China Eximbank provides $325 million preferential buyer’s credit for Shahjalal Fertilizer Factory Project (Linked to Record ID#34230)

Project narrative

On January 21, 2012, China Eximbank and the Government of Bangladesh signed an RMB 1.6 billion government concessional loan (GCL) agreement and a $325 million preferential buyer’s credit (PBC) agreement for the construction of the Shahjalal fertilizer factory near Fenchugonj Upazila (within the Sylhet District and the Division of Sylhett). The GCL and the PBC carried 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 is backed a Sinosure credit insurance policy. Record ID#34230 captures the GCL, while Record ID#38969 captures the PBC. According to the Government of Bangladesh’s Economic Relations Division (ERD), the GCL had disbursed RMB 1,269,698,000 as of June 30, 2014 and RMB 1.6 billion as of June 30, 2018 and the PBC had achieved a 100% disbursement rate ($325 million out of $325 million) as of June 30, 2021. According to the Government of Bangladesh’s ERD, the borrower had made repayments under the GCL worth RMB 106,670,000 as of June 30, 2018, RMB 320,000,000 as of June 30, 2020, and RMB 426,667,000 as of June 30, 2021, and it had made repayments under the PBC worth $86.667 million as of June 30, 2021. The purpose of this project was to set up a new urea fertilizer factory with a production capacity of 1760 metric tons per day (or 5,80,800 metric tons per year) of granular urea at the premises of Natural Gas Fertilizer Factory Limited (NGFFL) in Fenchugonj Upazila within Sylhet District and the Division of Sylhett. China National Complete Plant Import and Export Corporation Ltd was the EPC contractor for this project. Its work was overseen by the state-owned Bangladesh Chemical Industries Corporation. China Chengda Engineering Company Ltd. was also involved in project implementation. A foundation stone laying ceremony took place on March 24, 2012. Construction began on or around the same date. The plant was handed over on February 29, 2016. Its originally expected completion date was June 15, 2015. The factory began commercial production on March 1, 2016. In May 2017, the Comptroller and Auditor General of Bangladesh conducted an audit of the Shahjalal fertilizer factory's FY 2015-2016 (July 2015-June 2016) financial statements and found TK 1.098 billion in financial irregularities. Some of these irregularities include the Bangladesh Chemical Industries Corporation (BCIC) opening two accounts of fixed-deposit receipt (FDR) in a commercial bank with Tk 20 million taken out from the project allocations which did not show the profits and interest on the funds to the exchequer, purchase of office furniture in the fiscal year although there was no provision in its development project proposal (DPP), selected contractors were paid bills without deducting VAT and income tax from them, BCIC paid inflated bills beyond the contract price for land-development and upgradation works, and more. An independent auditor report from March 25, 2019 found no irregularities in the BCIC financial statements and documents provided.