conscious of the sensitivities around
corruption in Bangladesh, especially given the recent experiences, as well as the priorities of the World
Bank, and is fully committed to doing everything possible to prevent corruption from happening in the
PSDSP and to full disclosure and investigation if it does. Following the procedures and guidelines
28
mentioned in Section 3 of this document will be a considerable safeguard against corruption in the
Project.
Among the basic steps that the team will take in case of an allegation are the following:
Acknowledging all receipts of complaints and allegations of corruption that are received through
the established channels
Informing the CMU and Sector Management immediately once any allegation is received
Discussing with the internal WBOD team how to proceed in performing an initial review of the
documentation pertaining to the allegation
Apprising INT of the allegation so that a full investigation can be carried out
Implementing all recommendations of the internal team, INT, Sector Management and CMU with
regard to handling the allegation.
5. GAAP Implementation Matrix
The following is a summary of the mitigation measures described in Annex 3 of this document (in bold italics) with further detail on the
responsible entity, the projected timeline, and any early warning indicators that might trigger additional action:
Issues / Risk /
Objective Actions / Features
Reporting
Framework /
Agency
Responsible
Timeline /
Periodicity
Early Warning
Indicators to Trigger
Additional Action
Action in Case of Early
Warning
Cross-cutting
Measures
Presentations and workshops
for the private sector.
Adopting the provisions for
PSDSP team
jointly with GoB
counterparts
September 2013 –
June 2016
Private Sector
demonstrates a rejection
of the new EZ regime
Identify the reasons
expressed in the
workshops
Organize op-eds around
the constraints
RTI Act and transparency in
information sharing
BEZA, BEPZA,
HTPA
January 2014-June
2016
Designated officer not
appointed Designated Officer
appointed
Op-eds on zones and
governance
PSDSP team
jointly with GoB
counterparts
September 2013 –
June 2016
---
---
Training sessions on correct
procurement and financial
management procedures.
PSDSP team
ERD, BEZA,
BEPZA, HTPA
Oct 2012 – Dec
2014
Constant postponement of
proposed training (3
months or more)
Continue to provide
clearances and
comments on
procurement
Gain buy in of 1 key
person in each
implementing agency
Procurement
Risks
Employment of a full-time
procurement expert
BEZA, BEPZA,
HTPA
August 2012 –
June 2016
Delays (3 months or more)
in employing the expert Continue to provide
clearances and
comments on
procurement
Withhold funding on
projects until the expert
is hired
Establishment of a suitable
and functional webpage for
HTPA and BEZA
HTPA and BEZA
in collaboration
with the IFC
December 2013
30
Issues / Risk /
Objective Actions / Features
Reporting
Framework /
Agency
Responsible
Timeline /
Periodicity
Early Warning
Indicators to Trigger
Additional Action
Action in Case of Early
Warning
Suitable and functional
complaint handling system.
BEZA, BEPZA,
HTPA
March – Sept 2013 Delays in establishing the
system beyond June 2014 Facilitate TA for the
establishment of the
system
Withhold funding on
projects until the system
is established
Database for recording,
monitoring and following-up
on all procurement activities
BEZA, BEPZA,
HTPA
December 2013 Spot checks reveal that the
system is not working
(i.e., delays continue)
Facilitate TA for the
establishment of the
database
Withhold funding on
projects until the
database is establish
Procurement Risk Mitigation
Plan
ERD, BEZA,
BEPZA, HTPA
August 2013 Delays in establishing the
system beyond August
2013
Facilitate TA for the
establishment of the
plan
Withhold funding on
projects until the plan is
drafted and approved
Continue to provide no
objection and clearances
on procurement
Declarations of no conflict of
interest
ERD, BEZA,
BEPZA, HTPA
August 2013 Delays in establishing the
system beyond July 2013 Facilitate TA for the
establishment of the
plan
Withhold funding on
projects until the
practice is adopted
Hiring of a transaction
advisor for EZ projects
BEZA, HTPA December 2013 –
December 2015 Failure to establish the
zone according to the
master plan
Slower than
programmed in the
Warning notification to
zone developer
Revocation of zone
developer license
Revocation of the license of
the zone developer
BEZA, HTPA As needed
31
Issues / Risk /
Objective Actions / Features
Reporting
Framework /
Agency
Responsible
Timeline /
Periodicity
Early Warning
Indicators to Trigger
Additional Action
Action in Case of Early
Warning
license application
construction
Slower than anticipated
infrastructure
development
Slower than anticipated
uptake by investors
Specific complaints
from investors to
BEZA/HTPA
Financial
Management in
Implementation
Risks
Submission of interim
unaudited financial reports
ERD, BEZA,
BEPZA, HTPA
June 2012 – June
2016
Delays in submitting the
required reports of 3
months or more
Provide further training
for the FMSs in each
implementing agency
Downgrade rating in
ISR
Auditing of financial
statements annually
ERD, BEZA,
BEPZA, HTPA
June 2012 – June
2016
Delays in submitting the
required reports of 3
months or more
Provide further training
for the FMSs in each
implementing agency
Downgrade rating in
ISR
Complaints handling system
as above
Establishment of a suitable
and functional webpage for
HTPA and BEZA as above
Investigation of the
possibility for third-party
monitoring practices
PSDSP Team By Dec 2013
Delay in
Regulatory
Framework for
Zones
Use of codes of practice and
guidelines to provide
assurances to potential zone
developers and be a de-facto
ERD, BEZA,
BEPZA, HTPA
By Dec 2013 The institutions listed use
procedures and forms that
are not according to
international best practice
Hold working sessions
with the implementing
agencies on developing
correct forms and
32
Issues / Risk /
Objective Actions / Features
Reporting
Framework /
Agency
Responsible
Timeline /
Periodicity
Early Warning
Indicators to Trigger
Additional Action
Action in Case of Early
Warning
regulatory regime in the
absence of one formally
adopted by GoB.
guidelines
Provision of economic zones-
specific capacity building for
a wide group of stakeholders
PSDSP Team August 2011 –
June 2016
NOTE: The GAAP and this action matrix is a living document and the project team will review its content at regular intervals and
make the necessary changes by common agreement.