China Eximbank provides RMB 1.547 billion government concessional loan for the Modernization of Telecommunication Network for Digital Connectivity Project (MOTN) (Linked to Project ID#52663)

On August 24, 2016, the Government of Bangladesh awarded a contract to a Chinese consortium comprised of ZTE Corporation and ZTE Holdings to upgrade the fixed network of Bangladeshi state-owned Bangladesh Telecommunications Company Limited (BTCL). At that time, the Chinese Government pledged to finance 90% of the total cost of the project. Then, on September 27, 2016, BTCL signed a commercial contract with ZTE Corporation and ZTE Holding Co., Ltd. for the project. Approximately one year later, on September 10, 2017, the Chinese Government and the Government of Bangladesh signed a preferential loan framework agreement in which the Chinese Government agreed in principle to issue an RMB 1,547,071,939.09 ($231.5 million) loan for the Modernization of Telecommunication Network for Digital Connectivity Project (MOTN). However, there were delays in the signing of the formal loan agreement because the Government of Bangladesh and BTCL were concerned with the higher-than-expected cost of the contract with ZTE. BTCL negotiated with ZTE and managed to reduce the cost, which enabled the project to proceed. Then, on April 10, 2018, China Eximbank and the Government of Bangladesh signed an RMB 1,547,071,939.09 government concessional loan (GCL) agreement for MOTN Project. The GCL carried the following borrowing terms: an interest rate of 2%, a maturity period of 21 years, a grace period of 6 years, and a commitment fee (service charge rate) of 0.2%. In addition to the China Eximbank loan, the Government of Bangladesh was expected to contribute ৳7,561,100,000 BDT of counterpart financing for the MOTN project. According to the Government of Bangladesh’s Economic Relations Division (ERD), the GCL had achieved a disbursement rate of 19.9% (RMB 309,414,000 out of RMB 1,547,071,939.09) as of June 30, 2019, 49.8% (RMB 771,139,000 out of RMB 1,547,071,939.09) as of June 30, 2020 and 66.6% (RMB 1,030,397,000 out of RMB 1,547,071,939.09) as of June 30, 2021. No repayments on the GCL had been made as of June 30, 2020 or June 30, 2021. The purpose of the project is to upgrade the fixed network of BTCL in order to provide a wider, modernized, and cheap range of IP telephony, high-speed Internet, and converged services including video calling and videoconferencing over BTCL’s PSTN access lines, to compete better against mobile alternatives. The MOTN project involves the replacement of BTCL's public switched telephone network system (PSTN) with a IMS (IP Multimedia Subsystem)-based telephone system using Gigabit Passive Optical Network (GPON) technology that would cover all of Bangladesh's districts with the requisite transmission and IP networks. Upon completion, the project is expected to fulfill the Government of Bangladesh's ‘Vision-2021’ plan and help secure a Digital Bangladesh, More specifically, the MOTN project is expected to divide Bangladesh's IMS Core Exchanges into three parts: Dhaka, Chittagong, and Khulna, each with a capacity of 1,600,000 subscribers. It is also expected to replace old IP exchanges with IP-based Exchange Access gateways. The MOTN project also involves the creation of eight rings in several Bangladeshi districts, including Dhaka and Chittagong, that would allow the transmission backbone to be more reliable. It also includes the installation of a pair of core routers in Chittagong, Dhaka, and Khulna. A national operations center with 21 large monitors capable of monitoring the network will be created by the project. A submarine cable connection through Cox's Baxar and Kuawakata, through India via Benapole, is also supposed to be established to improve the network's resiliency. Additionally, the project will develop a computerized model using BTCL's existing optical fiber and the MOTN upgrades in order to better monitor the optical fiber network status. ZTE Corporation is the engineering, procurement, and construction (EPC) contractor responsible for implementation and Bangladesh's Ministry of Posts, Telecommunications and Information Technology is responsible for project supervision. The Government Bangladesh's Executive Committee of the National Economic Council (ECNEC) approved the project on October 17, 2017. The project was expected to take 3 years to implementation. ZTE reportedly began work in January 2019. However, the project's official commencement ceremony was held on January 8, 2020. The project implementation period was originally expected to take place between July 2017 and June 2020. However, a revised Development Project Proposal (DPP) was sent to Bangladesh's Posts and Telecommunications Division for approval by the ECNEC; the DPP proposed the extension of the project implementation period by an additional two years and an increase in the project cost to ৳33,749,400,000 BDT from ৳25,733,900,000 BDT. The new expected completion time was June 30 2022. On September 15, 2020, the project’s Business Operation and Support System (BOSS) and Network Operation Center (NOC) were launched, which signified that the project was entering a new (commercial use) phase. The COVID-19 pandemic led to various project implementation challenges and delays. Additionally due to heavy rains and floods, the project encountered significant problems, including the destruction of fiber and trench damage. A controversy also arose when a Bangladesh newspaper, The New Nation, alleged that ZTE had ‘arm-twisted [the] Ministry of Post and Telecommunication into buying additional switch boards’ for MOTN even though said switch boards were reportedly ‘substandard and useless.’ As of July 2023, the Government of Bangladesh reports the project as 75% complete.

Additional details

1. The Bengali project title is ডিজিটাল সংযোগের জন্য টেলিকমিউনিকেশন নেটওয়ার্ক আধুনিকীকরণ. The Chinese project title is 孟加拉国通信网络现代化项目. 2. This China Eximbank loan is not recorded the China’s Overseas Development Finance Dataset, which Boston University's Global Development Policy Center published in December 2020. 3. The Government of Bangladesh loan identification number for this China Eximbank GCL is L1120180410A. 4. To ensure that China Eximbank would issue the loan for the Padma Bridge Rail Link Project promptly (captured by Project ID#52663), in early February 2018, the Government of Bangladesh approved "on an urgent basis" a China Eximbank government concessional loan worth RMB 1,547,071,939.09 ($231.5 million) for the Modernization of Telecommunication Network for Digital Connectivity Project (MOTN) (captured via Project ID#52765) because the "[d]elay in offering the green signal to the Chinese assistance [for the telecommunications modernization project] was affecting the implementation of the [Padma Bridge Rail Link Project]." The Government of Bangladesh had previous problems with the MOTN loan and delayed approving it, which provoked concerns among the Chinese authorities (see more details at "China likely to confirm $3.0b loan next month"). To address these concerns and advance the Padma Bridge Rail Link Project, the Government of Bangladesh approved the MOTN loan. Then, China’s State Council provided its approval for China Eximbank to issue a loan for the Padma Bridge Rail Link Project in February 2018. 5. One official source identifies the maturity length of the loan as 20 years and the grace period as 5 years.

Number of official sources

17

Number of total sources

36