China Eximbank provides $405.8 million preferential buyer’s credit for Multi Lane Road Tunnel under River Karnaphuli Project (Linked to Project ID #52873 and #55046) [BRI]

On June 9, 2014, the Prime Minister of Bangladesh, Sheikh Hasina, visited China and the Chinese Government and the Government of Bangladesh signed a memorandum of understanding (MOU) on the Multi-Lane Road Tunnel under River Karnaphuli Project. Then, on November 14, 2016, China Eximbank and the Government of Bangladesh signed an RMB 1,950,000,000 government concessional loan (GCL) agreement and a $405.8 million preferential buyer’s credit (PBC) agreement for the Multi-Lane Road Tunnel under River Karnaphuli Project. The GCL carries the following borrowing terms: a 2% interest rate, a 20-year maturity, a grace period of 5 years, and a 0.2% commitment fee. The PBC carries the following terms: a 2% interest rate, a 20-year maturity, a grace period of 5 years, and a 0.2% commitment fee. Project ID#55046 captures the GCL, while Project ID#38342 captures the PBC. The borrower was expected to use the proceeds of the GCL and the PBC to finance a commercial contract between the Government of Bangladesh’s Ministry of Road Transport and Bridges and China Communication Construction Company (CCCC), which was signed in June 2015. The GCL had disbursed RMB 936,1890,000 as of June 30, 2018, RMB 1,557,869,000 as of June 30, 2019, RMB 1,950,000,000 as of June 30, 2020, and RMB 1,950,000,000 as of June 30, 2021. No repayments on the GCL had been made as of June 30, 2019 or June 30, 2021. As of June 30, 2021, the PBC had disbursed $165.559 million and no repayments had been made. The purpose of the project, which is also known as the Multilane Karnaphuli Tunnel Project, is to construct a 3.4-kilometer-long, 10 meter-wide tunnel under the Karnaphuli River near the Port of Chittagong. The total length of the proposed tunnel will be around 9.092 kilometers, including a 3.40-kilometer tunnel under the Karnaphuli River with an approach road of 4.89 kilometers alongside 740 meters of bridges linking the main port city, and western side of the Karnaphuli along with the eastern side of the river. Upon completion, the tunnel will connect the port of Chittagong to the industrial area of the city and thereby relieve pressure on the three existing bridges. The total area of the project is 382.03 acres. More than 360.64 acres of land were acquired for the construction of roads and installments of utility lines. A total of 2,275 families are affected by this project, and 1,660 were given compensation. China Communication Construction Company (CCCC) is the general (EPC) contractor responsible for project implementation. On November 24, 2015, the Executive Committee of the National Economic Council (Ecnec) approved the Multi-Lane Road Tunnel under River Karnaphuli Project. Construction began on February 24, 2017. Two years later, the Prime Minister of Bangladesh officially inaugurated boring works on the tunnel on February 24, 2019. The project had achieved a 40% physical completion rate by May 2019, including the installation of over 150 meters of the first tunnel and much of the above-ground works. Then, on July 31, 2020, the project reached a key milestone with the completion of the first underwater, after a made-in-China super-diameter slurry-pressure-balance tunnel boring machine (TBM) broke through at the Karnaphuli River east bank working shaft. The TBM, which is 94 meters long and weighs more than 2,200 tons, was developed by the Tianhe Mechanical Equipment Manufacturing Co. It was the first super-diameter slurry-pressure-balance TBM to be self-developed and exported by China. The TBM uses several self-developed technologies, such as an automatic mud water circulation system. As of October 2021, all boring-related work was completed — after the excavation of the second tube (from Anwara end of Chittagong to Patenga end) of the 3.315-km tunnel) — and the project had achieved a 73% physical completion rate. By November 2021, the project had achieved a 77.5% physical completion rate. On May 8, 2022, Harunur Rashid Chowdhury, Project Director of Karnaphuli Multilane Road Tunnel, sent a letter to the Bangladesh Bridge Authority (BBA). In it, he noted that Shanghai Port had remained closed since March 2022 due to Covid-19 and the Chinese Government’s zero-tolerance policy had affected project’s progress: ‘It may be noted that […] most of the goods and equipment are being manufactured/procured from Shanghai. Therefore, the closure of the Shanghai Port is causing a delay in shipments. […] The goods and equipment planned to arrive in March [2022] are still not able to reach Chittagong Port to date. Subsequent shipments will also get affected on this account.’ In the letter, Harunur Rashid Chowdhury also asked the BBA to take up the issue with the Economic Relations Division (ERD) and arrange an extension of the China Eximbank loan availability period by six months until May 6, 2023. On May 7, 2022, Li Zheng, the CCCC Project Manager of the Karnaphuli Tunnel Project Site Office, acknowledged in a letter to Harunur Rashid Chowdhury that the delay in shipments from Shanghai was the result of China’s ‘zero Covid’ measures. Then, in June 2022, BBA announced that two sub-contractors hired CCCC to complete two project components — a management software system for BBA and the service area (east) — had violated their contractual obligations. According to a letter from Harunur Rashid Chowdhury, Project Director of Karnaphuli Multilane Road Tunnel, to the BBA, ‘CCCC was instructed to undertake this work, but they employed sub-contractors to do so. CCCC selected these sub-contractors and is responsible for any default of the sub-contractors. […] Unfortunately, CCCC has not effectively monitored or exercised control over both these sub-contractors.’ The Multi-Lane Road Tunnel under River Karnaphuli Project was originally expected to reach completion by the end of 2020. However, in 2018, the project’s expected completion date was pushed back to December 4, 2022. Upon completion, the underwater tunnel is expected to reduce the time it takes to drive from Hittagong Shah Amanat International Airport to the Hittagong industrial park from four hours to 20 minutes.

Additional details

1. This project is a part of the Belt and Road Initiative and one of a series of loans captured via Umbrella Project ID#52873. 2. Karnaphuli is sometimes also spelled as ‘Karnafuli’. 3. This project is also known as the Karnaphuli River Tunnel Project and the Karnaphuli Multilane Road Tunnel Project. The Chinese project title is 孟加拉国卡纳普里河底隧道项目. 4. The Government of Bangladesh’s loan identification number for the GCL is L1120161014C. The Government of Bangladesh’s loan identification number for the PBC is B1120161014A.

Number of official sources

21

Number of total sources

54